IOVERVIEW

Lebanon has been plagued by a chronic electricity crisis since the end of the 1975–1990 Civil War, with successive governments failing to make large investments to regain a sustainable position in the ailing sector and its outdated infrastructure. Most Lebanese regions experience 10 to 12 hours of electricity rationing a day, and these power cuts increase dramatically in the event of malfunctions in any of the aging plants. It is common for residents to pay additional costs for external generators to compensate for frequent power cuts. The electricity sector in Lebanon has long suffered from the lack of a global strategy aimed at revitalising it by addressing the needs with respect to infrastructure, generation capacity, operation and maintenance. The large influx of Syrian refugees over recent years has exacerbated the electricity crisis.

The energy sector in Lebanon is mostly controlled by the government and other public sector institutions, namely the state-owned Electricité Du Liban (EDL) founded in 1964. EDL is an autonomous public institution operating under the tutelage of the Ministry of Energy and Water (MOEW), and is vested with certain prerogative rights with respect to the transmission and distribution of electricity throughout Lebanon. Generation of electricity in Lebanon is mainly produced through thermal power plants constituting 80 per cent of the total generation capacity, while hydroelectric power plants provide around 10 per cent of such capacity. Also, and until 2010, additional electricity was purchased from neighbouring countries.

The year 2010 was a turning point for the electricity sector as it witnessed the approval by the Lebanese government of a Policy Paper for the Electricity Sector initiated by the MOEW (the Policy Paper). The Policy Paper comprised a comprehensive plan and a realistic implementation programme for the radical rehabilitation and development of the electricity sector to respond to the economic and social needs and aspirations of Lebanon. It covers three strategic areas: infrastructure, supply and demand, and legal framework. The electricity sector requires drastic reform of the wider energy sector. The Policy Paper addresses renewable energy and energy efficiency, Lebanon being one of the wealthiest countries in terms of renewable energy resources, notably, solar and wind. Accordingly, and with the support of the Lebanese Centre for Energy conservation (LCEC), the MOEW launched a number of tenders for solar and wind energy projects.

While the MOEW initiatives and action plans provide for a series of solutions as part of a national energy strategy, the Lebanese electricity sector still requires long-term reform.

The first attempt to organise hydrocarbon resources in Lebanon in line with international standards occurred in August 2010, with the enactment of the Offshore Petroleum Resources Law (OPRL); this law established the Lebanese Petroleum Administration (LPA), which, together with the Lebanese Council of Ministers and the MOEW, participates in the regulation of the oil and gas sector.

In 2012, the Council of Ministers approved the launching of the first offshore licensing round for hydrocarbon exploration. In 2017, two long-awaited decrees were finally published in the Official Gazette, governing respectively:

  1. the delineation of the Lebanese maritime waters into 10 distinct blocs; and
  2. the tender protocol for the award of exploration and production agreements.

The first exploration and production agreements were signed on 9 February 2018 between the Lebanese government and a consortium of France’s Total, Italy’s Eni and Russia’s Novatek for bloc No. 4 and bloc No. 9.

Regarding onshore hydrocarbon resources, a draft law is still being discussed at the level of parliamentary commissions.

A draft hydrocarbon policy is currently being developed by the LPA, and will ultimately be subject to the approval of the Council of Ministers.

IIREGULATION

iThe regulators

The MOEW was established by virtue of Law No. 20 of 1966, and later reorganised by virtue of Law No. 247 of 2000, and is vested with the following powers, among others:

  1. Setting the general policy for the sector, as well as the general master plan, and the discussion of directive studies and putting them in their final version and submitting them to the Council of Ministers for ratification.2
  2. Proposing the comprehensive rules for the organisation of the services related to the electrical energy production, transmission, distribution and the supervision of execution.3
  3. Proposing draft laws and decrees related to the electricity sector.4
  4. Proposing general safety conditions, environmental conditions and technical specifications applicable to the electrical installations and equipment, provided that the same are issued by virtue of a decree taken by the Council of Ministers upon the competent minister’s proposal after consulting the competent authorities.5
  5. Entering into the necessary contacts with other countries aimed at establishing electrical interconnections and exchanging electrical energy, and the ratification of the necessary contracts after the parliament’s approval.6
  6. Taking all available measures, including the provision of distribution networks according to the laws and contracts ratified by the government to remedy any defects in any of the electricity sector’s activities that may have a negative effect on this sector’s interests or on the consumers’ rights and interests.7

The OPRL vested various prerogatives related to hydrocarbon resources in the Council of Ministers, the MOEW and the LPA. Most of the decisions taken by the MOEW are subject to the approval of the Council of Ministers and such decisions are backed by the LPA’s technical advice and recommendations.

The Council of Ministers approves the state’s petroleum policy and all decrees related to petroleum activities. The Council of Ministers also approves all exploration and production agreements, appoints the LPA’s board, approves petroleum licences and decides on extending the duration of the exploration or production periods after consulting with the LPA.

The MOEW is responsible, inter alia, for signing exploration and production agreements (following authorisation of the Council of Ministers), implementing the OPRL, supervising petroleum activities and protecting the environment from hydrocarbon-related pollution.

The LPA is an independent, technical, regulatory and advisory public entity in charge of regulating, managing and monitoring the petroleum sector, under the supervisory authority of the MOEW. The LPA’s prerogatives encompass the preparation of strategic, economic, financial, technical, geological and environmental plans so as to ensure a prudent and efficient management of Lebanon’s upcoming hydrocarbon wealth. The LPA’s goal is to ensure a successful, transparent and sustainable development process for all petroleum activities, in concert with various governmental bodies, international organisations and civil society.

The main laws and regulations governing hydrocarbons in Lebanon are:

  1. the OPRL dated 24 August 2010;
  2. Decree No. 9438 dated 4 December 2012, appointing the LPA;
  3. Law No. 163 dated 18 August 2011, identifying and delineating the marine zones of Lebanon;
  4. Decree No. 6433 dated 1 October 2011, governing and delineating the Lebanese Exclusive Economic Zone;
  5. Council of Minister Decision No. 41 dated 27 December 2012, opening the first offshore licensing round for hydrocarbon exploitation;
  6. Decree No. 9882 dated 16 February 2013, on the pre-qualification of companies;
  7. Decree No. 10289 dated 30 April 2013, providing for rules and regulations governing petroleum activities, as amended by Decree No. 1177 dated 31 July 2017;
  8. Decree No. 42 dated 19 January 2017, on the delineation of maritime blocs;
  9. Decree No. 43 dated 19 January 2017, approving the tender protocol for the award of exploration and production agreements and the model exploration and production agreement;
  10. Petroleum Tax Law No. 57 of 12 October 2017; and
  11. Council of Ministers’ Resolution No. 32 dated 14 December 2017, granting two petroleum licences over blocks 4 and 9 and mandating the MoEW to sign the corresponding exploration and production agreements, in accordance with the OPRL provisions.

iiRegulated activities

EDL is a public establishment with an industrial and commercial vocation. It was founded by Decree No. 16878 dated 10 July 1964, and is responsible for the generation, transmission, and distribution of electrical energy in Lebanon.8

Currently, EDL controls over 90 per cent of the Lebanese electricity sector (including the Kadisha concession in North Lebanon, which is owned by EDL), with a standing monopoly despite the enactment of Law No. 462 in September 2002 (Law 462) providing, inter alia, for the privatisation of electricity production and distribution activities. Some private companies hold a concession to generate or distribute electrical power. EDL’s capacity to generate electricity stands at approximately 1,800MW, leaving a gap with the actual market demand that is currently filled by unregulated private generators, mainly in residential and commercial sectors.

Other participants in the sector include hydroelectric power plants owned by the Litani River Authority, concessions for hydroelectric power plants such as Nahr Ibrahim and Al Bared, and distribution concessions in Zahle, Jbeil, Aley and Bhamdoun.

In order to ensure equality and competition, Law No. 462 provides that licences and permits are granted to those who satisfy the prerequisite conditions specified by the National Regulator for the Electricity Sector Organisation (NRESO), an establishment affiliated to the MOEW. Preferential treatment and imposing uncodified restrictions on the provision of services is explicitly prohibited by Law No. 462.

Although Law No. 462 entered into force in 2002, the privatisation process and the formation of the NRESO are not yet implemented for various reasons, mostly political.9 The long-awaited Law No. 48 regulating public-private partnerships (the PPP Law) was enacted on 7 September 2017. Such Law applies to government and municipality projects such as infrastructure projects, and also to electricity production and distribution projects.

The licence is an official document issued by the NRESO to joint-stock companies that are granted a concession for a maximum duration of 50 years to (1) establish, equip, develop, appropriate, operate, manage or market equipment within the scope of public services in the fields of production, transportation and distribution of power exceeding 10MW, or (2) use the aforementioned equipment by virtue of a financing leasing contract.10 Since the NRESO has not been established yet, the Lebanese Parliament enacted several laws granting the authority to the Council of Ministers to issue the licences and permits for a specific period of time until the establishment of the NRESO.

The OPRL subjects the performance of ‘petroleum activities’ to a licence; the term ‘petroleum activities’ encompasses planning, preparation, installation and implementation of activities associated with a subsea reservoir, such as reconnaissance, exploration, production and exploitation, laying of pipelines, development of facilities, production and transportation. The OPRL singles out the following licences:

  1. Reconnaissance licence: The general conditions and scope of this licence and the corresponding fees are determined by the Council of Ministers by decree upon the proposal of the MOEW based on the opinion of the LPA. This non-exclusive licence is granted by virtue of a MOEW resolution, based on the opinion of the LPA, for a period not exceeding three years.
  2. Construction, placement and operation of transportation or storage facilities: the Council of Ministers may grant such a licence if the corresponding works are required as part of the approved plan for development and production.
  3. Production licence: The general conditions and scope of this licence and the corresponding fees are determined by the Council of Ministers by decree upon the proposal of the MOEW based on the opinion of the LPA. This licence is granted by virtue of a MOEW resolution based on the opinion of the LPA.
  4. The OPRL also provides that the Council of Ministers awards exclusive authorisations to carry out petroleum activities in a specific bloc by virtue of an exploration and production agreement, setting out the right-holders’ authority to explore, develop and produce oil and gas offshore.11

iiiOwnership and market access restrictions

There are no major ownership and market access restrictions in the energy sector. However, it should be noted that there is a market monopoly by EDL, which controls approximately 90 per cent of the electricity generating capacity in Lebanon, save for the few above-mentioned concessions.

Lebanon recently witnessed instances where private sector companies were granted the right to generate electricity. Most notably, two power ships owned by a Turkish private company have been leased by the Lebanese government since 2013 in order to compensate for the shortage in the electric supply resulting from the lack of proper maintenance of existing plants. The two power barges are anchored at a specially constructed dock off the coast of Beirut, and have a total output of 370MW, with an output to the national grid of an extra two hours’ electricity a day.

The transmission of electrical energy remains exclusive to EDL, but it is possible, through a decree taken by the Council of Ministers upon the proposal of the Minister of Energy and Water, to ratify contracts with the private sector for the management, operation, development or equipment of the transmission’s activities.

The OPRL and Decree No. 43 of 19 January 2017 regulate the terms of exploration and production agreements to be entered into between the Lebanese state and a consortium of at least three right holders. The various right holders form an unincorporated joint venture in which each of them has an indivisible interest. However, the OPRL and Decree No. 43 unequivocally provide that the Republic of Lebanon has title to all petroleum resources in the seabed of Lebanese waters and the exclusive right to their management.

There are no specific restrictions on the award of licences pursuant to the OPRL, except for qualification requirements with which any prospected licensee is required to comply.

ivTransfers of control and assignments

Licensees and permit holders are not allowed to waive or assign their participating interest or permits to any other party, unless they have obtained the prior approval of the NRESO’s (currently the Council of Ministers) and provided that the transfer or assignment conforms with Law No. 462 and the regulations issued for its implementation.12

The OPRL provides that the interest of a right holder in an exploration and production agreement is a ‘non-transferable participation interest’.

The OPRL further provides that:13

  1. the rights and obligations pertaining to a petroleum right may not be transferred or assigned in whole or in part except to a company qualified according to the provisions of the OPRL, and only after obtaining the approval of the Council of Ministers;
  2. the same shall apply to the direct assignment of any right in a company that enjoys a petroleum right, including, inter alia, the transfer of shares or other rights that may grant the holder thereof decisive control over said company; and
  3. no ownership or usage right in any facility upon which a petroleum activity depends shall be transferred, except after approval by the Council of Ministers.

Finally, the OPRL14 provides that the conditions for the sale or transfer of any interest in petroleum shall be set out in a Decree taken by the Council of Ministers.

IIITRANSMISSION/TRANSPORTATION and DISTRIBUTION SERVICES

iVertical integration and unbundling

As stated above, the Lebanese electricity sector is monopolised by EDL, who currently controls over 90 per cent of the sector (including the Kadisha concession in North Lebanon). Moreover, the sector includes hydroelectric power plants owned by the Litani River Authority; concessions for hydroelectric power plants such as Nahr Ibrahim and Al Bared; and distribution concessions in Zahle, Jbeil, Aley, and Bhamdoun, each of which serves a particular geographical area.

According to the 2010 Policy Paper for the Electricity Sector, this structure should be subject to several changes that are aimed at a partial liberalisation of the electricity sector in Lebanon. After the Paper was announced, investors became interested in the electricity sector, and in engaging in the production and distribution of electricity according to the regulations in force. An important focal point is the collaboration between the public and private sectors since 2012, which consists in outsourcing to private sector companies some of EDL’s activities related to the design, implementation, operation and maintenance of a distribution network with the customers and metering services. This is encouraging for the private investors to invest increasingly in the Lebanese electricity sector.

In relation to natural gas, there is no market regulation yet; the only relevant instrument issued so far is Law No. 549 dated 20 November 2003 governing the design, financing, development and reconstruction of two refineries; building a terminal for the import and export of LNG; building facilities for the storage of LNG; and establishing networks for its sale and distribution.

Currently, no LNG terminals or facilities have been erected. Accordingly, there is no effective market for LNG sale or distribution.

iiTransmission/transportation and distribution access

As stated above, the transmission of electrical energy remains under EDL’s monopoly and it is possible, by a decree of the Council of Ministers upon the Minister of Energy and Water’s proposal, to ratify contracts with the private sector for the management, operation, development or equipment of the transmission’s activities. The ‘private sector’ includes any privatised company or any company owned by the private sector.15

In relation to natural gas, these issues have not been addressed yet.

iiiRates

The rates of the distribution and sale of electricity for all voltage levels are set by EDL according to its investment and financing needs in order to develop its activity.16

In relation to natural gas, these issues have not been addressed yet.

ivSecurity and technology restrictions

The MOEW is entitled to take any measures, including those aimed at ensuring that the distributions are executed according to the laws and contracts ratified by the government, in order to remedy any defects in the electricity sector’s activities that may negatively impact this sector’s interests or on the consumers’ rights and interests. The MOEW may also propose general safety conditions, environmental conditions and technical specifications with respect to electrical installations and equipment, provided that they are issued by virtue of a decree taken by the Council of Ministers upon the competent minister’s proposal after consulting the competent authorities.17

Similar considerations to those outlined above govern petroleum activities. Chapter 9 of the OPRL, entitled ‘Health, Safety and the Environment’, outlines the safety and security obligations imposed in conjunction with petroleum activities. These include ensuring the highest levels of safety, having in place a ‘health, safety and emergency response plan’ and efficient emergency preparedness. The competent authorities also have the right to request that the right holder place a determined facility at their disposal and facilitate any specific measures for the purpose of protecting health, safety, security or the environment.

In addition, it should be noted that the Israel Boycott Act enacted by the Lebanese parliament on 23 June 1955 prohibits, under penalty of criminal sanctions, any natural or moral person from conducting, directly or through an intermediary, any agreement with or in the interest of bodies or persons residing in Israel.

The Council of Ministers may, pursuant to a recommendation of the Boycott Bureau (a stand-alone body operating at the Lebanese Ministry of Economy and Trade), enlist any company breaching the provisions of the Israel Boycott Act on a blacklist and prohibit any dealings with such company.

IVENERGY MARKETS

iDevelopment of energy markets

Law No. 462 was expected to liberalise the sale and distribution of electricity in Lebanon and create a competitive free market for electricity. The NRESO, that was supposed to play a leading role in regulating the electricity sector, has not been established yet. The Policy Paper for the Electricity Sector provides for (1) the implementation of a programme to cover the traditional power supply infrastructure whereby international private companies have carried out the rehabilitation of existing power plants and construction of new plants, and (2) a promising renewable energy programme under which qualified developers will build and operate solar or wind power stations and sell the power generated to EDL, which retains the exclusive right of transporting the electricity to end users. However, until Law No. 462 is fully implemented, the supply and sale of energy remains primarily controlled by EDL. Some flexibility has been witnessed on that front since the management of EDL’s distribution business was handed over to three distribution service providers under service contracts. Further, the sale prices of sources of energy are fixed by the state, and investors can engage in the production of electricity subject to applicable regulations using the tariffs and fees mandated by EDL.

In relation to natural gas, no markets have been developed or regulated yet.

iiEnergy market rules and regulation

With regard to electricity, EDL is solely entitled to transmit and distribute electricity to end users in Lebanon. However, and as stated above, other parties play a partial role in the sector, such as the concessions for hydroelectric power plants of Nahr Ibrahim and Al Bared and the distribution concessions in Zahle, Jbeil, Aley and Bhamdoun.

It is important to mention that, up until the full liberalisation of the electricity sector in Lebanon, the tariffs and rates are set by EDL even for the above-mentioned concessions. As for any electricity production activities carried out by the private sector, the transmission of such produced electricity remains the sole right of EDL.

In relation to natural gas, no markets have been developed or regulated.

iiiContracts for sale of energy

Electricity producers and distributors are permitted to have individual contracts for the sale of electric power to EDL, since the latter possesses the sole right to transmit the electricity. Hence, electricity producers are required to connect their production to EDL’s grid in order for it to reach the end users, while the rates and other charges are mandated by the government.

In relation to natural gas, the corresponding guidelines are yet to be developed.

ivMarket developments

The full implementation of Law No. 462 would be considered a huge step forward in the liberalisation and encouragement of private investments in the energy sector. However, this law presents some flaws pertaining to the tendering process for the operation and management by independent power producers (IPPs) of existing power plants, as a prelude to the IPPs entering into power purchase agreements with the Lebanese government.

The PPP Law will undoubtedly create new prospects for the implementation of power projects in Lebanon. The PPP Law introduces a new legal regime, replacing the traditional procurement processes, which suffered from weak transparency, competitiveness and accountability standards. The PPP Law renames and grants the High Council for Privatization and PPP the authority to evaluate potential PPP projects. The PPP Law stipulates the main mandatory provisions that must be included in the PPP agreement

The Sustainable Oil and Gas Development in Lebanon project is being developed as part of the United Nations Development Programme (UNDP). One of the programme’s components is titled ‘Enabling Environment for the Use of Alternative Fuels in the Energy and Transport Sectors’, and provides for the conducting of cost-benefit analyses for the introduction of natural gas and other low carbon fuels in the energy and transport sectors. These should act as a precursor for the development of the corresponding legislation, including without limitation in relation to market development.

In December 2017, the Council of Ministers awarded exclusive licences to a consortium of three companies (Total, Eni and Novatek) for the exploration and production of petroleum offshore, in the Lebanese Exclusive Economic Zone.

VRENEWABLE ENERGY AND CONSERVATION

iDevelopment of renewable energy

There is an obvious trend to increase the inclusion of the production of renewable energy as part of the implementation of the national electricity strategy. The MOEW encourages public, private and individual initiatives to adopt the utilisation of renewable energies to reach the 12 per cent target in the generation of electricity by 2020. In an initiative launched in partnership with the MOEW, the UNDP established the Country Energy Efficiency and Renewable Energy Demonstration Project for the Recovery of Lebanon (CEDRO) in 2007, with an initial budget funded by the government of Spain to enhance the national energy strategy by contributing in achieving renewable energy projects.

Also, the LCEC18 works closely with the MOEW by setting action plans and national strategies in terms of energy efficiency and renewable energy. In an effort to reach the 12 per cent objective, the LCEC has set two consecutive four-year action plans, known overall as the National Energy Efficiency Action Plan (NEEAP).19 The 2011–2015 NEEAP comprises 14 initiatives of which seven were dedicated to renewable energy. The 2016–2020 NEEAP includes 26 initiatives, setting targets and strategies for the achievement of the energy-saving targets. The LCEC, with support from the MOEW, has further put in place the National Renewable Energy Plan (NREAP) 2016–2020, a follow-up report to the 2011–2015 NEEAP specifically dedicated to renewable energy strategies and their implementation.

Lebanon has already witnessed the implementation of projects using renewable sources that are connected to the grid via EDL:

  1. Wind energy: Lebanon constitutes a viable country for energy wind production. In 2013, as part of the implementation of the national strategy for renewable energy development leading to achieving the 500MW wind generation target by 2020, the MOEW launched a tender to private corporations to build the first wind power farm in Lebanon with a capacity of 50–100MW. Under its first power purchase agreement, signed on 1 February 2018, the Lebanese government agreed to purchase 200MW in total from three Lebanese companies. In March 2018, the MOEW launched a second bid round to build additional wind farms for a total capacity of 200–400MW. The electricity generated by the wind farm will be sold to EDL via offtake agreements.
  2. Solar energy: a first of its kind on a national level, the Beirut River Solar Snake, consisting of a photovoltaic (PV) farm, with a total planned output of 10MW, comes as part of the NEEAP to install 200MW of solar farms by 2020. The first phase of the project has been achieved, connecting an extra 1MW of electricity to the grid. Also, the MOEW plans to install around 30MW of solar farms for the public sector between 2016 and 2020. In 2017 and 2018, the Moew launched two consecutive bids for 12 and 24 PV farms respectively (of 10–15MW each). Recently, a new bid has been launched for three PV farms (of 70–100MW each) to include for the first time electricity storage of 70 mw/70mwh. The development of PV farms is becoming more appealing, especially with the decrease in related solar installations’ prices, the decentralisation of PV farms and the growing involvement of the private sector.
  3. Water energy: while 75 per cent of Lebanon’s market demand was covered by electricity generated from hydroelectric sources in the 1970s, the production of hydroelectric power was seriously affected during the civil war and afterwards. Opportunities in the hydropower sector are numerous, as the General Directorate of Hydraulic and Electric Resources at the MOEW envisages a promising strategy encompassing rehabilitation of the existing hydropower plants, the development of dams and the construction of new hydroelectric plants and micro hydropower systems. The current hydropower installed capacity is approximately 221MW, the main plant being the Litani station located in the Bekaa Valley. Also, as part of the NREAP 2016–2020 action plan, the MOEW launched the implementation of the Janna dam,20 which will include the hydroelectric power plant supplying the grid with approximately 100MW of hydroelectricity. In 2018, the MOEW launched a bid for hydroelectric power plants based on studies carried out by leading European engineering firms, aimed at identifying potential sites for such projects. It is expected that hydroelectric sources will generate approximately 300MW by 2020.
  4. Bioenergy (including waste to energy): 23 bioenergy streams have been identified as potential resources for energy production. All action plans stated in the National Bioenergy Strategy for Lebanon set in 2012 by the MOEW along with the UNDP as part of the CEDRO project have been reinstated in the NREAP 2016–2020, as the Ministry recognises that the future of bioenergy is promising. On-ground surveys and assessments have been carried out to identify the most efficient and promising biomass streams. As for waste to energy, the process for producing electricity was launched in 2015 through the establishment of a 7MW plant in the Naameh landfill to produce electricity.

iiTechnological developments

The LCEC has drafted an energy conservation law, the Renewable Energy and Energy Conservation Law, which sets the legal framework for the implementation of the NREAP and addresses the production by the private sector of electricity from renewable energies, the management of energy supply and demand and the computation of renewable energy tariffs. The proposed law also covers topics related to energy efficiency in connection with the electricity grid. It provides for mandatory audits and certifications while catering for incentives to promote green solutions.

Notwithstanding the above, a series of initiatives are being carried out with respect to the development of smart technologies that would have an estimated impact on energy demand management. The launching by EDL of the advanced metering infrastructure, comprising the installation by three private distribution service providers of smart meters over the Lebanese territory, is expected to provide energy efficiency in terms of monitoring and synchronisation of wide area networks. A pilot project is currently being carried out to test the responsiveness of the Lebanese network.

ViTHE YEAR IN REVIEW

There is a growing national momentum to develop action plans and strategies for the electricity sector, and to encourage all related initiatives. The political commitment in a country like Lebanon plays a crucial role in achieving the goals of the 2016–2020 NREAP. The involvement of the private sector in the various tenders relating to energy and electricity projects is increasing, especially in light of the incentives proposed by the Central Bank of Lebanon and private financial institutions to finance such projects.

A 10-year reform plan proposed by the incumbent Minister of Energy and Water based on the 2010 Policy Paper was approved by the Council of Ministers on 28 March 2017. The first phase of the plan involves the lease of two additional power barges from the Turkish company that already operates two smaller ships in Lebanon, and the activation of the two recently overhauled power plants of Zouk Mikael and Jiyyeh, with the aim of increasing electricity supply to 21 hours a day this year. The main idea behind the leasing of the barges is to give the MOEW more time to build new power plants that can provide all of Lebanon with 24 hours of electricity in the future. The two additional floating power plants will reportedly generate up to 890MW at a cost of US$340 million a year. The plan also envisions the construction of solar power plants and hydroelectric power plants in several areas of the country.

The plan has been met with scepticism and controversy, with challengers alleging its high-cost factor, lack of transparency and the expectancy that it will result in a significant increase in electricity tariffs.

The issuance in early 2017 of the decree on the delineation of maritime blocs and the decree on the tender protocol and the model exploration and production agreement has paved the way for the closing of the prequalification process; the grouping of the qualified companies in consortia; and, finally, following approval by the Council of Ministers, the execution of the corresponding exploration and production agreement between the winning consortia and the Lebanese state for one or more of the maritime blocs.

On 26 January 2017, the MOEW announced that five out of the 10 maritime blocks were open for bids. Prequalified companies should submit their bids by 15 September 2017. The aim of the Lebanese government is to have one or more exploration and production agreement signed by the end of 2017.

VIICONCLUSIONS and OUTLOOK

While the Lebanese energy and electricity sector is currently witnessing drastic progress, it is essential to ensure a full correlation between the development of the legal framework and the privatisation process set out by the PPP Law and Law 462. The restrictions imposed by Law 462 should be lifted so as to offer a more flexible legal framework, allowing the private sector to invest in energy production and distribution at fair yet competitive rates to third parties. Additionally, the introduction of legal reforms for alternative technologies and renewable energy activities should be envisaged to fill a considerable gap towards a sustainable national energy strategy.

After a long stalemate (between 2013 and 2017), Lebanon is steadily heading towards becoming a hydrocarbon state, provided extractable discoveries are made in the near future. A successful first licensing round will be a decisive step.

Lebanon’s key challenge is to ensure that the process is managed with a sound governance system and utmost transparency. The Lebanese government’s recent request to join the Extractive Industries Transparency Initiative is a key indicator in this direction, and a message of confidence to both the applicant companies and the Lebanese civil society.


Footnotes

1 Souraya Machnouk is a partner and Hachem El Housseini, Rana Kateb and Chadi Stephan are senior associates at Abou Jaoude & Associates Law Firm. The information in this chapter is correct as at May 2018.

2 Article 6 of Law No. 462 of 2002.

3 Article 6 of Law No. 462 of 2002.

4 Article 6 of Law No. 462 of 2002.

5 Article 6 of Law No. 462 of 2002.

6 Article 6 of Law No. 462 of 2002.

7 Article 6 of Law No. 462 of 2002.

8 Article 1 of Decree No. 16878 of 1964.

9 Article 19 of Law No. 462 of 2002.

10 Article 1 of Law No. 462 of 2002.

11 As per the specific provisions of the draft EPA enacted by virtue of Decree No. 43 dated 19 January 2017.

12 Article 23 of Law No. 462 of 2002.

13 Article 70 of the OPRL entitled ‘Transfer or Assignment of a Petroleum Right’.

14 Article 40 of the OPRL entitled ‘Sale of Petroleum’.

15 Article 5 of Law No. 462 of 2002.

16 Article 8 of Decree No. 16878 of 1964.

17 Article 6 of Law No. 462 of 2002.

18 The Lebanese Center for Energy Conservation (LCEC) is an independent governmental organisation operating under the supervision of the Lebanese Ministry of Energy and Water.

19 The National Energy Efficiency Action Plan is a national action plan developed based on the requirements of the League of the Arab States and according to the format used by the European Union.

20 The construction of the 300-foot high Janna Dam was suspended in May 2016, only to resume later despite local ecological and environmental warnings and concerns.