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French Version

Fneish close to energy deal with Syria

Energy minister considers closure of Baalbek and Tyre generators if agreement is reached

The Lebanese government will shutdown one or two power plants if Syria agrees to sell Lebanon electricity, Energy and Water Minister Mohammad Fneish said.

"We may close electricity plants in Baalbeck and Tyre if the Syrian government accepts to sell us electricity," the minister told The Daily Star. He added the priority for the Lebanese energy sector is to get premium prices from neighboring oil producing countries and ultimately gas so as to face rising costs that could be detrimental to the economy.

Fneish, who is a member of Hizbullah, explained that it is cheaper to buy electricity from countries like Syria instead of running very costly power plants in Lebanon.

"We are really close to sign a deal" said Fneish.

But the tense political situation between the two countries following the withdrawal of Syrian troops from Lebanon, may make it bit difficult for such an agreement to take place.

Industrialists argue the cost of energy in Lebanon is one of the highest in the world.

"As a net importer of oil and other energy derivatives, Lebanon should be subsidized by neighboring countries if it wants to stop incurring heavy losses," Fneish said.

Finance Minister Jihad Azour said earlier that the total losses of Electricite du Liban (EDL) may reach $800 million at the end of 2005.

The minister hoped to work on lowering the cost of oil derivatives by insuring that supply stays, referring to previous problems of shortage that required buying derivatives at high prices.

But Fneish stressed that a political consensus is needed for any reform to occur. He added, "Everybody today more than ever realizes this and no one is going to block reforming the energy sector."

A recent deal with Kuwait to supply Lebanon with oil at low interest rates is soon entering the execution phase once the government signs it.

"It would allow us to save $45 to $50 million and secure constant supply," said Fneish.

He added, "We are ready to knock on all the doors" referring to attempts to secure deals with other neighboring countries.

Fneish said the government is also working on a possible agreement with Algerian state-run oil company Sunatrak.

But on the mid-to-long term, Fneish insisted that Lebanon will have to switch to gas, which makes the Syrian historical offer a strategic one. Syria agreed three years ago to supply Lebanon with gas at preferential prices provided it completes the necessary pipeline for transporting gas. The Lebanese government failed to do so due to management inefficiency and succesful political lobbying to protect oil interests.

Following the Syrian withdrawal in April 2005, the pipeline which ran from Syria to Dir Ammar in Tripoli was completed under Energy and Water Minister Maurice Sehnaoui but Damascus at that moment, withdrew its offer.

"Syrians claimed they did not have enough capacity at the moment, but I think the current political situation is not helping at all," said Fneish.

He added that the country had to be at peace and set its priorities straight in order to reconcile with the Syrians.

Qatar also talked of building a liquified natural gas refinery plant in Lebanon that would convert unprocessed gas to a liquefied state. According to Fneish, discussions are being held over a possible "build, operate and transfer" scheme that is "if our Qatari brothers will still offer the initial deal."

As for local challenges, Fneish said "through EDL, we want to try to address all the problems facing the sector."

Illegal electricity supply is the second most pressing issue after the import of oil said Fneish. "We have to fix our collection capacity by enlarging its scope."

Experts estimate that 40 percent of the Lebanese do not pay their electricity bills which add to the already heavy losses of EDL.

"And for this to happen, you need better administrative organizational skills Fneish added, pointing out that one of the major challenges facing EDL is its managerial inefficiency.

When asked about the potential goal of shrinking the size of the company by privatizing it, Fneish said "the problem of the sector is not its size but its productive efficiency."

"Privatization could be a tool to increase the level of expertise to which the sectors is in bad need of."

He added that there is a severe shortage in manpower.

"EDL had 5,500 qualified employees in 1974 for 300,000 subscribers; today it has a little more than 2,000 for over two million subscribers."

However, the minister said that the average age of EDL's staff is 69 years old.

With oil prices skyrocketing above $60 a barrel, an increase in local prices means above all a decrease in the state's revenues, said Fneish.

Beirut 29-08-2005
Bechir Saade
The Daily Star

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