How Oil Prices Impact Fiscal Regimes
Markets largely dictate how the relationship between international oil companies and host states will play out, with governments attempting to ensure they receive a ‘fair share’ of petroleum revenues.
But with no clear definition of what a fair share is, particularly in relation to changes in oil prices, the perception of a fair share remains under near constant review. This results in a pendulum effect, whereby changing market conditions can place either governments or companies in more advantageous positions in negotiations.
In terms of policy-making by the Lebanese government, these dynamics suggest that existing market conditions should be taken into consideration when launching the country’s first licensing round but this does not necessarily mean that the government should wait for oil prices to recover to pre-2014 levels, as that might take a while to happen. The fiscal regime should be internationally competitive and balanced.
- Jul 12, 2016