Econostrum | Economic News in the Mediterranean

Lebanon to import gas from Egypt to fuel its power plants

Written by Eric Apim on Monday, June 20th 2022 à 09:05 | Read 356 times

Lebanon needs fuel to power its power plants and allow EDL to expand its electricity distribution slots (photo: DR)
Lebanon needs fuel to power its power plants and allow EDL to expand its electricity distribution slots (photo: DR)
LEBANON / EGYPT. Lebanon will sign on Tuesday 21 June 2022 an agreement described as "final" by the Lebanese government to import gas from Egypt. The information comes from a statement by the Lebanese Minister of Energy to the Reuters news agency on Friday 17 June 2022.

Combined with a separate agreement to import electricity via Jordan, Egyptian gas will be supplied by Jordan, but also Syria. The US authorities had to study whether the terms of this text were in line with the sanctions imposed by Washington against Syria (Caesar Act of 2019) before approving it.

Electricity imports via Jordan and gas imports from Egypt will be supported by the World Bank. However, the Bretton Woods institution is making its aid conditional on the vote for reforms in this sector, which has been adding to the debt of a country in default since March 2020 (to the tune of more than $40 billion). The national operator Electricité du Liban (EDL) represents almost half of the Lebanese public debt which should exceed $100bn by the end of 2022. It stood at 197.5% of GDP at the end of 2021.

The International Monetary Fund (IMF) signed, at the beginning of April 2022, a loan with the Lebanese government in the amount of $3bn. However, the sum cannot be released without a policy of budgetary rigour and drastic structural reforms including the banking sector, taxation, the implementation of a floating exchange rate system, and the privatisation of certain state-owned companies. Like EDL, which could transform its shareholding through Public Private Partnership (PPP).

Addressing the electricity shortage

The announcement of a possible gas contract between the two countries dates back to the summer of 2021 and the desire, supported by the United States, to find a solution to electricity shortages, an endemic problem in Lebanon.

The combined imports, electricity from Jordan and gas from Egypt, would, according to the Lebanese government, increase the country's daily electricity supply from just a few hours (due to a lack of fuel to power its power plants) to ten hours.

Lebanon, which currently imports fuel oil from Iraq, wants to reorganise the electricity sector. The objective is to increase supply to justify a price increase and thus fill the empty coffers of EDL. The national public company controls 90% of the country's electricity production, transport and distribution activities.

Already, in 2009, an agreement had been reached for the delivery of 600 million m3 of Egyptian natural gas to Lebanon via the "Pan-Arab natural gas pipeline" and Syria.

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