Blue Gold

Blue Gold

Project Definition:

Based on the principle of people’s right to water, the BLUE GOLD project promotes disruptive measures that ensure sharing of water resources nationwide, reforming the water sector management, transforming water from a commodity to a national wealth, creating platform for public private partnership, enforcing water laws, promoting sustainable use of water and conserving freshwater eco-systems.

Project Definition: Based on the principle of people’s right to water, the BLUE GOLD project promotes disruptive measures that ensure sharing of water resources nationwide, reforming the water sector management, transforming water from a commodity to a national wealth, creating platform for public private partnership, enforcing water laws, promoting sustainable use of water and conserving freshwater eco-systems.read more
  • A key element for improving the water sector in Lebanon is the development of an institutional and legal setup that ensures transparency, accountability and participation of all concerned stakeholders including the private sector. Accordingly, the BLUE GOLD proposes the establishment of Lebanon National Council of Water as the higher regulatory authority to work on strategic planning for water resources management, while implementation will be done at the local level, as well as the initiation of a Watch Dog Association from the Civic Society experts to oversee and monitor key performance indicators of all water sector stakeholders. Finally, another innovative dimension of BLUE GOLD project is to actively involve the Lebanese in water resources management, through creating companies that operate water production and distribution and billing with maximum defined shares. Background: Today, the available water in Lebanon is estimated to 2.7 Bn m³ during a typical year, of which 2.2 Bn m³ comprise surface water resources from 17 rivers, and the remaining 0.5 Bn m³ constitute groundwater resources mainly in 8 aquifers. Annual water demand in 2010 was estimated to be 1.5 Bn m³, which exceeded total withdrawal capacity and created a deficit of 73 MCM. The demand is driven by the agriculture (61%, 810 MCM), domestic (30%, 510 MCM) and industrial (9%, 152 MCM) sectors. Water consumption is not optimized due to obsolete irrigation schemes, a suboptimal crop pattern and the lack of awareness regarding the need to conserve water. With the inevitable increase in population, water demand is expected to increase by 54% in 2020 and reach 2.3 Bn m³, noting that in 2010 withdrawals accounted for 1.4 Bn m³, leaving 1.3 Bn m³ of untapped water as a result of inefficient and under-developed infrastructure. See Figure 1. Figure 1.  Deficit between water supply and demand With regards to storage, Lebanon lacks dams and hill lakes capacity and the ability to extract ground water in a controlled and sustainable way. Only 2 dams exist and are partially operational, distribution networks exhibit high leakage rates (48% on average), and treated wastewater accounts for only 8% of the total water consumed. As for water quality, the assessment has raised alarming facts about the status of both surface and ground water. In fact, unacceptable levels of dangerous pollutants have been assessed in almost all rivers, especially in Litani.   On the institutional front, the Water Establishments face structural deficiencies, whereby investment planning and execution is scattered among various players. While, the water law 221 of 2000 was designed to improve water service efficiency; however it was not fully implemented. Practically, Water Establishments face a number of organizational challenges that result from staff shortages, lack of training, poor customer relations, unfavorable fixed tariffs and inability to collect bills. Going forward, the ongoing plans from the Ministry of Energy and Water and the Council for Development and Reconstruction are primarily focused on increasing surface storage and wastewater treatment capacity as well as the execution of required institutional measures. These initiatives are blocked mainly due problems in accountability, financial/ political constraints and lack of qualified staff, and if implemented will be able to meet the demand by 2020 without water surplus.     Objectives:   Consequently, the BLUE GOLD project aims to:
    1. Increase water supply, through:
      1. Enabling the implementation of initiatives to reduce network loss (flow meters, leakage detection, etc. ) an reduce pollution
      2. Developing new sources e.g. increase storage capacity (hill lakes, dams) and non-conventional (reuse wastewater, desalination)
    2. Optimize water demand, through:
      1. Devising policies and policy tool packages to incentivize end-users to consume less water: e.g. raise public awareness, review tariffs structures.
    3. Ensure up-to-standard water quality, through:
      1. Enabling the implementation of monitoring processes and systems to ensure water quality.
      2. Developing proper policies and infrastructure for pollution reduction
    4. Improve water management efficiency, through:
      1. Optimizing the organization of the water sector in Lebanon (e.g. structures, roles and responsibilities, PPPs[1] and WUAs[2])
      2. Improving end-users’ satisfaction.
      3. Supporting participatory and inclusive water management by engaging all stakeholders.
    Road Map Foreseen Results: The project identifies a set of initiatives that increase water supply in a sustainable way based on Integrated Water Resources Management and looking at water sector planning and management in a more strategic and integrated way.  In total, 40 promising Initiatives have been identified that if implemented at the long term will ensure a surplus of 1.5 Bn m³ by 2030. However, 13 supply/demand side initiatives are short-listed .to cover the water deficit by 2020 ( in 5 years), and yield a total of 650 MCM as surplus of water for use at a cost of USD 3.546 Bn as seen in the figure below. Figure 2 cost vs MCM of supply demand initiatives Figure 3 below shows the implementation roadmap of the supply and demand levers discussed above. Each initiative is termed as short, medium, or long term. The total cost in each term is tabulated along with the total MCM of the initiatives
    0.0.715
    . The water resources are progressively exposed to sources of domestic, industrial and agricultural pollution impacting water quality for multipurpose use and the self-purification and ecologic viability. As such, it is critical to instate proper water quality monitoring to insure sustainable access to safe domestic water, enhance water productivity and pre-treatment and reclaim waste water effluents to protect human health and ecologic wellbeing. Accordingly Blue Gold suggested the following initiatives.
    ID Initiative                                                         Year1 Year 2 to 5 Year 5 to 10
    3.1 Protect and increase vegetation cover in watersheds 18 MUSD
    3.2 Develop off-network wastewater treatment solutions 25 MUSD 100MUSD
    3.3 Build and operate wastewater treatment plants to treat  industrial wastewater 200 MUSD 900MUSD 1200MUSD
    3.4 Study burden of disease resulting from bad water quality 4 MUSD
    3.5 Promote and devise an urban development plan for industries 6MUSD
    3.6 Develop knowledge and awareness on water quality in Lebanon 20 MUSD 60 MUSD
    TOTAL Bn USD 0.273 1.065 1.2
    MCM                                                38                         114 Nevertheless, the implementation of the supply and demand side levers and water conservation solutions need to be coupled with a series of institutional and legal reforms. As such, the project suggests institutional changes entailing more involvement from the private sector, planning at the national and the river basin levels, advanced monitoring and controlling capabilities, as well as reviewing and updating and enforcing water laws. Accordingly, the Blue Gold Project suggests implementing the following Management side initiatives by 2020 as a pre-requisite for results optimizations.
    ID Initiative 1 2 to 5
    4.1 Create a monitoring centre that provides information on water resources and systems 2 MUSD 8 MUSD
    4.2 Implement performance monitoring systems to track financial/ operational performances of service providers 4 MUSD
    4.3 Monitoring of  the impact of climate change on water resources 8 MUSD
    4.4 Implement river basin organizations and enable planning at local level 8 MUSD
    4.5 Involve the private sector in the operations and maintenance of water supply and sanitation services 2 MUSD
    4.6 Involve the private sector in the construction and operation of water systems at the production stage 2MUSD
    4.7 Involvement of  the private sector in water conservation by creating the Water PSP Platform 2 MUSD
    4.8 Implement volumetric pricing 1 MUSD
    4.9 Introduce tariff for wastewater 1 MUSD
    4.10 Establish the water court 1MUSD 5 MUSD
    4.11 Create a training centre 3 MUSD 12 MUSD
    4.12 Establish a hydro-diplomacy function 1 MUSD 2MUSD
    4.13 Develop a risk management competency 1 MUSD 4 MUSD
    4.14 Assess the environmental impact of ongoing water projects 2 MUSD
      TOTAL 9 MUSD 59 MUSD
     Investment The quantification of the total social costs and benefits of a Blue Gold must take into consideration Tariff planning. The costs and benefits concerned in this document only include direct pecuniary costs and benefits, the discount rate used is 5%.  The tariff planning was designed based on data of BMLW as it has the highest rate of collection 70% and more concrete data. As seen in the figure below. If this tariff apply at the current demand for water before the addition it will enable a 45o MUSd per year. This tariff model is estimated.    
    Figure 3 Tariff planning Figure 4. Tariff analysis at the current situation.   As mentioned earlier this tariff is normalized based on BMLW data hence it is structured as depict in the figure 5 below: this tariff is also constructed from the production and distribution side and allow the participation of the private sector.   Figure 5 Tariff constituents The next step is distribute the BLUE GOLD Initiatives cost both capex and opex in addition to the revenue due to MCM generation over the year:
    Initiative Benefits Water produced in MCM Cost in USD Timeline
    Supply-side Initiatives
    Surface storage and Interconnectivity between basins ·  Increase surface storage with minimum number of dams. ·  Adequate water flow all year long. ·  Private Sector involvement. 753 1,300 5 years
    Network rehabilitation ·  Reduce water leakage from 48 to 20% ·  Saving around 340 MUSD due from technical losses/year. 50 372 5 years
    Waterways optimization ·  Increase around 77.5 MUSD as revenue from water produced. ·  Facilitate water quality and quantity measurement at the production units. ·  Improve water quality 62 100 5 years
    Increase forestation ·  Reduce the effect of climate change. ·  Increase water absorption in the ground. ·   Increase green cover by more than 20%. ·  Improve water quality in watersheds. 25 32 5 years
    Artificial recharge of underground aquifers ·  Increase the revenue from water by 160 MUSD / year. ·  Improve water quality. 128 200 5years
    Capture water from sea springs ·  Increase the revenue from water by 65 MUSD / year. ·  Provide fresh water for the northern cost of Lebanon. ·  Meet the demand for the current and future touristic resorts. 52 18 5years
    Grey water system ·  Increase the revenue from water by 5 MUSD / year. ·  Reduce the stress on fresh water resources during the dry season. 4 8 5 years
    Rainwater harvesting ·  Increase the revenue from water by 5 MUSD / year. ·  Reduce the stress on fresh water resources. ·  Decrease the high tariff cost for water delivering by trucks 4 69  5 years
    Demand-side Initiatives
    Implement Smart drip irrigation schemes ·  Increase the revenue from water by 335 MUSD / year. ·  Reduce water demand from 10,000 m³/ha to 5,500 m³/ha. ·  Reduce the stress on fresh water resources. ·  Reduce agro-chemicals in fresh water. ·  Improve crops production 270 40  5 years
    Crops mix alteration ·  Increase the revenue from water by 75 MUSD / year. ·  Reduce demand on water. ·  Production of added value and economically viable crops 60 15  5 years
    Water efficient household appliances ·  Increase the revenue from water by 18 MUSD / year. ·  Reduce stress on fresh water during dry season. 15 15  5 years
    No-till farming ·  Increase the revenue from water by 11 MUSD / year. ·  Reduce the stress on fresh water resources. ·  Reduce agro-chemicals in fresh water. 9 0  5 years
    Awareness campaigns ·  Reduce water demand ·  Improve water quality 0.5  5 years
    Quality-side Initiatives
    Develop off-network wastewater treatment solutions ·  Increase the availability of surface water for usage by around 45%. ·  Improve water quality at the river basin levels. ·  Private Sector involvement. 12  5 years
    Management-side Initiatives
    Monitoring and Information center on Water ·  Increase knowledge on the status of water resources & infrastructure Monitor and control water supply and sanitation services. ·  Information exchange among key stakeholders in the water sector. ·  Monitor water use and shares. ·  Increase integrated water sector planning and management at both national and basin level. 5  5 years
    River Basin Organizations and planning at the local level ·  Engage key stakeholders in planning and implementation processes. ·  Avoid dominance of one sectoral interest group. ·  Management of the water sector in an integrated approach 10  5 years
    National Training Center on Water ·  Build the capacities of stakeholder working in the water sector (private and public). ·  Create and implement university degree major on Integrated Water Resources Management. 10  5 years
         
    year 1 year 2 year 3 year 4 year 5
    supply 1445 500 500 500 500
    demand 70.5 22.5 22.5 22.5 22.5
    quality 273 266 266 266 266
    management 9 12 12 12 12
        Figure 6. Capex expenditure over 5 years
    year 1 year 2 year 3 year 4 year 5
    supply 100 150 175 185 200
    demand 20 20 25 30 30
    quality 15 20 25 35 45
    Figure 7 opex expenditure over 5 years
    year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 11 year 12 year 13 year 14 year 15
    Capex supply 1445 500 500 500 500 0 0 0 0 0 0 0 0 0 0
    demand 70.5 22.5 22.5 22.5 22.5 0 0 0 0 0 0 0 0 0 0
    quality 273 266 266 266 266 0 0 0 0 0 0 0 0 0 0
    management 9 12 12 12 12 0 0 0 0 0 0 0 0 0 0
    Total 1797.5 800.5 800.5 800.5 800.5 0 0 0 0 0 0 0 0 0 0
    Opex supply 100 150 175 185 200 225 225 225 225 225 225 225 225 225 225
    demand 20 20 25 30 30 30 30 30 30 30 30 30 30 30 30
    quality 15 20 25 35 45 45 45 45 45 45 45 45 45 45 45
    Total 135 190 225 250 275 300 300 300 300 300 300 300 300 300 300
    Capex+Opex   1932.5 990.5 1025.5 1050.5 1075.5 300 300 300 300 300 300 300 300 300 300
    extra water 0 180 355 360 500 500 500 500 500 500 500 500 500 500 500
    Domestic 510 690 730 810 850 850 850 850 850 850 850 850 850 850 850
    Tourism 27 54 60 75 75 75 75 75 75 75 75 75 75 75 75
    Industrial 152 260 280 320 325 325 325 325 325 325 325 325 325 325 325
    Agriculture 810 950 975 1025 1150 1150 1150 1150 1150 1150 1150 1150 1150 1150 1150
    revenue MUSD 390 430 475 525 590 680 680 680 680 680 680 680 680 680 680
    Revenue if extar water is counted MUSD 360 619 847.75 903 1115 1205 1205 1205 1205 1205 1205 1205 1205 1205 1205
    Table I/O of expanditure and revenue Figure 8 expences vs. revenue over 15 years A close analysis of this cash flow shows a NPV over 15 years of near 1.9 BNs at 5 % discount rate and 2.2 BN at 8% discount rate  the IRR over 15 years is 18 % The scurve of the project is also shown below
    BLUE GOLD Project – Legal Aspects
    Legal aspect  
    Initiatives Legal aspects – Ref: Code de l’Eau (2012) currently under study by the Council of Ministers Matching with the proposed BLUE GOLD Initiatives 
    Cross-cutting Initiatives
    Watch Dog ·      According to Articles 32 to 39, the MoEW is directly responsible for monitoring and following-up of production, distribution, and metering and billing through the Water Establishments. ·      The MoEW will monitor the water quality, and implementation of the Environment Law 444/2002 articles 24 to 48 regarding industries. Remarks: ·      The new proposed law does not mention external entities to monitor the water quality and the management of the water sector. ·      No link between the monitoring process and the Water National Commission. ·      Right to access to information law. ·      A new law to establish the Watch Dog.
    Supply-side Initiatives
    Surface storage and Interconnectivity between basins ·      The storage capacity and the need to conduct water from basin to basin it to be identified by the MoEW as needed. ·      .
    Network rehabilitation ·      The new law kept all maintenance actions at the water establishment’s level. ·      Need to highlight the role of PPP in rehabilitation of networks as part of distribution operations. Recently approved
    Waterways optimization ·      The law identify different ways to protect the water resources including the rivers. ·      Law enforcement
    Increase forestation ·      The law recognizes the environment impact of water related projects at the production level. However, it doesn’t recognize the importance of forests eco-systems and watersheds for groundwater and surface water and the direct correlation with climate change ·      Law amendment
    Artificial recharge of underground aquifers ·      The new law state clearly that all water resources in Lebanon are publicly owned except water rainwater and water collected inside building and facilities, and the acquired rights to the ownership of water (the same as the previous water law). and these acquired rights would be dropped and the landowner won’t be able to use the water in case of land use change. ·      However, the new law enable the government represented by the MoEW to put hand on all water resources for public interest, but with compensation of the affected groups. ·      According to the Law, it is forbidden to use or exploit any groundwater without permission from concerned authorities.   Remarks: There are no guidelines in the law about how to calculate the tariffs for using groundwater ·      Further research to be done about the different types of water resources ownership, types of permissions and tariffs and amend the law accordingly. ·      Propose a new law to reclaim the acquired rights to the ownership of water.
    Capture water from sea springs ·      The law mentions that only the government can use the sea springs but without putting any guidelines ·      Law amendment
    Grey water system ·      The law doesn’t mention this ·      It is part of the municipalities law
    Rainwater harvesting ·      The law doesn’t recognize rainwater harvesting as part of the government water strategy, and gives the right to individuals and groups to use this water taking into consideration the quality of collected water before usage. ·      Propose a new incentives mechanism to encourage individuals and investors to collect rainwater.
    Demand-side Initiatives
    Implement Smart drip irrigation schemes ·      The proposed law mentions that the MoEW will collaborate with the Ministry of Agriculture in order to optimize water demand, but not specifically using drip irrigation ·      Propose a new incentives mechanism to encourage farmers to use new technologies such as drip irrigation to optimize water demand.
    Crops mix alteration ·      The proposed law mentions that the MoEW will collaborate with the Ministry of Agriculture in order to optimize water demand, but not specifically working on crops alteration ·      A new strategy involving both ministries MoA and MoEW for crops alteration
    Water efficient household appliances ·      The law doesn’t mention this ·      Municipalities’ law.
    No-till farming ·      The law doesn’t mention this ·      Propose a new incentives mechanism to encourage farmers to use this method.
    Awareness campaigns ·      The law doesn’t mention this ·      Involve the WEs and the local communities in awareness campaigns
    Quality-side Initiatives
    Develop off-network wastewater treatment solutions ·      The law doesn’t mention this ·      Propose a new incentives mechanism to encourage industries and investors to establish wastewater treatment solutions at the production level and involving the private sector in collaboration with municipalities.
    Management-side Initiatives
    Monitoring and Information center on Water ·      According to Articles 32 to 39, the MoEW is directly responsible for monitoring and following-up of production, distribution, and metering and billing through the Water Establishments. ·      The MoEW will monitor the water quality, and implementation of the Environment Law 444/2002 articles 24 to 48 regarding industries. ·      The law indentifies a mechanism of reporting between the Water Establishments and the Ministry. ·      Propose new law for the national monitoring center. ·      Right to access to information law.
    Introduce the private sectors as water services operators (production, distribution, mitering and billing) ·      Private Sector Involvement: According to article 31, The MoEW and subcontract private sector companies to manage surface and groundwater resources, such as lakes, rivers, dams. This can be achieved based on the recommendations of the Minister of Energy and Water and after approval from the Council of Ministers. Private sector involvement: According to Article 71, the private sector companies can be delegated by the Minister of Energy and Water to manage the potable water, wastewater, irrigation, after the approval of the Council of Ministers. Remarks: ·      The new law didn’t clearly stated the participation of the private sector at the local level in the three main operations (production, distribution and mitering and billing), it was limited to above mentioned categories. And these operations are to be managed only by the Water Establishment. ·      Propose a new law for involving the private sector as operators for production, distribution, mitering and billing. ·      Propose a law for distribution of shares on water (not more than 5% per shareholder).
    National Training Center on Water ·      The law doesn’t mention this ·      Develop a new mechanism to establish this training center.
    Regulatory Authority
    Regulatory Authority ·      Article 15: Establish a Water National Commission including: – Minister of Energy and Water, Chair – Director General of water and electricity resources, Member – Director General of  Investment, Member – Director Generals, Head of Water Establishments, Members – Director of Litani Department, Member – Director General of the Ministry of Agriculture, Member – Director General of the Ministry of Finance, Member – Director General of the Ministry of Public Health, Member – Director General of the Ministry of Environment, Member – Director General of Urban Planning, Member ·      One member will be selected from NGOs according to a decree from the Council of Minister for two years with possibility to extend its membership only once. ·      The National Commission can request the assistance of experts as needed. ·      The main role of this Commission is: – National policies – National planning – National programs – Possible funding resources – Recommendations Remarks: ·      The proposed Commission in the new law doesn’t have clear mandates and the recommendations as well. ·      As per Article 23, MoEW is responsible for putting the General Master Plan for water that should be approved by the Council of Ministers, with no role for the Water National Commission. Need to amend the existing law or propose a new law for the Regulatory Authority: ·       To establish the RA under the council of ministers; ·      To involve the non-governmental stakeholders in addition to the private sector. ·      To secure the right to access information about water within the different concerned public and private entities. ·      To make the recommendations of the RA mandatory. ·      To have a key role in the planning process and in putting the national strategies for water management.
      BLUE GOLD Impact   Economic – Social – Environment Blue Gold tackles the water sector in an innovative approach for the first time in Lebanon, where equal attention is given to all water sides including increasing supply, optimizing demand, improving quality and management of the sector. BLUE GOLD will help to meet the water demand and to yield a surplus of 500 MCM water. Consequently, it will have a great impact on economic, social and environmental aspects as summarized in the following chapter. Economic Impact The water surplus of 500 MCM can serve the following objectives:
    • Increase the agricultural areas.
    • Improve livestock industries.
    • Export water to the Gulf and neighboring countries.
    Different stakeholders will benefit economically from BLUE GOLD as follows:
    Households ·     Provision of water 24/24 even during dry season. ·     Decrease the water bill per household from 700 USD currently to 285 USD per year.
    Government ·     23% profit from public-private partnerships projects.
    Private Sector ·     12% annual profit after tax from Service Providers Contracts (production, distribution, metering and billing).
    Lebanese Citizens ·     Ability to invest in the water sector through a crowd fund with a minimum benefit of 5% after tax.
    Hotels ·     Reduce the hotels water bill annually from 13,000 USD to 9,000 USD.
    Social Impact The implementation of Blue Gold will also help socially through:
    • Reducing the cost of health due to water diseases by improving the quality of water estimated to 800 MUSD per year.
    • Helping creating more than 500,000 seasonal jobs in local communities, which will decrease the displacement of people to big cities.
    • Bringing all the Lebanese together to protect and value their common wealth of water.
    Environment Impact BLUE GOLD will have a significant impact on environment that can be summarized as follows:
    • Supporting the national reforestation initiative to plant 40 million native trees, which will help reducing of CO2 emissions by 3 million tons of CO2/year, increasing O2 by 4 million tons of O2/year, increasing rain and helping in increasing underground water by 35% due to infiltration.
    • Reducing the percentages of agro-chemicals in ground water resulting from current irrigation techniques through shifting to localized irrigation.
    • Decreasing the stress on rivers and watersheds by limiting the pollution resulting from wastewater and industrial wastewater impacting the ability of the river to dilute and handle organic and inorganic contaminants.
    • Limiting the number of dams to 16 instead of 40 as proposed by Government, which will save many natural sites in Lebanon from deterioration and degradation.