Thread by @AzarsTweets

How much tax revenue could the Govt of Lebanon generate from future oil & gas activities?I’ve modeled out one scenario assuming ~17 tcf of gas, which is enough to support a 2-train onshore LNG project.Early estimates range from 10-25 tcf (take these w a grain of salt).

The scenario results in ~$54 billion of direct tax revenue to the Govt through 2052, 30 years after the start of the “development” phase of the project. ~$1bn per year through 2036, ~$2+ bn per year through 2046, and ~$3.5 bn per year after that.

The tax payments are back-ended because of the way the payments in the Exploration and Production Agmt are formulated.This is customary in production sharing agreements. In fact, the Agmt is actually fairly generous to the Govt compared to others I’ve seen.

Other assumptions: $1.8 bn per ton (capex, excl finance), 2 bcf/day wellhead production to support 2 LNG trains, conservative opex and shipping (DES) costs based on a similar project, 60:40 debt to equity (with bankable debt metrics). Most assumptions r based on a similar project

Finally LNG is assumed to be sold at a price of 11.5% of crude oil (compared to 12-12.5% for contracts signed today) and crude oil assumed to be $75/bbl in 2028 increasing 2% per year with inflation

This estimate is based on detailed financial modeling and reference to projects in countries similar to Lebanon, but is only one possible scenario. It is based on a set of assumptions and is meant to give a general idea for the scale and timing of any potential tax revenue.

Not included: smaller taxes (stamp,VAT,personal income tax), benefits to the Lebanese economy broadly,and Govt share of dividends if it takes a Participating Interest in petroleum activities (ex. 10% Interest could generate ~$7 bn less $1.2 bn for its share of construction costs)

For reference, Lebanon’s GDP is about $55 billion and its government revenue is $12 bn per year (versus more than $15 bn per year of spending).

@Jessica_Obeid this might be of interest to you