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French Version

Lebanon - Lebanon inks key fuel deal with Algerian national oil firm

Lebanon signed an agreement with Algerian national oil company Sonatrach for 1.1 million tons of fuel oil and 1 million tons of gas oil for three years beginning in 2006, the Lebanese energy minister said.

Lebanon has been seeking to buy oil directly from Gulf countries rather than on the international oil market, where prices have risen sharply this year. Many Lebanese cities suffer power blackouts for up to eight hours per day due to a government power rationing system aimed at reducing energy costs.

Lebanon's state-owned electricity company Electricite du Liban (EDL) is losing about $400 million per year.

Lebanese Energy Minister Mohammad Fneish said in a statement that the deal with Algeria, signed last week, will save EDL $40 million per year.

He did not say how much the deal was worth. Sonatrach did not return phone calls Monday.

Lebanon concluded an $800 million deal with Kuwait in August to import 600,000 tons of diesel oil per year. The ministry said at the time that 600,000 tons would supply EDL's needs for about six months.

Fneish said Lebanon will continue to buy diesel oil from Kuwait, a deal his ministry said will save $50 million yearly.

"The agreement with Algeria complements the agreement with Kuwait," he said. "We hope to implement the two contracts to insure the needs of EDL and the local market for fuel oil and gas oil."

EDL consumes an average of 1.9 million tons of oil per year - about 40 percent of Lebanon's total - most of which is fuel oil. Lebanon imports all of its needs for petroleum and petroleum derivative products, mostly from Europe.

As oil prices surged over the summer and Lebanon's economy slowed to near zero growth after the assassination of former Prime Minister Rafik Hariri, Lebanon appealed to Arab governments to cut oil deals directly with Lebanon.

The government has been under pressure to reduce the cost of diesel fuel, which is currently set at LL16,000 per tank. Dozens of residents of the Bekaa region took to the streets Friday to demand that the government lower the cost to LL12,000 per tank.

Beirut,11 21 2005
Will Rasmussen
The Daily Star
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