How is the private sector able to import fuel while the Ministry of Energy struggles to pay for diesel to run the country's power plants? Here’s why.
The private sector is able to import fuel under the watchful eye of the Ministry of Energy, which sets and monitors prices, while the ministry struggles to afford diesel to keep the country's power plants running.
Maroun Chammas, president of the Association of Petroleum Importing Companies, told This is Beirut that the two sectors operate very differently: the public sector has its own mechanisms, while the private sector, which imports fuel for private use, follows a different approach. "We don't operate in the same way," he said.
Indeed, the private and public sectors show deep differences in managing essential resources. The public sector, responsible for supplying fuel to power plants, operates with mechanisms that are often faulty and inefficient. “The problem lies with the state's decision-making power,” Chammas says, pointing to ineffective subsidy policies. He notes that Électricité du Liban (EDL) hasn’t issued invoices for over a year, since June 2023, because the Central Bank of Lebanon (BDL) has not set the exchange rate. As a result, EDL has been facing a liquidity shortage.
Chammas also points out the political and bureaucratic conflicts and poor decisions that have impacted the finances of the public electricity provider. In contrast, he explains that the private sector has developed more direct and transparent methods. By dealing directly with oil companies, the private sector pays for fuel without intermediaries, while the Ministry of Energy oversees price regulation. "That’s why it works," he says.
Debts of $1.7 billion
The Lebanese government has been struggling to meet its contractual obligations for years due to payment defaults. The issues range from malfunctions in the payment system to delays in opening lines of credit. The outcome is always the same: there’s still no electricity, and the threat of a blackout remains constant.
In short, by October, Lebanon will owe nearly $1.7 billion to Iraq for the fuel it has received over the past three years: $500 million from the first year, $460 million from the second, and $720 million for this year.
The total shutdown of the two remaining operational power plants on Saturday, August 17, is due to a fuel shortage. The Deir Ammar plant has been out of service since August 7. However, the Zahrani plant has resumed minimal operations to supply essential facilities with five million liters of diesel from its reserves.
Currently, Lebanon's electricity production relies on the Zahrani and Deir Ammar plants, as the Jiyeh and Zouk plants are undergoing maintenance.
Zahrani and Deir Ammar receive monthly diesel deliveries from the Ministry of Energy under an agreement with Iraq signed on July 23, 2021. This agreement, which began in September 2021, provides fuel to Lebanese power plants under favorable terms, with a monthly quota of 100,000 tons. The agreement was renewed in August 2022 and again in May 2023, with Iraq increasing its annual deliveries to 1.5 million tons. However, due to its high sulfur content, Iraqi fuel cannot be used directly in Lebanese power plants. Therefore, Lebanon buys compatible fuel from other suppliers selected through a tender process, and these suppliers receive the Iraqi fuel in exchange.
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