Sustainable Oil and Gas Development in Lebanon, “SODEL” COST BENEFIT ANALYSIS for the USE of NATURAL GAS and LOW CARBON FUELS
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J669-ILF-BGE-AD-0021/REV.0 United Nations Development Programme Sustainable Oil and Gas Development in Lebanon, “SODEL” COST BENEFIT ANALYSIS FOR THE USE OF NATURAL GAS AND LOW CARBON FUELS FINAL REPORT 01.11.2016 ILF Business Consult GmbH Joseph-Wild-Strasse 16 81829 Munich Germany Phone: +49-89-25 55 94 - 0 Fax: +49-89-25 55 94 - 550 E-mail: [email protected] Internet: www.ilf-bc.com United Nations Development Programme Final Report REVISION 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 0 19. 08.09.2016 Issue for use 20. F. Baretzky 21. S. Roth 22. S. Roth Rev. Date Purpose Prepared Checked Approved J669-ILFBC-AD-0023-Final Report_Rev0 28.10.2016 01.11.2016 Page 2 of 147 United Nations Development Programme Final Report TABLE OF CONTENTS TERMS AND DEFINITIONS 11 ABBREVIATIONS 11 1 INTRODUCTION 16 1.1 Authorization 16 1.2 Project Description 16 1.3 Work Methodology for the Project 17 1.3.1 Task 1: Overview of the current hydrocarbons in the energy sector in Lebanon 17 1.3.2 Task 2: Assess the existing infrastructure in Lebanon and provide recommendations to implement a new fuel mix in the target sectors 17 1.3.3 Task 3: Conduct Cost benefit Analysis on the possible use of natural gas and LCFs in the target sectors 18 1.3.4 Task 4: provide recommendations to update or develop new legislation to implements the new fuel mix in the target sectors 20 1.3.5 Task 5: Provide policy recommendations 21 1.3.6 Task 6: Conduct consultation workshop to verify the attained results 21 1.3.7 Task 7: Design a pilot study on the use of natural gas and LCFs in an identified zone in Lebanon 21 2 OVERVIEW OF THE CURRENT HYDROCARBONS IN THE ENERGY SECTOR IN LEBANON22 2.1 Stakeholders 22 2.2 Literature Review 24 2.2.1 Studies 24 2.2.2 Relevant Laws, Policies and Plans 25 3 EXISTING HYDROCARBONS INFRASTRUCTURE 29 3.1 Hydrocarbons Production 29 3.2 Transport 29 3.2.1 Inland Water Transport 30 3.2.2 Import Pipelines 30 3.2.3 Road Transport 34 3.2.4 Railway Transport 41 J669-ILFBC-AD-0023-Final Report_Rev0 28.10.2016 01.11.2016 Page 3 of 147 United Nations Development Programme Final Report 3.2.5 Export Infrastructure 42 3.3 Terminals and Storage Facilities 43 3.3.1 Public Oil Infrastructure 43 3.3.2 Private Oil Infrastructure 46 3.3.3 Public Gas Infrastructure 49 3.3.4 Private Gas Infrastructure 49 3.4 Local Refineries 53 3.4.1 Tripoli Refinery 53 3.4.2 Zahrani Refinery 54 3.5 Fuel Stations 54 3.6 Local Power Plants 56 3.7 Thermal Power Plants 56 3.7.1 Zouk Power Plant 59 3.7.2 Jiyeh Power Plant 59 3.7.3 Deir Ammar Power Plant 60 3.7.4 Hrayche Power Plant 61 3.7.5 Zahrani Power Plant 61 3.7.6 Tyr Power Plant 61 3.7.7 Baalbek Power Plant 62 3.7.8 Power Ships 62 3.8 Hydro Power Plants 63 3.8.1 Future developments or expansion plans 64 4 OVERVIEW OF THE MAIN ENERGY CONSUMING SECTORS IN LEBANON 66 4.1 The Power Sector 67 4.1.1 Existing Challenges in the Power Sector 68 4.1.2 Future plans 70 4.2 The Industrial Sector 70 4.2.1 Growth of industry 2007-2014 74 4.2.2 Cement industry in Lebanon 74 4.2.3 Chemical industry 75 4.2.4 New steel and petrochemical industries (2030) 75 J669-ILFBC-AD-0023-Final Report_Rev0 28.10.2016 01.11.2016 Page 4 of 147 United Nations Development Programme Final Report 4.2.5 Fuel consumption and potential gas demand 77 4.3 The Residential Sector 78 4.3.1 Existing population and households size; geographical distribution by caza 78 4.3.2 Estimated fuel consumption and potential gas demand 80 4.4 The Commercial and Institutional Sectors 82 4.4.1 Consumption by Economic Category (Boilers, Private Power, LPG) 82 4.4.2 Consumption and potential gas demand 84 5 POTENTIAL NEW INFRASTRUCTURE FOR DELIVERING NATURAL GAS TO THE TARGET SECTORS 86 5.1 Potential New Infrastructure for the delivery of natural gas 99 5.2 The Coastal Pipeline 99 5.2.1 General 99 5.2.2 CAPEX 100 5.2.3 OPEX 100 5.3 City Gas Distribution Network for the industrial, commercial, institutional and residential sectors 101 5.3.1 Technical Infrastructure Requirements 101 5.3.2 CAPEX 101 5.3.3 OPEX 102 5.4 LNG Trucking 103 5.4.1 Technical Infrastructure Requirements 103 5.4.2 CAPEX 103 5.4.3 OPEX 103 6 COST BENEFIT ANALYSIS 105 6.1 Characterization of Target Sectors and Fuel Demand 105 6.2 NG Demand Clusters for the Study Target Sectors 108 6.3 NG Infrastructure Scenarios 108 6.4 Results of the second CBA model simulation 110 7 PILOT STUDY, TERMS OF REFERENCE 121 7.1 INTRODUCTION 121 7.2 OBJECTIVE OF THE STUDY 121 J669-ILFBC-AD-0023-Final Report_Rev0 28.10.2016 01.11.2016 Page 5 of 147 United Nations Development Programme Final Report 7.3 SCOPE OF THE STUDY 121 8 STAKEHOLDERS CONSULTATION WORKSHOP 123 9 POLICY CONSIDERATIONS 124 9.1 Funding and financing the gas-to-power value chain 125 The Gas-to-Power Versus the Gas-to-End-User Value Chain 125 9.2 Some Initial Observations on Investment and Debt Financing of the Infrastructure Scenarios 127 9.3 Project Risk, Emerging Markets and De-Risking Options 129 9.4 Financing Options 130 9.4.1 Equity Investment by a Strategic Investor 130 9.4.2 Debt Financing and PPP Arrangements 131 9.5 Master Plan, Strategy and Priority Focus 133 9.6 Indicative Recommendation on Funding and Financing Gas-to-Power Infrastructure 134 9.7 Lebanese Energy Policy Context 137 9.7.1 Policy Considerations 137 9.7.2 Lebanese Policy Recommendations 139 9.7.3 Legal Framework 141 9.8 Subsequent Scope of Work 143 10 SCHEDULE OF DELIVERABLES 146 FIGURES Figure 1: The IPC pipeline route 31 Figure 2: The TAPLINE route 32 Figure 3: Arab Gas Pipeline and GASYLE 33 Figure 4: General overview map of the road network in Lebanon 36 Figure 5: Vehicle fleet distribution in Lebanon in 2012 37 Figure 6: Contribution of the different vehicle categories to the direct GHG emissions in 2005 38 Figure 7: Border crossings between Lebanon and Syria 40 Figure 8: Railway routes of Lebanon 42 Figure 9: Tripoli oil installations components (yellow) and Deir Ammar power plant 44 Figure 10: Zahrani oil installations components (yellow) and Zahrani power plant 45 J669-ILFBC-AD-0023-Final Report_Rev0 28.10.2016 01.11.2016 Page 6 of 147 United Nations Development Programme Final Report Figure 11: Location of the private fuel import terminals in Lebanon 48 Figure 12: Examples of private sector fuel storage tanks 49 Figure 13: LPG bottling 51 Figure 14: Location of private LPG import terminals in Lebanon 52 Figure 15: Licensed gas stations in Lebanon 55 Figure 16: Typical gas stations in Lebanon 56 Figure 17: Location of the power plants in Lebanon 58 Figure 18: Zouk power plant 59 Figure 19: Jieh power plant 60 Figure 20: Deir Ammar power plant 60 Figure 21: Zahrani power plant 61 Figure 22: Turkish power ships In Jieh and Zouk 62 Figure 23: Potential new hydro power plants in Lebanon categorized according to financial viability 65 Figure 24: Historical total primary energy supply in Lebanon (TPES) in tons of oil equivalent 66 Figure 25: Historical electricity supply in Lebanon between 2003 and 2014 68 Figure 26: Concentration of industries (within red circles) and coastal pipeline in Lebanon 71 Figure 27: Total industrial establishments in Lebanon by category and size 72 Figure 28: Pulp and paper industry establishments by caza and size 73 Figure 29: Distribution of Lebanese population by governorate 79 Figure 30: Size of population by caza 79 Figure 31: Consumption of diesel for private power generation in 2012 83 Figure 32: Consumption of diesel for heating boilers in the commercial and institutional sector in 2012 83 Figure 33: Consumption of LPG in the commercial and institutional sectors in 2012 84 Figure 34: Distribution of demand by geographical area and caza in the relevant sectors for a low growth scenario, for year 2018 and in MMCM 88 Figure 35: Distribution of demand by geographical area and governorate in the relevant sectors for a low growth scenario, for year 2018 and in MMCM 88 Figure 36: Distribution of demand by geographical area and caza in the relevant sectors for a low growth scenario, for year 2030 and in MMCM 89 Figure 37: Distribution of demand by geographical area and governorate in the relevant sectors for a low growth scenario, for year 2030 and in MMCM 90 Figure 38: Distribution of demand by geographical area and caza in the relevant sectors for a high growth scenario, for year 2030 and in MMCM 90 J669-ILFBC-AD-0023-Final Report_Rev0 28.10.2016 01.11.2016 Page 7 of 147 United Nations Development Programme Final Report Figure 39: Distribution of demand by geographical area and governorate in the relevant sectors for a high growth scenario, for year 2030 and in MMCM 91 Figure 40: Distribution of demand by geographical area and caza in the relevant sectors for a low growth scenario, for year 2050 and in MMCM 91 Figure 41: Distribution of demand by geographical area and governorate in the relevant sectors for a low growth scenario, for year 2050 and in MMCM 92 Figure 42: Distribution of demand by geographical area and caza in the relevant sectors for a high growth scenario, for year 2050 and in MMCM 92 Figure 43: Distribution of demand by geographical area and governorate in the relevant sectors for a high growth scenario, for year 2050 and in MMCM 93 Figure 44: Cost estimate ground rules 99 Figure 45: Max.