Why Lebanon’s electricity crisis is so hard to fix

Why Lebanon’s electricity crisis is so hard to fix
Lebanon’s woefully inefficient energy sector — as illustrated by the labyrinth of cables that stretch across the capital city Beirut — has long been an economic thorn in the country’s side. (AFP)
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Updated 15 June 2020

Why Lebanon’s electricity crisis is so hard to fix

Why Lebanon’s electricity crisis is so hard to fix
  • An IMF official told Arab News “electricity reform is one of the key steps to re-equilibrate the economy”
  • The crisis gripping the sector is partly linked to smuggling of fuel oil and fuel products to war-torn Syria

BEIRUT: It is two in the afternoon and Verdun Street, one of Beirut’s upscale neighborhoods, is doubly lit up — by the midday sun and by street lights.

“Look at the street lamps shining brightly in the middle of the day while most areas suffer from power outages,” Fatima Hachem, 29, a local resident, told Arab News.

The incongruity of the scene — street lights kept unnecessarily on during daylight hours — is unmistakable in a country where residents get between three and 12 hours of electricity a day depending on the locality.

Such systemic inefficiencies are all the more glaring at a time when Lebanon is seeking a $10 billion loan from the International Monetary Fund (IMF).

Given its disproportionate contribution to Lebanon’s public debt, the urgency of an overhaul of the electricity sector cannot be overstated.

“Electricity reform is one of the key steps to re-equilibrate the economy,” an IMF official, speaking on condition of anonymity, told Arab News.

“We will see it as an emblematic and major improvement.”

 

The official added that, without reforms, “there would be no loan program.”

As a first step, the IMF has asked Lebanon to audit its national electricity company, known as Electricite du Liban (EDL). Loss estimates should note “not only the changes in price of fuel oil, but also the change in the exchange rate,” it said.

In recent months, the purchasing power of the Lebanese population has eroded, with the currency losing two-thirds of its value, dropping to LBP4,000 from LBP1,515 to the US dollar.

“At the moment, the Lebanese government links increasing tariffs on electricity to the increase in power generation, while the IMF believes that those two should not be tied. Also, eliminating electricity subsidies is the most significant potential expenditure saving,” the IMF official said.

To generate fiscal savings, it is imperative the Lebanese government increases tariffs as soon as possible, they said.

However, this would mean raising electricity charges for most of the population, who are already under economic pressure as a result of the COVID-19 pandemic.

Opinion

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The power sector’s total bill comes to almost $2 billion annually, roughly 4.5 percent of the country’s gross domestic product.

Most of the losses can be attributed to a combination of fuel oil subsidies, tariff pricing on the basis of $20 per barrel since 1994, and theft from the power grid.

The problem is only set to worsen with an increasing population, including refugees (currently 1.5 million) whose numbers have grown through recent arrivals and whose electricity consumption has crossed the 400 MW mark.

Under the circumstances, Lebanon’s electricity shortfall is estimated at 1,600 MW.

Among the things the IMF wants to see are the creation of a regulatory authority for the electricity sector and the appointment of new board members for EDL, which after resignations has been left with only three members to oversee it.

INNUMBERS

44 per cent - EDL subsidies’ share of Lebanon’s entire debt

$1.5 billion - Yearly state transfers to EDL

$42 billion - Electricity sector’s debt

$94 billion - Estimated size of Lebanon’s public debt

2 - Power shortages’ rank as a business hindrance

Lebanon’s Energy Ministry, meanwhile, is pushing for an amendment to laws before the implementation of proposed reforms.

Electricity reforms already exist — but only on paper.

The law, 462/2002, permits the setting up of a regulatory authority, frees it from political interference, and disallows EDL’s monopoly over the electricity sector in terms of production, transportation and distribution of electricity.

The implementation, however, is easier said than done.

Christina Abi Haidar, a legal expert with 15 years’ experience in the energy sector, said: “Once we have a regulatory authority, the political authority would cease to exist.”

She told Arab News: “We only pass reform-related laws when we need to borrow from the international community, but we rarely implement them.”

Last month, Dr. Antoine Habchi, a Lebanese Forces MP, filed a lawsuit against the Energy Ministry for corruption and waste of public money.




Dr. Antoine Habchi, Lebanese Forces MP.  (Supplied)

“The electricity sector is a black box marred by corruption,” he told Arab News, “It is not in the interest of those planning on financially benefiting from it to implement laws or to fix the situation.”

Take Law 181 passed in 2011. It was enacted in support of a proposal by Gebran Bassil, the then energy and water minister, to enable the power sector to hire consultants, appoint a board of directors for EDL and establish a regulatory authority within three months.

The cost to the government was projected to be LBP1.772 trillion (equivalent to $1.175 billion at the time). The proposal was to be implemented within four years, resulting in most of Lebanon receiving power for up to 24 hours a day.

By the end of the period, the money had been spent, but unsurprisingly, there was no improvement in the electricity supply.

“We have spent the money, appointed consultants and built two new power plants in Zouk and Jiyeh, and over $350 million was spent on the primary works of rehabilitating the old Zouk and Jiyeh power plants,” said Habchi.

“But to date, we do not have a regulatory authority or a new board of directors for EDL. We also do not have 24/7 electricity supply.”

 

The new Zouk and Jiyeh power plants are said to lack the fuel treatment systems and separators necessary for the burning of any type of fuel.

After many bureaucratic delays, separators reached Lebanon, only to be held up at the Beirut docks instead of being transported to the site and installed.

Now, Lebanon is planning to have four gas-fired plants, two of which were built in 1996. Use of gas could save up to a quarter of a billion dollars per power plant in imported fuel oil costs, according to experts.

But here, too, problems have arisen.

The Selaata power project is a case in point. Work on the new plant is scheduled to start by the end of 2020, around the time when Lebanon intends to shut down the old Zouk and Jiyeh power plants.

Selaata is linked to a plan involving the installation of Floating Storage Regasification Units, or FSRUs, across the country to serve both new and existing plants operating on gas.




Lebanon plans to install Floating Storage Regasification Units, or FSRUs, across the country to serve both new and existing plants operating on gas. (AN photo by Leila Hatoum)

The initial idea was to have one FSRU for all of Lebanon, located in the northern, Sunni-majority Beddawi area.

However, the issue has sparked political debate along sectarian lines, resulting in the plan expanding to include three FSRUs, tripling the cost.

The argument in favor of Selaata is that there is a need for such a large power plant and that it will be constructed in an industrial area.

However, a number of ministers within the Cabinet object to the Selaata project on the grounds that it involves costly land appropriation.

They say the project was conceived only to please the Christian constituency of the Free Patriotic Movement party and not on merit.

Other concerns are insufficient feasibility and its environmental impact, in light of the power plant’s location close to the sea.

“The whole of Egypt has one FSRU, yet the smart people here in Lebanon want to build three FSRUs and waste public money on a useless power plant and overpriced land appropriation,” said Habchi.

Raymond Ghajar, the energy and water minister, declined to comment on the Selaata project among other issues.

Lebanon’s power crisis is also linked to the smuggling of fuel oil and fuel products to neighboring Syria, according to experts.

This is not only problematic from the standpoint of electricity generation, says Habchi, but also poses a risk in light of Washington’s Caesar Act, which bans aiding the Syrian regime.

Within its borders, too, fuel oil transactions are a cause for concern.

An official document obtained by Arab News suggests that subsidized fuel oil has been finding its way from the EDL to the private sector.

A letter numbered 198 and dated June 4, 2018, sent by Sarkis Hleiss, director general of the petroleum facilities in Tripoli and Zahrani (ports), to Cesar Abi Khalil, Lebanon’s then energy minister, asked for permission for the purchase of 6,000 metric tons of fuel oil.

More worrying than the amount is the likelihood that the deal was only the tip of the iceberg.

The letter said: “Due to the shortage of fuel oil in our possession, and in order to supply of the local market, your Excellency is kindly requested to accept the request from EDL to hand us a quantity that is about 6000 metric tons of fuel oil from the first tanker loaded with an ISO 8217 fuel oil reaching the oil facilities in Zahrani, knowing that we are ready to pay for the price of this quantity in cash, after determining its cost by the General Directorate of Petroleum, as always.”

The request was approved on June 6, 2018.

It seems that Lebanese taxpayers are paying double to receive electricity: Once, during the importing of fuel oil, and again when buying power from the private sector during blackouts.

Against this backdrop of mismanagement, wastefulness, incompetence and corruption in the power sector, what is the realistic probability of the Lebanese government getting the IMF loan?

Not much, says Nazih Najm, head of the energy parliamentary committee, who doubts that international donors will lend any money to Lebanon.

Najm is not even sure Lebanon needs to go cap in hand to the IMF. His logic: “We still have about $18 billion in foreign reserves at the Central Bank as well as gold reserves.”

* * * * * * * * * 

@Leila1H


Philippines, Egypt added to Oman’s travel ban list

Philippines, Egypt added to Oman’s travel ban list
Updated 49 min 5 sec ago

Philippines, Egypt added to Oman’s travel ban list

Philippines, Egypt added to Oman’s travel ban list
  • Omani citizens, diplomats, health workers and their families are excluded from the latest rule

DUBAI: The Philippines and Egypt were the latest inclusion in Oman’s list where travelers from the said countries are banned from entering the Sultanate.

The decision was issued by the Supreme Committee, which takes lead in the country’s fight against the coronavirus pandemic, and took effect on Friday, May 7.

Travelers from Egypt and the Philippines, and those who transited in any of the said countries during the 14 days, are particularly affected by the travel restriction a report from Times of Oman said.

Omani citizens, diplomats, health workers and their families are excluded from the latest rule but are subject to the procedures adopted upon entering the Sultanate, the report added.

Oman earlier added India, Pakistan and Bangladesh to the travel ban list, joining Sudan, Lebanon, South Africa, Brazil, Nigeria, Tanzania, Ghana, Guinea, Sierra Leone, Ethiopia and the United Kingdom where their residents have been barred from entering since February 24.


UAE reports 1,766 new COVID-19 cases, three deaths in last 24 hours

UAE reports 1,766 new COVID-19 cases, three deaths in last 24 hours
Updated 08 May 2021

UAE reports 1,766 new COVID-19 cases, three deaths in last 24 hours

UAE reports 1,766 new COVID-19 cases, three deaths in last 24 hours
  • The total number of recorded cases in the UAE is now at 532,710 since the pandemic began

DUBAI: UAE health authorities reported 1,766 new coronavirus cases after conducting 211,462 additional COVID-19 tests over the past 24 hours, as well three deaths fatalities from the contagious disease.

The total number of recorded cases in the UAE is now at 532,710 since the pandemic began, with 1,607 confirmed deaths, a report from state news agency WAM said.

The Ministry of Health and Prevention reiterated its call for residents to adhere coronavirus protocols and maintain social distancing to ensure public health and safety.

Meanwhile, 141,283 doses of the COVID-19 vaccine have been provided during the past 24 hours, bringing the total number of doses provided to residents and citizens to 11,048,547.

The rate of vaccine distribution now stands at 111.71 doses per 100 people.


US calls on Israelis, Palestinians to ‘deescalate’ tensions

US calls on Israelis, Palestinians to ‘deescalate’ tensions
Updated 15 min 17 sec ago

US calls on Israelis, Palestinians to ‘deescalate’ tensions

US calls on Israelis, Palestinians to ‘deescalate’ tensions
  • US State Department: Palestinian families targeted for eviction have "lived in their home for generations"

WASHINGTON: The United States called Friday for de-escalation in annexed east Jerusalem, and warned against carrying out a threatened eviction of Palestinian families that has sent tensions soaring.
“The United States is extremely concerned about ongoing confrontations in Jerusalem ... which have reportedly resulted in scores of injured people,” a statement from State Department spokesman Ned Price said.
“There is no excuse for violence, but such bloodshed is especially disturbing now, coming as it does on the last days of Ramadan.”
He said Washington was calling on Israeli and Palestinian officials to “act decisively to deescalate tensions and bring a halt to the violence.”
And he warned it was “critical” to avoid any steps that could worsen the situation — such as “evictions in East Jerusalem, settlement activity, home demolitions, and acts of terrorism.”
An earlier State Department statement said Washington was concerned in particular about the “potential eviction of Palestinian families in Silwan neighborhood and Sheikh Jarrah,” two areas of east Jerusalem where tensions have been running high.
It noted that some Palestinian families targeted for eviction have “lived in their home for generations.”
The comments came as more than 160 people were wounded after Israeli riot police clashed with Palestinians at Jerusalem’s flashpoint Al-Aqsa mosque compound late Friday, capping a week of violence in the Holy City and the occupied West Bank.
Earlier Friday, Israeli security forces killed two Palestinians and wounded a third after the trio opened fire on a base in the occupied West Bank, police said.
The unrest came on Al-Quds Day – named for the Arabic word for Jerusalem – an annual day of pro-Palestinian rallies held by Iran, the arch-enemy of Israel.
The nation’s supreme leader Ayatollah Ali Khamenei called Israel “not a country, but a terrorist base,” and in a televised speech said that fighting the Jewish state was “everyone’s duty.”


Opposition forces leave Somali capital after deadly clashes

Opposition forces leave Somali capital after deadly clashes
Somali opposition soldiers pose for a photograph in Mogadishu as they move to their barracks after reaching an agreement with the prime minister. (Reuters)
Updated 08 May 2021

Opposition forces leave Somali capital after deadly clashes

Opposition forces leave Somali capital after deadly clashes
  • Soldiers loyal to influential opposition leaders began pouring into the capital, where clashes broke out with pro-government troops, killing three

MOGADISHU: Opposition fighters withdrew from the Somali capital on Friday, ending a tense standoff with pro-government troops after a dispute over delayed elections triggered the country’s worst political violence in years.
Hundreds of heavily armed gunmen pulled out of strongholds in Mogadishu they had occupied since late April, when a long-running political crisis turned deadly with clashes erupting between rival factions of the security forces.
Under a deal reached by the warring sides this week, opposition troops began leaving their positions in the capital, and key roads sealed off with sandbags and machine guns were opened once more.
“We are sending our forces back to the frontline position to defend the country and its people,” said Mahad Salad, an opposition lawmaker, at a camp outside Mogadishu where troops assembled after pulling out of the city.
Mogadishu had been on edge since February, when President Mohammed Abdullahi Mohammed’s term ended before elections were held, and protesters took to the streets against his rule.
But a resolution in April to extend his mandate by two years split the country’s fragile security forces along all-important clan lines.
Soldiers loyal to influential opposition leaders began pouring into the capital, where clashes broke out with pro-government troops, killing three.
The fighting drove tens of thousands of civilians from their homes and divided the city, with government forces losing some key neighborhoods to opposition units.
Under pressure to ease the tension, Mohammed abandoned his mandate extension and instructed his prime minister to arrange fresh elections and bring together rivals for talks.
“These forces came to the rescue of the people, and have taught a new lesson which will be remembered in future. They refused a dictatorship, and have forced the democratic governance process to continue,” opposition lawmaker Salad said.

FASTFACT

Hundreds of heavily armed gunmen pulled out of strongholds in Mogadishu they had occupied since late April, when a long-running political crisis turned deadly with clashes erupting between rival factions of the security forces.

Indirect elections were supposed to have been held by February under a deal reached between the government and Somalia’s five regional states the previous September.
But that agreement collapsed as the president and the leaders of two states, Puntland and Jubaland, squabbled over the terms.
Months of UN-backed talks failed to broker consensus between the feuding sides.
In early May, Mohammed relaunched talks with his opponents over the holding of fresh elections, and agreed to return to the terms of the September accord.
Prime Minister Mohammed Hussein Roble has invited the regional leaders to a round of negotiations on May 20 in the hope of resolving the protracted feud and charting a path to a vote.
The international community has threatened sanctions if elections are not held soon, and warned the political infighting distracted from the fight against Al-Shabab, the militants who control swathes of countryside.
Maj.-Gen. Ali Araye Osoble told opposition troops outside the capital that it was time to return to duty.
“I order that you return to your positions and fulfil your commitments in the fight against Al-Shabab,” the opposition commander said.


Tunisia orders lockdown amid ‘worst’ ever health crisis

Tunisia orders lockdown amid ‘worst’ ever health crisis
People wearing protective face masks walk in Tunis, amid the coronavirus disease (COVID-19) outbreak, Tunisia, April 29, 2021. (REUTERS)
Updated 08 May 2021

Tunisia orders lockdown amid ‘worst’ ever health crisis

Tunisia orders lockdown amid ‘worst’ ever health crisis
  • Under new rules, travel will be banned between regions, gatherings and celebrations prohibited, and a 7 p.m. to 5 a.m. curfew imposed

TUNIS: Tunisia ordered a partial lockdown from Sunday for the week-long Eid Al-Fitr holidays, warning that any further increase in coronavirus infections could overwhelm specialist care facilities.
Announcing the measure on Friday, Prime Minister Hichem Mechichi said Tunisia was going through “the worst health crisis in its history.”
Mosques, markets and nonessential businesses will be closed under the new restrictions, which come as Muslims mark the end of the month of Ramadan, said Mechichi.
“Health institutions are at risk of collapse,” Mechichi said, adding that medics were stretched to the limit, with around 100 people a day dying of COVID-19.
More than 500 people are currently in intensive care, an unprecedented number that has required medics to set up field hospitals, and the North African country is struggling to meet the demand for oxygen.
Under new rules, travel will be banned between regions, gatherings and celebrations prohibited, and a 7 p.m. to 5 a.m. curfew imposed.
Tunisians are encouraged to leave their homes only for what is strictly necessary, government spokeswoman Hasna Ben Slimane said.
The Mediterranean country, with a population of around 12 million, has recorded more than 300,000 coronavirus cases and over 11,200 deaths.
Tunisia’s economy has lurched from one crisis to another since the country’s 2011 revolution, with GDP estimated to have contracted by a record 8.2 percent last year.
Mechichi had said several times in recent weeks that Tunisia is unable to afford to repeat the restrictions put in place in March 2020 at the start of the pandemic.