Lebanon has awarded its first ever tender to swap Iraqi fuel oil with a specific fuel oil grade and gasoil for use in its power plants.
Lebanon's energy ministry said that Dubai's state-owned Enoc won the tender to swap 84,000t (542,000 bl) of Iraqi fuel oil with 30,000t of a specific fuel oil grade and 33,000t (246,000 bl) of gasoil.
Iraqi fuel is unsuitable for Lebanon's power plants, and the country has been experiencing an acute power shortage that has resulted in severe rolling blackouts.
This tender is part of a deal that allows Lebanon's cash-strapped government to buy and resell 1mn t of heavy fuel oil from Iraq through monthly spot tenders — in cargoes of between 75,000-85,000t — for one year on behalf of Lebanon's main power provider Electricite du Liban (EDL). The deal, which was signed in late-July, should cover around one third of EDL's fuel needs, and therefore tie the country over for around four months.
The Iraqi fuel will be delivered to Enoc between 3-5 September and it will deliver cargoes to Lebanon two weeks later, the ministry said. Two other companies participated in the tender, including Kuwaiti trading firm IPG and Coral Energy.
Lebanon's power plants run on fuel oil and on gasoil with particular specifications. Of the two grades of fuel oil used — Grade A and Grade B — Enoc will supply the latter. According to tenders issued by the ministry, imported fuel oil should have a maximum sulphur content of 1pc and gasoil should have maximum sulphur content of 0.001pc (10ppm), which Iraqi refiners do not produce.
This announcement comes a few days after the Lebanese government increased fuel prices, having partially reduced subsidies on fuel oil prices. Lebanon's central bank, which manages the system of fuel imports, said on 11 August that that it would be ending fuel subsidies as the country can no longer afford to foot the bill. The value of the Lebanese pound has fallen by 90pc in two years and around half the population live below the poverty line. Power cuts last for several hours each day and streets full of cars queuing for rationed allowances of fuel have become a common sight.
Other efforts have been made to ease the fuel shortage. Lebanon's Hezbollah said on 19 August that it has arranged the first shipment of fuel oil from Iran to Lebanon, without specifying details. It is unclear whether the shipment has been made. Three LPG carriers will discharge in Lebanon later this month.
Source: Argus