Lebanon Passes Oil Tax Law

Lebanon made progress in its efforts to develop a hydrocarbons industry on Tuesday when lawmakers passed a petroleum tax law, as companies prepare to bid on a first round of offshore exploration licences next month.

 

Earlier this month, Energy Minister Cesar Abi Khalil extended by four weeks the deadline for companies to submit bids for exploration and production. Bidding will be held for offshore blocks 1, 4, 8, 9 and 10.

 

The government has pre-qualified more than 50 companies to bid for the licences.

 

The energy ministry said it extended the deadline to allow time for ratifying the law, and based on requests from some companies. The new legislation includes taxing the profits of companies that take part in exploration and production.

 

The bids, due by Oct. 12, will "abide by (the) new tax law approved today," and the government will publish the details of the law, Abi Khalil said on Twitter (TWTR).

 

Lebanon re-opened its first licensing round in January after a three-year delay, hoping to revive development of a hydrocarbon industry that political paralysis had stalled.

 

Lebanon sits on the Levant Basin in the eastern Mediterranean, along with Cyprus, Egypt, Israel and Syria. A number of gasfields have been discovered there since 2009, such as the Leviathan and Tamar fields.

 

Bidding might also have been extended because not enough bidders had applied so far, said Diana Kaissy, who heads the Lebanese Oil and Gas Initiative, a non-profit promoting transparency and policy development in the sector.

 

Regional turmoil and slower rates of gas sales have probably shaken investor confidence, she added. "Geopolitically, the situation does not really encourage a lot of companies to come and invest hundreds of millions of dollars," she said.

 

Politicians have billed Lebanon's offshore resources as an opportunity for a major economic boost. Nearby conflicts and Beirut's own political troubles have battered the mainstays of the economy, including tourism.

 

With large debt and stagnant growth, Lebanon would benefit from the revenues and job creation that might accompany a hydrocarbon industry. But analysts urge caution, warning that the potential impact remains unknown until drills actually break ground.

 

"This is what the government is depending on," Kaissy said. "But it will only boost the economy if it's done right."


(Reporting by Ellen Francis, editing by Larry King)