LONG TERM INVESTMENTS AND EXPORT OPPORTUNITIES
The nature of the oil and gas industry entails that investments take place over a long term period across the value chain of petroleum activities.
In this regard, the contract between the State and the winning consortium – the Exploration and Production Agreement (EPA) – legally binds both parties over thirty years and enables the Operator to export remaining gas resources once the local energy demand is satisfied.
To de-risk investments and to mitigate above ground risks, Lebanon formulated the right incentives to ensure a balance between the State and the consortium’s objectives. In this regard, the fiscal system is designed in such a way to be predictable and progressive based on the R-factor.
The share of the investor from the produced petroleum increases when prices are low, costs are high or produced volumes are limited thus providing the investor with a higher guarantee for cost recovery. At the same time, the State gets a higher share of the returns with time and when the project economics become more favourable (prices are high, costs are low or produced volumes are high). Therefore, the R-factor calibrates itself and safeguards the interests of the State and the consortium across the lifespan of the project.
Furthermore, the availability and readiness of a local market, and the geographical proximity to large markets safeguard that produced petroleum can be monetised. Indeed, once local demand is met, the Operator has the opportunity to export remaining gas resources.
Lebanon has a strategic geographical position at the crossroads between regional and international markets that are looking forward to diversifying their source of energy supply.
Depending on the quantities of petroleum resources to be discovered, Lebanon can tap into several export options through, for instance, existing pipelines to which Lebanon is already connected such as the Arab Gas Pipeline (AGP). Alternatively Lebanon could consider the option of exporting natural gas in its liquefied form (LNG) and use existing regional LNG plants in the region to reach international markets. Lebanon could also choose to build its own liquefaction factories to export its prospective gas should the size of discovered resources justify such an investment.
Finally, as Lebanon holds friendly relations with neighbouring countries including Syria, Egypt, Jordan, Cyprus, Greece, Turkey and the EU, Lebanon actively promotes the creation of an integrated gas market in the region through platforms, bilateral and multi-lateral agreements, unitization frameworks and projects of common interests so to facilitate the development of projects allowing the export of the Eastern Mediterranean gas.
© 2017. Lebanese Petroleum Administration. All Rights Reserved.