For­bid­den no more

With sanc­tions on the way out, only po­lit­i­cal bar­ri­ers pre­vent Ira­nian in­vest­ments in Le­banon’s energy sec­tor

Executive Magazine - - Special Report -

Le­banon was most likely a mar­ginal topic on the side­line of nu­clear dis­cus­sions in Vi­enna, but the nu­clear agree­ment be­tween Iran and the P5+1 group is ex­pected to have di­rect im­pli­ca­tions on lo­cal Le­banese pol­i­tics. Since the dead­lock in Le­banon is largely a re­flec­tion of re­gional dead­lock, it would be rea­son­able to ex­pect a pos­si­ble re­gional ap­pease­ment to con­trib­ute to un­lock­ing the sit­u­a­tion in Le­banon. The im­me­di­ate post-Iran deal pe­riod is ex­pected to be a pe­riod of hes­i­ta­tion and test­ing un­til the time is ripe for broad ar­range­ments. While the over­all re­gional bal­ance is ex­pected to tip in fa­vor of the Ira­ni­ans, in Le­banon, ar­range­ments be­tween Ira­nian-backed fac­tions and Saudi-backed fac­tions are in­evitable, both at the po­lit­i­cal and busi­ness lev­els.

While the world pre­pares for in­vest­ments in Iran, a Le­banese-cen­tered ap­proach con­sid­ers how the deal could free up Ira­nian in­vest­ments in Le­banon, par­tic­u­larly in the energy sec­tor, long lim­ited by sanc­tions, and a cer­tain re­luc­tance from some Le­banese. In the past, Iran ex­pressed re­peated in­ter­est in the Le­banese energy sec­tor. Tehran of­fered to re­ha­bil­i­tate the coun­try’s two re­finer­ies (cur­rently in­ac­tive and used for stor­age only), build a power plant un­der fa­vor­able terms, and sup­ply Le­banon with oil and nat­u­ral gas. These projects faced a num­ber of chal­lenges and their fea­si­bil­ity was not al­ways en­sured.

SUP­PLY­ING LE­BANON WITH GAS AND/OR OIL

Sup­ply­ing Le­banon with gas faces a num­ber of chal­lenges. Gas can be ex­ported ei­ther by pipe­lines or chilled to a liq­uid form and trans­ported by spe­cial­ized tankers. The first sce­nario, (ex­port­ing gas to Le­banon via pipeline), re­quires build­ing the pipeline which has to pass through some of the most un­sta­ble coun­tries in the world. With re­gards to the sec­ond sce­nario, Iran had sev­eral projects for build­ing liq­ue­fied nat­u­ral gas (LNG) plants and even started work­ing on one, but work was sus­pended due to sanc­tions. De­vel­op­ing LNG ca­pa­bil­i­ties is costly and it is go­ing to take Iran sev­eral years to build the nec­es­sary in­fra­struc­ture, even if Iran is con­sid­er­ing a float­ing LNG plat­form. Sup­ply­ing Le­banon with gas is not fea­si­ble in the short term, but could be­come a pos­si­bil­ity a few years down the road. On the other hand, sup­ply­ing Le­banon with oil and other petroleum prod­ucts would be less prob­lem­atic.

ELEC­TRIC­ITY

Le­banese de­mand stands at ap­prox­i­mately 2,500 MW per day (with peak de­mand ex­ceed­ing 3,000 MW), while the avail­able ca­pac­ity is lim­ited to 1,500 MW, caus­ing se­vere short­ages, cov­ered mostly by pri­vate diesel gen­er­a­tors. The 2010 Pol­icy Pa­per for the Elec­tric­ity Sec­tor pro­poses mea­sures to im­prove per­for­mance, and, more sig­nif­i­cantly, cut the energy bill by $1.5-2 bil­lion per year. The pa­per sug­gests achiev­ing this by re­duc­ing de­pen­dency on ex­pen­sive im­ported oil, and grad­u­ally con­vert­ing ex­ist­ing power plants to op­er­ate us­ing nat­u­ral gas. At a con­fer­ence in De­cem­ber 2014, an LPA board mem­ber es­ti­mated that 65 per­cent of the power gen­er­a­tion ca­pac­ity could be gen­er­ated us­ing gas. Power plants in Deir Am­mar and Zahrani are fit and ready to re­ceive nat­u­ral gas. With some mi­nor mod­i­fi­ca­tions, two other power plants, in Tyre and Baal­beck, could be made to re­ceive nat­u­ral gas. LNG im­port ter­mi­nals and a coastal pipeline are planned to sup­port the im­ple­men­ta­tion of the con­ver­sion process. The pipeline is set to sup­ply ma­jor power plants along the way, in ad­di­tion to fac­to­ries and in­dus­trial plants.

Tehran has re­peat­edly pro­posed to sup­ply Le­banon with elec­tric­ity over the past few years (Iran ex­ports around 25,000 MW per day and has a sur­plus of pro­duc­tion es­ti­mated at around 6,000 MW), and build ad­di­tional power plants at fa­vor­able con­di­tions.

TEHRAN HAS RE­PEAT­EDLY PRO­POSED TO SUP­PLY LE­BANON WITH ELEC­TRIC­ITY

PAR­TIC­I­PA­TION IN EX­PLOITA­TION OF PO­TEN­TIAL OIL & GAS RE­SOURCES IN LE­BANON

In 2013, the only Ira­nian com­pany that sought to pre­qual­ify for Le­banon’s first li­cens­ing round, the Na­tional Ira­nian Drilling Cor­po­ra­tion, failed to do so. Also, no­tably ab­sent

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