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French Version

Lebanon to reap benefits of Arab energy grid by April

Ministers stress the need for private-sector investment in making the project a success.
The ambitious proposal would link Jordan, Syria, Iraq, Egypt, Turkey and Libya as well, though its funding is not yet complete

The linkage of seven Arab states in a single electricity network has tremendous economic benefits, according to a statement released by Arab energy ministers on the last day of a conference on the Arab energy market in Beirut on Wednesday. However, the statement added, this linkage requires that several essential conditions be met.

“The Arab states must make bigger financial investments, liberalize the energy sector, give the private sector a bigger role in this sector’s development and acquire advanced technology,” the ministers said in their statement. They also said natural gas should replace fuel oil to run the power plants.

The multibillion-dollar power grid will link Jordan, Syria, Iraq, Lebanon, Egypt, Turkey and Libya in the first phase.

Excluding Libya, the power grid has a capacity of 400 to 500 Kilovolts, which means that it could meet the energy needs of all the countries linked to the network. Experts said Lebanon and Syria would start benefiting from this link in April 2004.

Lebanon, which still relies on expensive fuel oil to run its power plants, has already signed an agreement in Egypt last month to receive natural gas from a pipeline running through Jordan and Syria.

This is expected to reduce the country’s electricity bill by at least 30 percent and lower pollution, a welcome step for hard-line environmentalists.
Some of the ministers even called for the excess energy to be exported to other countries in Europe and Africa.
The idea of establishing a power grid in the region was originally inspired by the experience of the Nordic countries.

Allan Khalil, from the Jordanian Electric Power Company, talked at length in the conference about the electricity market in Scandinavia.

“The electricity markets in the Nordic states have undergone major changes since electricity market reforms were started in the early 1990s,” Khalil said in his paper.

At present, Sweden, Norway, Denmark and Finland are connected to the Nordic power grid. The Nordic states managed to cut the cost of electricity gradually, from 1996, and have also succeeded in reducing pollution.

Most importantly, the Nordic states turned electricity into a commodity, subject to the law of supply and demand.

Ghada Shartouni, the head of the research and planning department at Electricite du Liban (EDL), underlined the importance of the private investment in the development of the energy sector.

She said that implementing the seven-nation power grid required investments that exceeded hundreds of millions of US dollars.

“The Lebanese government cannot afford to finance such a project all by itself. So Lebanon is trying to secure pledges from Arab and international financial groups to contribute to this project,” Shartouni said.

She said that the private sector should be encouraged to take part in some of the power projects in the country.

One suggestion floated in government circles recently involved privatizing some of the power plants or building new ones under Build, Operate and Transfer deals (BOT). Citing an example, Shartouni said that some European countries allowed private companies to participate in the production of electricity. He said that this measure caused prices of electricity to fall, because of the intense competition between companies.

EDL, which incurs a loss of more than $200 million a year due to the poor collection of bills and technical problems, has carried out a rigid restructuring plan to end its financial hemorrhaging. But despite the relative success of the restructuring plan, EDL is still plagued by numerous problems, like poor management and overstaffing.

To end this state of chaos, the government of Prime Minister Rafik Hariri decided to partly privatize some departments of EDL to cut costs. In 2002, the parliament passed a draft law that paves the way for the liberalization of the electricity sector and allows private companies to take part in the production and distribution of energy.

According to the plan, two major companies will be set up, one for the transport of electricity and the other for production and distribution. The distribution company will be controlled and run by the state, while the second will be partly sold to private companies.

Shartouni said that the cost of electricity production in Lebanon is probably one of the highest in the world. She added 85 percent of the power stations in the country are still run on fuel oil. “The creation of the power grid will certainly reduce the cost of the energy bill in the future,” Shartouni said.

She stressed the fact that Arab states must encourage private companies to take part in the construction of the power grid.

Beirut,02 16 2004
Osama Habib
The Daily Star
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