Abu Dhabi, UAEWednesday 5 August 2020

Lebanon crisis: fuel scandal leaves Lebanese in the dark for longer

Electricity cuts are increasing across the country as power plants run low on imported fuel

Lebanon’s routine daily electricity cuts have increased up to five-fold in the capital Beirut in recent days following a corruption scandal involving Algeria’s national oil company that caused fuel shortages at power plants.

“The main reason behind the lack of fuel ... is because of a problem between Lebanon and supply companies due to [shipments] that do not meet the specifications,” Lebanese Energy Minister Raymond Ghajar said after a meeting in Parliament on Wednesday.

His comments were widely interpreted as a reference to Algeria’s national oil company Sonatrach, the main supplier of fuel to the state power utility, Electricite du Liban (EDL).

A Lebanese judge ordered the arrest of 17 people in April after fuel imported from Algeria was discovered to be tainted. Sonatrach, which has sold fuel to Lebanon through sub-contractors for 15 years, denied any involvement and called it a “Lebanese-Lebanese affair”.

The scandal caused a temporary interruption in fuel delivery from Sonatrach, which announced it would not renew its contract with Lebanon when it expires at the end of the year.

Mr Ghajar said the extended power cuts would continue until next week, when another fuel shipment from Sonatrach is expected. “The rationing of electricity will remain as it is until July 8, until feeding will start to improve,” he was quoted as saying in the local press.

“This issue continues with the judiciary though we agreed with the company [Sonatrach] that we can order material regularly until the end of the year,” he said.

At least one of the 17 people who was supposed to be arrested as part of the probe into the scandal is still on the run. Sarkis Hleiss, the head of the state-run oil installations company which imports fuel and diesel on behalf of the state, has received protection from local politician Sleiman Frangieh.

Sonatrach provides 70 per cent of the fuel oil used by Lebanon’s power plants, said Tony Issa, vice president of IPT, a Lebanese oil importer and operators of petrol stations. The rest is purchased from Kuwait.

Even in normal times, EDL is not capable of providing electricity round-the-clock electricity because of a decades-long lack of investment in infrastructure. But now, the usual three-hour daily blackouts in central Beirut have extended to 14 hours in certain areas.

In a note to Mr Ghajar obtained by news website Akhbar Al Yawm, EDL director Kamel Hayek warned that Lebanon’s power plants would shut completely should fuel shipments not be secured “at the earliest opportunity”.

Contacted by The National, an EDL employee blamed the Energy Ministry for the shortage, saying that “the power plants are ready to work but there is no fuel”.

Private generator operators, who ususally fill in for cuts in EDL’s output, are struggling to keep up with the electricity cuts as diesel supplies are also running low.

On Wednesday, the telecom minister said that mobile phone coverage had been cut in several regions because of fuel shortages at switchboards, reported local daily L’Orient-Le Jour.

In addition to blaming the diesel shortage on smuggling to Syria, where it is more expensive than in Lebanon, Mr Ghajar said that the Lebanese were panic-buying diesel in large quantities.

With certain products disappearing from supermarket shelves and rumours circulating of massive shortages, the Lebanese are hoarding as much as they can.

Because the country relies on imports, the cash crisis that started last summer has caused the price of goods to rise rapidly.

Several other reasons explain the current shortage of diesel, said Mr Issa.

“First, the difficulties in financing the [fuel] shipments due to the banking crisis and complex mechanism set up by the central bank, which is pre-approving and subsidising diesel imports,” he explained. Foreign reserves at Lebanon’s central bank are critically low, economists have warned.

"Second, there is a higher demand from private generators owners to fill the gap of EDL’s shortage,” said Mr Issa. "Third, considerable quantities of diesel are smuggled to Syria because of the difference in pricing between the two countries.”

Officials regularly announce measures to curb fuel smuggling to Syria along their porous land border, with little result.

Lebanese officials have been negotiating a bail-out with the International Monetary Fund, but talks have stalled as the government bickers with the country’s banking association over the size of its losses.

“There’s a dollar shortage, there’s high risk, there’s no financial plan,” said energy consultant Jessica Obeid. “Unless Lebanon has a plan to get out of the financial crisis, it might be heading to more severe blackouts.”

Updated: July 2, 2020 04:44 PM

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