Lebanon has now been in its economic and energy crisis for around two years, battling every day with a lack of electricity and relying on generators for the most basic energy supply. Earlier in the year, Human Rights Watch said that the crisis was driving up poverty and inequality as the government was failing to uphold the nation's right to electricity. But an oil deal with Iraq, developments in its own oil and gas sector, and the expansion of the country's solar energy capacity could potentially help to keep Lebanon afloat.
In 2021, Lebanon was thrown into economic turmoil, which the World Bank identified as "one of the top ten, possibly top three most severe economic collapses worldwide since the 1850s." The country was plunged into darkness due to a severe lack of fuel, with the energy ministry scrambling to source enough power to keep the lights on. The government and the state electric company, Electricité du Liban (EDL), have been blamed for making poor energy decisions for decades, which eventually resulted in shortages and ultimately an energy crisis. Lebanese citizens have long been plagued with daily power outages due to the country's heavy reliance on foreign energy imports. Lebanon contributes around 20 percent of its import bill to fuel, to meet more than 90 percent of the country's energy needs. This has left the country with a high level of energy insecurity.
In August 2022, EDL said it was "fighting tooth and nail" to find a solution before the lights go out at Beirut's airport, port, and presidential palace. There were major concerns about losing power to Lebanon's key infrastructure, such as hospitals and prisons. EDL quickly became reliant on Grade B gas oil to maintain power in the summer months, having to choose which buildings would receive electricity. This was necessary while the government hashed out a deal with Iraq for more fuel.
A year on, there is some optimism around the future of Lebanon's energy situation, but it is still a long way from being stable. In July, Iraq renewed its agreements to deliver up to 2 million tonnes of crude to Lebanonover the next year, according to the Lebanese energy ministry. And Iraqi news outlets reported that the two governments had signed a memorandum of understanding over the crude exports. This followed a deal signed in May over the supply of more fuel from Iraq, to support Beirut's fight to stay alight and tackle its economic crisis. Iraq is also expected to increase the volume of heavy fuel oil it sends to Lebanon this year by 50 percent, to 1.5 million metric tonnes, under a 2021 deal. In return, Lebanon will provide services such as health care for Iraqi citizens.
In terms of Lebanese energy, a consortium led by TotalEnergies expects to begin drilling for oil and gas off the coast of Lebanon in September. The group, which includes Italian firm Eni and QatarEnergy, has a rig prepared for offshore southern Bloc 9. Lebanon's caretaker energy minister Walid Fayyad stated, "The rig will start working in Lebanon in September ... before the end of the year we will know if there is a discovery." This move comes following the delineation of the country's maritime border with Israel last October.
If the exploration is successful, the government hopes it will encourage greater investment in the country's oil and gas sector. The ministry is expected to extend the deadline for applications to explore eight additional offshore blocs, with Fayyad explaining "I have been hearing from players in the field that they are keen to see the result of the drilling in Bloc 9 before they make decisions as to further investments or commitments in Lebanon." He added, "In the end, if we don't have enough interest and players, we must adapt." Meanwhile, an agreement under the World Bank to receive electricity from Jordan and gas from Egypt through Syria has not moved forward, with the organisation requesting further reforms before going ahead with the deal.
Lebanese residents have come to rely heavily on fuel-guzzling generators to supply their electricity during the hours when there is no power, leading the average Lebanese household to spend 44 percent of their monthly income on generator bills between November 2021 and January 2022. However, some have now decided to invest in rooftop-fitted solar panels. From 2020 to 2022, the country's installed capacity of solar energy rose eight-fold, with more than 650 MW installed in 2022, to a total of 870 MW. Installed capacity was expected to reach around 1,000 MW by June 2023. Estimates suggest that around 50,000 households have rooftop solar panels, approximately 4 precent of Lebanon's 1.3 million households.
While solar power continues to roll out on a small scale, with mostly individual, private investors dominating the market, it shows the potential for a shift away from the reliance on generators. And in the longer term, the Lebanese government must continue to make the economic reforms necessary to ensure World Bank funding for energy, as well as maintaining its energy relationship with Iraq and attracting other foreign players to its offshore oil and gas sector.
By Felicity Bradstock for Oilprice.com
Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More