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Domestic market overview

Production

What is the extent of oil and gas production in your jurisdiction?

Lebanon has taken the first steps towards becoming an oil and gas producing country. It has established a modern oil and gas legal and contractual regime and is in the process of developing its nascent oil and gas sector. Although no exploration or production activities have started yet, exploratory drilling activities are expected to commence as soon as the first licensing round resumes, pending the issuance of two decrees by the Council of Ministers related to the delineation of blocks and to the model exploration and production agreement (EPA).

Lebanon’s hydrocarbon wealth is promising. Geological studies conducted in Lebanon’s exclusive economic zone indicate the likely presence of potentially large oil and gas reserves in its offshore areas. Estimates are for at least 100 trillion cubic feet of gas and 865 million barrels of oil in Lebanon’s waters. 

Consumption

How does domestic energy consumption break down with respect to oil and gas, as well as imports and exports?

Consumption

Lebanon depends entirely on imports of fuel for energy. Consumption of energy has increased steadily over the last few years. Primary energy sources include gasoline, gas oil, fuel oil and diesel oil.

Recently, consumption in Lebanon peaked at:

  • 134,000 barrels of crude oil per day;  
  • 55,000 barrels of distillate fuel oil per day;
  • 7,500 barrels of liquefied petroleum gases per day;
  • 5.6 billion cubic feet of dry natural gas per day.

Imported liquefied petroleum gas is currently used in both commercial and residential sectors for different purposes, such as heating and cooking. In addition, propane gas (delivered in bulk) is used in industries, hotels and hospitals.

Imports
In 2013, Lebanon’s imports of oil and its derivatives amounted to $5.11 billion.

Lebanon imports petroleum products from several different countries, including Russia, France, Italy and Kuwait. Statistics reveal that Lebanon imported between 5.3 billion cubic feet and 8.8 billion cubic feet of natural gas in 2010.

For a short period, Lebanon imported natural gas from Egypt through Syria to generate electricity, using the Arab Gas Pipeline. However, natural gas imports were suspended in 2010 due to events in Egypt. Given Lebanon's limited opportunities for securing pipeline gas imports from neighbouring countries, it plans to start importing liquid natural gas (LNG) until its own domestic production can replace imports. However, these plans have yet to be implemented.

The future evolution of natural gas demand is strongly linked with that of electricity demand. The Lebanese government has plans to increase the share of gas used to generate power. Recent studies estimate that Lebanon’s gas demand will reach 91.8 billion cubic feet by 2020.

Exports
Lebanon is geographically well placed to benefit from export options for natural gas in the future through existing and planned gas pipelines and LNG projects.

Exports to neighbouring countries through regional pipelines have always been considered the first option, especially given that Lebanon is already connected to the Arab Gas Pipeline, through which it could supply Syria, Jordan and Egypt. However, with discoveries of gas in Egypt, there are now fresh options for Lebanon to export to the Asian or European markets. It could also supply Turkey through an onshore or offshore pipeline, eventually reaching the European market using Turkish and European networks. The timing of Lebanon’s gas production will help to determine the country’s gas export plans.

Depending on the size of the hydrocarbon resources discovered and the cost of production, Lebanon could use planned LNG plants in Lebanon or the region to supply European and Asian markets.

Trends

What are the current trends and future prospects for oil and gas supply and demand in your jurisdiction, and what policies has the government adopted to address these?

Lebanon plans to convert its power plants from oil to natural gas. Due to a lack of additional power generation capacity and subsidies, the country is suffering from power shortages. Government plans foresee importing around 1.2 million tonnes of LNG per year by 2017, expected to reach 3.5 million tonnes by 2022. There are also plans for floating storage regasification units. 

Regulatory overview

Regulation

What are the primary laws and regulations governing the oil and gas industry in your jurisdiction?

Petroleum activities within Lebanon's territorial waters and exclusive economic zone are regulated by the Offshore Petroleum Resources Law (132/2010), which is supplemented by the Petroleum Activities Regulations (Decree 10289/2013).

Other decrees and laws are ready to be enacted, including the Block Delineation Decree, the Model Contract Decree, the Oil and Gas Taxation Law and the Onshore Petroleum Resources Law.

What government bodies are charged with regulating the oil and gas industry and what are the extent of their powers?

Petroleum activities in Lebanon are regulated and managed by the following bodies:

  • The Council of Ministers sets the state's general policy for managing petroleum resources.
  • The minister of energy and water is responsible for ensuring the implementation of petroleum policy and related laws, as well as for monitoring and supervising petroleum activities. The minister has the right to sign oil and gas contracts with international oil companies and to take necessary measures to protect water, public health, property and the environment from pollution.
  • The Lebanese Petroleum Administration is an autonomous public entity created in 2012 under the Offshore Petroleum Resources Law to regulate, manage and monitor all petroleum activities – some of its financial and administrative decisions are subject to the approval of the minister of energy and water. The administration comprises six departments: strategic planning; technical and engineering; geology and geophysics; legal affairs; economy and finance; and quality, health, safety and the environment. 

Exploration and production

Rights

Who holds the rights to oil and gas reserves in your jurisdiction?

The Lebanese Constitution and the Offshore Petroleum Resources Law vest full ownership of petroleum resources and their management in the state. Petroleum activities cannot be performed without official authorisation, which will give oil and gas companies the exclusive right to explore for, develop and produce oil and gas in Lebanon’s exclusive economic zone. 

Is there a distinction between surface and subsurface rights?

No.

What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?

Petroleum rights are awarded either as reconnaissance rights or as exploration and production rights.

For reconnaissance rights, a licence is granted by the Council of Ministers for up to three years on a non-exclusive basis without any preference or privilege with regard to obtaining any other petroleum right.

Exploration and production rights are awarded through an exploration and production agreement (EPA) approved by the Council of Ministers and signed by the winning bidders (ie, oil and gas companies) and the minister of energy and water.

An EPA (signed with a pre-qualified joint stock company) allows rights holders to carry out petroleum activities in the contract area. It defines the rights and obligations of the rights holders between themselves and towards the state, and establishes:

  • the EPA's duration and each of its phases;
  • the state and rights holders' participation interests;
  • the minimum work obligations and expenditure commitments for the exploration phase;
  • any environmental matters;
  • any accounting rules and provisions applicable to petroleum activities under the EPA;
  • methods for determining profits;
  • the standard minimum guarantees; and
  • other miscellaneous provisions.

Under an EPA, a consortium of at least three rights holders (with one operator and two non-operators) are granted exclusive rights to explore, appraise, develop and produce oil and gas in a defined offshore block, on a production sharing basis, and non-exclusive rights for construction and the processing, transportation and storage of petroleum.

The EPA includes two phases. The exploration phase is five years, which is divided into two periods of three years and two years. This can be extended to up to 10 years, further to approval from the Council of Ministers.

This is followed by a production phase of 25 years, which can be extended to up to 30 years upon the council’s approval.

To date, the Council of Ministers has yet to approve the final version of the model EPA.

What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?

The EPA is the contractual instrument for awarding exclusive petroleum rights in Lebanon. Winners sign it with the minister of energy and water as part of a consortium of three rights holders.

Each rights holder must be a joint stock company and is subject to financial and technical requirements.

Each consortium must comprise at least one operator, with minimum participating interests of 35%, and at least two non-operators, with minimum participating interests of 10% each. Under the Offshore Petroleum Resources Law and the Petroleum Activities Regulations, an unincorporated joint venture must be established between the three rights holders, which are jointly and severally liable.

Rights holders can be national or international oil and gas companies.

Oil and gas companies can pre-qualify as operators or non-operators. Requirements for these roles are different and are significantly more stringent for operators. These pre-qualification criteria address the following four main categories:

  • Legal – an oil and gas company that is not Lebanese and resident in Lebanon must establish and maintain a legal presence in Lebanon.
  • Financial – operators must have total assets of $10 billion, while non-operators need total assets of $500 million.
  • Technical – operators must operate at least one petroleum development in water deeper than 500 metres, while non-operators must operate an established petroleum development.
  • Quality, health, safety and environment – both operators and non-operators must have evidence of established and implemented quality, health, safety and environment management systems.

Joint ventures

Are there any special legal provisions applicable to joint ventures?

Rights holders to an EPA must form an unincorporated joint venture in which each has a joint and undivided percentage participation interest. They jointly hold an exclusive petroleum right to conduct petroleum activities. Joint venture agreements must be approved by the minister of energy and water.

Rights holders are jointly and severally liable towards the state for obligations related to or arising out of petroleum activities. However, each is liable for its own taxes.

The rights holders must indemnify the Lebanese state against any third-party claims resulting from an act or omission in the carrying out of petroleum-related activities by the rights holders or the operator, affiliates, contractors or subcontractors.

On or after the award of a petroleum right, the minister can require the rights holder to provide financial security both towards the state and towards third parties, in addition to its decommissioning obligations. The rights holder's obligations under the EPA must be guaranteed by its parent company in the form of a parent company guarantee if the rights holder is:

  • a pre-qualified company which has relied on the characteristics of its parent company to be pre-qualified; or
  • a wholly owned affiliate of a pre-qualified company appointed to enter into the EPA.

No change of operator may take place without the approval of the Council of the Ministers. In addition, any amendment to the agreement shall be subject to the minister’s approval.

Third parties

Can exploration and production rights be transferred to third parties?

Rights and obligations obtained through a petroleum right can be transferred or assigned in whole or in part only to a company which is qualified under the Offshore Petroleum Resources Law, and only after obtaining the approval of Council of Ministers on the basis of a proposal by the minister of energy and water based on the opinion of the Lebanese Petroleum Administration.

An assignment of shareholdings which provide decisive control of a company possessing a participating interest in a petroleum right is subject to the same rules. Transfer of a rights holder’s ownership or right of use of a facility on which a petroleum activity depends also needs the approval of the Council of Ministers, which is granted on the basis of a proposal by the minister of energy and water and based on the opinion of the Lebanese Petroleum Administration.

Assignment to a qualified third party is allowed if the minimum work commitment for the first exploration period has been fulfilled. Such an assignment will not be permitted if, following the assignment:

  • there would be fewer than three right holders; or
  • any rights holder would hold a participating interest of less than 10% or an operator would hold a participating interest of less than 35%.

Assignment to a wholly owned affiliate is possible if the rights holders agree to remain liable for or to guarantee the obligations transferred under the assignment.

Fracking

Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?

Nothing in Lebanon prevents hydraulic fracturing. 

Transport and storage

Legal framework

What is the general legal framework governing the transportation and storage of oil and gas resources in your jurisdiction?

There are currently no distribution or transportation by pipelines in Lebanon. However, the infrastructure of most power plants is equipped to receive natural gas for electricity production.

Transportation and storage facilities or systems must meet Lebanese and international requirements for the protection of public safety, the environment and personnel working on or near the system.

Transportation

How is cross-border transportation of oil and gas resources regulated?

Agreements on the joint production, transportation, utilisation and cessation of petroleum activities must be submitted to the minister of energy and water and are subject to approval by the Council of Ministers.

Are there specific provisions governing marine and ground transportation of oil and gas resources?

There are no specific provisions in place yet.  

Construction and infrastructure

How are the construction and operation of pipelines, storage facilities and related infrastructure regulated?

The regulatory requirements established for the oil and gas sector in Lebanon allow for the construction and operation of oil and gas pipelines. If an approved plan for development and production contains plans for the construction, placement and operation of transportation or storage facilities, the Council of Ministers must award the rights holder a licence for this purpose. If the approved plan does not contain such plans, the rights holders can submit a separate plan for the construction, placement and operation of a transportation or storage facility to the minister of energy and water (with a copy sent to the Lebanese Petroleum Administration); the Council of Ministers can then award a specific petroleum licence for these purposes.

The conditions for awarding such a licence are set by the Council of Ministers based on the opinion of the Lebanese Petroleum Administration.

Oil and gas pipelines must be constructed in accordance with best petroleum industry practices and best pipeline practices. The routes of pipelines, cables or sites, and other facilities or equipment comprising a transportation system to be used for petroleum activities must be surveyed before construction, installation or placement.

A foreign legal person other than a rights holder wishing to construct, maintain or operate a sub-marine cable or pipeline related to petroleum activities in maritime areas under Lebanese jurisdiction is subject to the Offshore Petroleum Resources Law – to the extent that this does not contradict international law.

What rules govern third-party access to pipelines and related infrastructure?

The minister of energy and water can allow third parties to use a facility’s spare capacity for the production, transportation or storage of petroleum.

Third-party use of spare capacity may be granted only when it does not materially negatively affect the petroleum activities of the rights holder which owns or has use of the facilities in question. Third-party use of spare capacity shall be permitted only when it is feasible from a technical, environmental and safety point of view, and provided that:

  • there is available capacity in the facility or system; and
  • there are no insuperable technical problems which exclude the proper use of the facility or system of facilities to satisfy third-party requests.

Terms and conditions for the use of a facility or system, preservation or increase of capacity, and transportation or storage of third-party petroleum shall be negotiated on the basis of the applicable regulatory requirements and reasonable commercial terms. Negotiations shall be conducted in good faith.

If the parties cannot reach an agreement with regard to the commercial and operational terms for the use of a facility or a system of facilities for the purpose of petroleum activities, the matter can be settled by an independent commission of three experts selected by the Lebanese Petroleum Administration in accordance with the procedure included in the relevant exploration and production agreement.

Trading and distribution

Regulation

How are oil and gas resources traded in your jurisdiction and what (if any) regulations and procedures apply to oil and gas sales, distribution and marketing activities, both nationally and internationally?

Lebanon has not yet begun any exploration or production activity and so has not yet reached this level. However, general rules govern petroleum sales and natural gas marketing.

The sale or transfer of any interest in petroleum originating from a reservoir in an exploration and production agreement (EPA) area shall be based on the terms and conditions of independent parties in the international market. Any sale or transfer of interest in petroleum or volumes delivered shall be reported to the minister of energy and water and the Lebanese Petroleum Administration.

Regulations for the sale of petroleum shall be stipulated by a decree issued by the Council of Ministers, upon a joint proposal from the minister of energy and water and the minister of finance.

In the event of a natural gas discovery, the right holders must submit a gas infrastructure and marketing plan to the minister of energy and water for approval.

The state shall have priority rights over any royalties and profits from petroleum in the form of natural gas, as well as the right to purchase all or a portion of this natural gas for the Lebanese domestic market.

Is oil and gas pricing regulated in your jurisdiction?

The prices adopted for calculating royalty payments and the cost of petroleum are determined in accordance with the Petroleum Activities Regulations, which require that the prevailing market price be used, in addition to certain specific valuation provisions. The valuation provisions for crude oil specify:

  • a determination at the end of each calendar month;
  • that freight, insurance or costs paid by the seller beyond the delivery point be disregarded;
  • for sales to non-affiliates, a valuation equal to weighted average of actual sales prices at each delivery point during the month; and
  • that sales to affiliates are subject to a formula specified in the Petroleum Activities Regulations.

The valuation provisions for natural gas specify the following:

  • for sales to non-affiliates, a weighted average price per 1 million British thermal units in the relevant month from Lebanese reservoirs, and the weighted average of publicly available prices for alternative fuels for large-scale industrial consumers;
  • for sales to affiliates, the same price as above, or as otherwise agreed with the minister of energy and water; and
  • for sales to the state, a price no higher than the price sold to an affiliate.

Occupational health and safety and labour issues

Health and safety

What health and safety regulations and procedures apply to oil and gas operations (upstream, midstream and downstream)?

The health, safety and environmental (HSE) regime is regulated by the Offshore Petroleum Resources Law and the Petroleum Activities Regulations.

New HSE legislation and regulations in Lebanon are being developed.

Before petroleum activities can begin, the rights holders must establish and publish a health and safety plan, including an emergency response plan, taking into consideration the specific conditions of its petroleum activities.

The current Lebanese HSE rules state that petroleum activities must be conducted in a way that enables a high level of safety and benefit from operational techniques and technological development.

Rights holders, operators and any person undertaking petroleum activities on their behalf must comply with:

  • the HSE rules of the Offshore Petroleum Resources Law and the Petroleum Activities Regulations;
  • the EPA provisions;
  • Law 444/2002 and Decree 8633/2012; and
  • the HSE Best International Petroleum Industry Standards and all other applicable Lebanese laws relating to the HSE regime and the reasonable requirements of the Lebanese Petroleum Administration or any other competent authority relating to the HSE regime.

Any person managing or undertaking petroleum activities according to a petroleum right awarded under the Offshore Petroleum Resources Law must ensure a high standard of health and safety for employees and the employees of subcontractors, and must be sufficiently prepared at all times to deal with incidents, accidents or emergencies that could lead to loss of life, personal injuries, pollution or damage to property.

Rights holders must ensure that necessary measures are taken to prevent or reduce harmful effects to persons, property or the environment, including measures required to restore the environment to the condition it was in before any incident or accident occurred.

The current Lebanese HSE regulations impose a range of obligations on an operator executing petroleum activities. An operator must:

  • establish, continuously develop and maintain a high level of health, safety and protection system for the environment;
  • prepare and regularly update and develop a health and safety plan;
  • develop a system for the registration, evaluation and follow-up of any accident, damage, injury or any other significant safety occurrence; and
  • immediately report injuries to personnel, significant material damage and hazardous incidents, as well as the results of the enquiries to such incidents, to the Lebanese Petroleum Administration.

Non-operator rights holders must continuously ensure that the operator executes the petroleum activities in a prudent manner and complies with the HSE requirements stipulated by applicable law and petroleum industry best practice. 

Labour law

Are there any labour law provisions with specific relevance to the oil and gas industry (eg, with regard to use of native and foreign personnel)?

The Lebanese Labour Law is being reviewed and shall be amended to accommodate the technical requirements of the sector. 

What is the state of collective bargaining/organised labour in your jurisdiction’s oil and gas industry?

This is not applicable in Lebanon.  

Environmental protection

Authorisation

What preliminary environmental authorisations are required before commencing oil and gas-related activities?

Both operators and non-operators must have evidence of established and implemented quality, health, safety and environment management systems before signing an exploration and production agreement with the minister of energy and water.

Under the Offshore Petroleum Resources Law, the operator must – on behalf of the rights holders – submit a detailed environmental impact assessment (EIA) to the minister based on an approved programme as part of any plan for development, production, transportation, storage or usage, and cessation of work.

The minister of energy and water, based on the opinion of the Lebanese Petroleum Administration, then approves the EIA programme and submits a proposal for a development and production plan, including the EIA study, for the Council of Ministers' approval.

The procedures, requirements and conditions for the EIA are stipulated in the Decree of Environmental Impact Assessment Rules (8633).

An EIA study must also form part of the plan for the cessation of petroleum activities and the decommissioning of facilities. This plan is subject to the approval of the minister of energy and water, based on the opinion of the Lebanese Petroleum Administration. The minister can ask for amendments to the plan. The EIA study must cover all areas which may be affected.

When an EIA is required, the rights holders must engage third-party specialist health, safety and environmental professionals to conduct it.

When carrying out petroleum activities, the rights holders shall employ up-to-date techniques, practices and methods of operation to prevent environmental damage, control waste and avoid unnecessary loss of, or damage to, natural resources.

The rights holders must obtain a permit from the minister of energy and water and coordinate with the minister of the environment before initiating any planned flaring or cold ventilation.

Requirements

What environmental protection requirements apply to the operation of oil and gas facilities?

Facilities and work sites shall be planned, designed, built, equipped and set up so that the various petroleum activities can be performed safely and efficiently in accordance with best petroleum industry practices and best pipeline practices.

Preferential treatment shall be given to the use of materials which are considered harmless – either in isolated use or in combination with other materials or gaseous components.  

A transportation or storage facility or system shall be located in a safe, environmentally acceptable and otherwise protected manner in order to prevent damage, and to reduce or prevent interference with other activities.

Facilities shall be equipped with adequate safety systems and designed so as to avoid potential defects or failures from endangering people, the environment or assets and financial interests. 

Facilities shall be equipped with a reliable emergency power system which shall be independent from other power sources and capable of providing sufficient power to safety systems and other vital equipment in the event of failure of the main power system.

Before operating the facilities, the operator shall undertake testing, inspections and checks so as to ascertain that the safety requirements established in applicable laws are met.

A safety zone must be established surrounding a facility unless otherwise provided by a justified decision from the Council of Ministers.

In the event of incidents, accidents or emergencies, the rights holders or person responsible for the operation and use of the facility must suspend the petroleum activities to the extent and for as long as is prudent. 

Consequences

What are the consequences of failure to adhere to the relevant environmental regulations and to what extent can operators be held liable for environmental damage?

The rights holders shall take all necessary and adequate steps to:

  • avoid irremediable environmental damage to the area covered by the exploration and production agreement and adjoining or neighbouring lands and marine areas caused by the rights holder’s petroleum activities; and
  • rehabilitate, at its own cost, all areas that suffer environmental damage as a result of the petroleum activities.

If the rights holder fails to comply with its environmental obligations or contravenes any law on the prevention of environmental damage, and such failure or contravention results in environmental damage, it shall take all necessary and reasonable measures to remedy such failure or contravention and the effects thereof.

Taxes and royalties

Taxes

What taxes (direct and indirect) and/or royalties apply to oil and gas activities in your jurisdiction (including upstream, midstream and downstream activities)?

Total government revenues from oil and gas activities include royalties, profit sharing and taxes.

Royalties
The state is entitled to royalties for all petroleum extracted from reservoirs located within its waters. The rights holders must pay royalties to the state equal to a flat percentage of 4% of the gas produced and a varying and sliding scale percentage of between 5% and 12% for crude oil based on monthly average daily production rate.

The state has the right to collect its entitlements to royalties either in cash or in kind. A royalty taken in kind must be delivered at no cost to the state, at the point of delivery stipulated in the plan for development and production.

Before sharing production, the rights holder is allowed to recover costs after deducting royalties.

Profit sharing
Revenues remaining after the deduction of royalties and cost recovery are referred to as profit petroleum, which is divided between the state and the rights holders.

Profit petroleum must be shared between the state and the rights holders according to a scale varied by the value of factor R, where ‘R’ is linked to quarterly cumulative cash inflows and quarterly cumulative capital expenditures.

The method for calculating factor R is specified in the exploration and production agreement.

Tax
Petroleum activities and petroleum rights conducted in Lebanon and its waters are subject to Lebanese taxes, as stipulated by the applicable law.

There is no taxation law governing oil and gas activities in Lebanon. Parliament is currently working on a new specific taxation law for petroleum activities, due to be enacted soon. 

Imports and exports

What taxes and duties apply to oil and gas imports and exports?

Based on the general Lebanese taxation law, several types of tax are applicable, including:

  • corporate income tax at 15% (applicable to Lebanese resident companies or Lebanese branches of overseas companies);
  • branch tax at 15%;
  • capital gains tax at 10%;
  • value added tax at 10%;
  • withholding tax on dividends at 10%;
  • withholding tax on interest at 10% (but 5% on interest earned on Lebanese bank accounts);
  • withholding tax rate on payments for services at 7.5%;
  • withholding tax rate on supply of goods at 2.25%;
  • branch remittance tax at 10%;
  • property tax, from 4% to 14%;
  • employee income tax, from 2% to 20%; and
  • stamp duty at 0.3%.

Decommissioning

Regulation

How is the decommissioning of oil and gas facilities regulated?

The rights holders shall prepare a plan for the cessation of petroleum activities and the decommissioning of facilities.

Decommissioning plans must be presented to the minister of energy and water at the earliest three years and no later than one year before the expiry of an exploration and production agreement (EPA) or petroleum licence. In cases of revocation of a petroleum right, a decommissioning plan must be prepared and submitted as soon as is practically possible. The rights holders and the owner of a facility are strictly liable for any direct loss or damage caused to third parties resulting from the implementation of an approved decommissioning plan.

A decommissioning plan consists of two parts:

  • an environmental impact study; and
  • an analysis of the relevant resource management, industrial, technical, safety, environmental and economic aspects of the alternative solutions.

The plan must ensure that cessation of activities and decommissioning of facilities are conducted in a manner which gives effect to standards and procedures generally recognised as prudent in the international petroleum industry.

The decommissioning plan is subject to the approval of the minister of energy and water based on the opinion of the Lebanese Petroleum Administration. The minister can ask for amendments to the plan in accordance with the applicable law.

The operator must, on behalf of the rights holders, establish an interest-bearing escrow account in a bank acceptable to the Central Bank of Lebanon. This account is allocated funds for decommissioning and must cover the total costs of implementing an approved plan for the cessation of petroleum activities and the decommissioning of facilities (decommissioning plan). These funds are accumulated by the rights holders from revenue that is subject to cost recovery in accordance with the EPA or to tax under the applicable law. On takeover of the facility by the state, these funds become the property of the state. 

Dispute resolution

Disputes

How are oil and gas disputes typically resolved in your jurisdiction?

A dispute shall be resolved by negotiation between the parties, if possible. In the event that no agreement is reached within 30 days of the date on which one party notifies the other that a dispute exists, either party shall have the right to have such dispute determined by arbitration or an expert determination. Arbitration and expert determination shall be the exclusive method of determining a dispute pursuant to the exploration and production agreement (EPA).

Any dispute, controversy or claim arising out of or relating to the EPA shall be settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce.

Any matter in dispute which must be referred to expert determination, and any other matter which the parties may otherwise agree to so refer, shall be referred to expert determination.

The expert shall be an independent and impartial physical or legal person of international standing with relevant qualifications and experience.

Anti-corruption measures

Dishonest practices

What regulations and procedures are in place to combat bribery, fraud, collusion and other dishonest practices in the oil and gas sector in your jurisdiction?

Any physical or legal person participating in petroleum activities shall cooperate with the Lebanese government to prevent corruption, in line with:

  • the applicable laws of Lebanon;
  • the laws of the country of formation, registration or principal place of business of a rights holder or owner of facilities, or of its affiliated companies at their principal place of business;
  • the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed in Paris on December 17 1997 and the convention's commentaries; and
  • the UN Convention against Corruption, ratified by Law 33/2008.   

Any legal person participating in petroleum activities shall take immediate administrative disciplinary actions and rapid legal measures to prevent, investigate and prosecute any person suspected of corruption or other deliberate or grossly negligent misuse of resources in accordance with applicable Lebanese laws and, if required, other applicable laws.

No offer, payment or benefit of any kind which would or could be construed as an illegal or corrupt practice, shall be made or accepted, either directly or indirectly, as an inducement or reward for any rights granted by the government under the Offshore Petroleum Resources Law.

The Lebanese government is considering joining the Extractive Industries Transparency Initiative. This would make it the first East Mediterranean country to officially comply with the initiative’s standards of transparency and accountability.