World Bank urges Lebanon to shift to cost-effective natural gas

Dec 30, 2004 01:00 AM

The World Bank urged the Lebanese government to shift to natural gas as a source of energy to cut the high cost of electricity production.
According to the World Bank report, the use of natural gas will reduce power generation costs from $ 300 mm to $ 140 mm a year, and avoid damage to the environment and public health estimated to be at least $ 740 mm over a 15-year period.

Lebanon is one of the few countries in the region which still depends on fuel oil to run all of its power plants. The World Bank noted that Lebanon is strategically located in a gas-rich region and surrounded by several supply options including piped gas, LNGF, and possibly its own offshore resources.
Syria was supposed to supply Lebanon with LNG through a pipeline in 2002 but for technical and bureaucratic reasons this project was delayed. New Energy Minister Maurice Sehnawi earlier said Syria will start supplying Lebanon with LNG as of March 2005, adding that the two plants in Tripoli and Sidon are being prepared to run on gas. Lebanon is believed to have abundant quantities of natural gas and oil offshore based on studies by some European companies.

The World Bank added that natural gas will require significant development in infrastructure that includes the restructuring of state-owned Electricite du Liban (EdL), along with the formulation of a long-term sector strategy to increase private sector participation and efficient competition.
The World Bank recommended the unbundling of monopoly transportation activities from competitive import, shipping and supply businesses; separating commodity gas contracts from transportation contracts and creating regulated third party access to the gas transportation networks.

Prime Minister Omar Karami travelled to Saudi Arabia and Qatar earlier in an attempt to buy oil directly from these countries to save money for the Treasury: The government believes it can save $ 100 mm a year if it bought oil directly from oil producing countries without going through oil companies.
The World Bank said EdL has become a burden on the government due to the heavy losses the company incurs each year. It estimated EdL's losses at $ 400 mm a year and said the company has built up more than $ 3 bn in debt.
"EdL's reliance on imported oil has further increased the fiscal drain on the Treasury given escalating global oil prices," the World Bank said.

On the operational level, transmission and distribution losses, mostly due to illegal connections, have approached 45 %, the highest rate in the region.
The World Bank warned that even if the government cracked down on electricity theft, EdL will continue to suffer losses if it continued to depend on oil as a source of energy. Electricity tariffs in Lebanon are also the highest in the region.

Source: The Daily Star
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