As energy problems fuel protests, Lebanon eyes gas revolution

Renewed urgency to tackle chronic power problems could jump start integration of natural gas into Lebanon’s energy mix.

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Unreliable, inefficient and expensive electricity is a huge drag on Lebanon's economy and a root cause of the deepening financial crisis that has sparked protests all across the country [File: Andrea Prada Bianchi & Sergio Colombo/Al Jazeera]

Beirut, Lebanon – When the lights in his textile shop went out, Nadir did not even blink. No one in the Baalbek souk did. In Lebanon‘s Bekaa Valley, where the city stands, state-run electricity is provided for only seven hours a day – the lowest of any region in a country that has not had 24-hour electricity supply since the 1975-1990 civil war.

“We are used to it,” said Nadir, who asked Al Jazeera to withhold his surname to protect his privacy. “It’s been like this for 30 years. The government always takes, but never gives.”

On the road to Beirut, Hezbollah flags waved in the dark, under unlit street lamps that that stretched in a line for kilometres into a black abyss.

“Lebanese are sick of living in these conditions,” said Michel, an architect working in the capital who also asked his surname be withheld. “Political parties have been promising the moon for years, but maybe they should start fixing electricity.”

Unreliable, inefficient and expensive electricity is one of the biggest obstacles to doing business in Lebanon, and a root cause of the deepening financial crisis that has sparked protests across the country.

Renewed urgency to finally tackle Lebanon’s power problems could jump start the integration of natural gas into the country’s energy mix, and dovetail with a highly anticipated, years-in-the-making exploration of Lebanon’s offshore natural gas reserves.

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Two men sit under a street lamp in the centre of Lebanon’s capital Beirut which experiences on average three hours of rolling blackouts a day [File: Andrea Prada Bianchi and Sergio Colombo/Al Jazeera]

‘We have no other choice’

Lebanon is one of the only countries on the planet that is heavily dependent on fuel oil and diesel oil to generate electricity.

Among the raft of economic reforms announced by Prime Minister Saad Hariri on October 21 is an overhaul of the country’s energy sector that includes transitioning power plants run by state-owned giant Electricite du Liban (EdL) from oil to less expensive natural gas.

Though the reform package failed to assuage protesters, oil-powered electricity is undeniably a huge drag on Lebanon’s finances. Government energy subsidies reached $1.8bn in 2018, according to the World Bank – roughly 30 percent of the state’s budget deficit last year.

In July, the IMF determined that “eliminating electricity subsidies is the most significant potential expenditure saving,” Lebanon could make. The IMF also proposed that EdL charge customers more for the electricity they use.

The current tariff structure, which only covers around a third of the company’s operating costs, has not changed since 1996, when global benchmark crude oil traded around $23 a barrel. It currently trades around $62 a barrel.

But hiking prices is a tough sell, given EdL’s dodgy service.

Last year, the company supplied less than half of Lebanon’s electricity needs. Private power suppliers – known as “generator mafias” made up the difference.

“We have to pay two bills,” said Mohammed, a driver from Tripoli who asked Al Jazeera to withhold his surname. “One to the state and one to generator owners that provide us with the electricity that the government is unable to give us.”

Private suppliers often charge an extortionate flat rate, which means customers pay the same price every month, regardless of how much electricity they use.

“I shell out $65 to EdL and $100 to the privates for the apartment I live in with my family,” said Michel.

Demand for privately generated power varies from region to region. Rolling blackouts in Lebanon range from three to 17 hours a day, with Beirut and South Lebanon experiencing the shortest disruptions, and the Bekaa Valley experiencing longest, according to the World Bank.

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A web of power lines in Baalbek in Lebanon’s Bekaa Valley, where state-run electricity is provided for only seven hours a day on average [File: Andrea Prada Bianchi and Sergio Colombo/Al Jazeera]

In April 2019, Lebanon’s council of ministers approved an energy sector reform plan that includes cracking down on illegal connections to the grid, increasing generation capacity, hiking tariffs, and upgrading infrastructure to shift the state’s power plants to natural gas and build new ones, as well.

“Lebanon currently has around 42 percent of power plants that can run on gas,” Chatham House fellow Jessica Obeid told Al Jazeera. “The plan is that the new upcoming power plants will primarily run on natural gas.”

Overhauling the power sector has been discussed for years. But the pressure is on to finally deliver on such reforms, which are among a list of preconditions for unlocking $11bn in loans and grants pledged to Lebanon by Western and regional donors.

“We are wasting considerable time discussing and explaining our plans over and over again to various parties,” Minister of Energy and Water Nada Boustani Khoury tells Al Jazeera. “It is a ‘no-brainer’ to conclude that [a reform] would lead to a reduction of the electricity deficit and hence an improvement of the dire financial straits that Lebanon is facing. We have no other choice.”

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Zouk power plant, located at 13.5km North East of Beirut, is run by EdL and operates on expensive, dirty fuel oil [File: Andrea Prada Bianchi and Sergio Colombo/Al Jazeera]

At long last, exploration

Such reforms include what Boustani describes as “the gasificaiton” of the power sector – a stated goal that dovetails with a long-awaited inaugural exploration of Lebanon’s offshore gas fields.

The territory claimed by Lebanon in the Levant Basin holds potentially 708 billion cubic metres (25 trillion cubic feet) of natural gas reserves, according to government estimates. But the International Energy Agency cautions “that figure remains speculative” until more exploration occurs.

That is finally set to happen this December when a consortium, including France’s Total, Italy’s ENI, and Russia’s Novatek, is scheduled to start drilling wells in one of the 10 blocks claimed by Lebanon in the Levant Basin, with initial results expected by March.

“Expectations are quite high,” says Ali Ahmad, director of the Energy Policy and Security Program at the American University of Beirut. “Lebanon pays a lot for purchasing fuel oil. Having domestically produced resources such as natural gas would be a relief for the state coffers.”

But geopolitical tensions could interfere with unlocking those potential offshore gas riches. One of the 10 blocks claimed by Lebanon in the Levant Basin is in waters disputed with Israel.

“A mediation is taking place concerning the southern maritime borders and progress is being made on that front,” Boustani told Al Jazeera.

Should exploration efforts bear fruit, it would still take years to develop the infrastructure to produce and distribute indigenous natural gas.

In the meantime, making natural gas the dominant player in Lebanon’s energy mix will require imports, but that also faces hurdles.

Supplies of natural gas from Egypt to Lebanon via the Arab Gap Pipeline stopped flowing nine years ago. Given the security and geopolitical challenges with importing gas via pipelines, liquified natural gas (LNG) is considered the most viable option in the near term.

“Lebanon has prepared an international tender for the supply of LNG at specific locations and is in the process of evaluating the bids,” says Boustani.

Qatar and Egypt are both under consideration as potential LNG suppliers to Lebanon. Egypt, along with Saudi Arabia, Bahrain and the United Arab Emirates cut ties with Qatar in 2017 and imposed a land, sea and air blockade on the Gulf state that is still in force.

But Ahmad said Lebanon cannot afford to take sides when it comes to securing a more efficient and cost-effective energy future.

“We should benefit from any help, be it from Cairo or Doha,” says Ahmad. “We don’t have the privilege to choose. If your house is on fire, you don’t argue with your neighbour. You put the fire off and then you solve your family problems.”

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As economic crisis fuels discontent throughout Lebanon, pressure is mounting on the government to finally implement long talked about energy reforms that include transitioning the country away from fuel-oil-powered electricity, to less-expensive natural gas [File: Andrea Prada Bianchi and Sergio Colombo/Al Jazeera]