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French Version

Lebanon to begin privatization of EDL

Energy minister is overhauling management of beleaguered company

Lebanon's Energy Minister said he is pushing forward with a long-stalled 2002 law which calls for the gradual privatization of state electricity company Electricite Du Liban (EDL). Mohammad Fneish, the first Hizbullah member to serve in the Lebanese cabinet, broke with the recent history of his party, which along with fellow Shiite group Amal had traditionally opposed privatization.

But political pressure has increased, especially ahead of an international donor conference expected in the beginning of 2006, to proceed with privatizing EDL, which loses $800 million per year.

"There is a law that is very clear and we are committed to it," Fneish said.

Law 462, passed in 2002, dictates that transmission and distribution of electricity be at least partially privatized, a goal Fneish says EDL should accomplish within the next two or three years.

Fneish said he is currently changing the management of EDL, which is blamed for daily power blackouts of up to 10 hours per day in many Lebanese cities.

"There will be a new management and they can negotiate contracts with the private sector," Fneish said.

Lebanon is currently engaged in negotiations with Kapco Co., a Korean company, to maintain and operate the country's two power plants, Zehrani in the South and Baddawi in the North.

Fneish also said Lebanon may commission an advanced study of potential offshore oil and gas reserves.

Previous two-dimensional studies have indicated a potential for oil and gas reserves off Lebanon's coast. The government is now considering a three-dimensional (3D) study, which uses computer modeling to develop images of the ocean floor which detail exactly where to drill for oil and gas.

"It's better to conduct a 3D study to determine where the oil is," Fneish said. "We are in negotiations for the study at the same time as we are drafting a new law."

Fneish did not say which companies the government is negotiating with, although the lead contender is believed to be Norway-based Petroleum Geo-Services.

He said the cost of a 3D study, about $1.5 million, would be covered by the company conducting the study, which could generate revenues by selling the results to oil companies determining where to drill.

Oil majors Shell, Occidental, Total Elf Fina, Petrocanada Amerada Hess, and Reading and Bates have purchased two dimensional studies of Lebanon's offshore regions and have expressed interest in exploring for oil and gas.

Fneish said the government is drafting a profit sharing law which enables oil companies to invest and take a cut of profits, typically around 20 to 25 percent, with the rest going to Lebanon.

"I don't know what the quantity is but oil is possible offshore," he said.

Fneish also said Lebanon was seeking 1.5 million tons of liquid natural gas (LNG) from Qatar. Prime Minister Fouad Siniora led a delegation to Qatar Wednesday and appealed in a speech Thursday for other Arab states to aid Lebanon's economy.

"We are still in discussions to see what they have to offer," Fneish said about a potential deal with Qatar, which has the third largest gas reserves in the world.

Beirut 28-11-2005
Will Rasmussen
The Daily Star

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