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Lebanon seeks to get swapped Iraqi oil by end-August

The Electricite Du Liban (EDL) building in Beirut, May 20, 2020. (The Daily Star/Mohamad Azakir)

BEIRUT: Lebanon hopes to get the first shipment of the swapped Iraqi oil to run the country’s power plants before the end of August, a government source said Tuesday.

The Iraqi side will hand over the crude oil shipment to international companies that won the tender.

These companies will swap the Iraqi oil with HFO Grade (A) and / or HFO Grade (B) and / or gasoil that will be shipped to Lebanon to run the country’s power plants.

“We are not getting any Iraqi oil. What we are doing is a standard stock cargo and we have been doing that for almost a year. The difference between what we used to do and what we are doing now is that in the old days we used to make a tender book with an open LC (line of credit) confirmed by the Central Bank and JPMorgan. Instead, there will be a standby LC in the amount that is equivalent to an Iraqi I sulphur heavy fuel which is also equivalent to the amount the standby LC,” the source told The Daily Star on condition of anonymity.

The source said that if everything goes according to plan and all conditions are met, Lebanon will start getting the swapped fuel regularly every month for the next 12 months.

In other words, the companies that win the tenders will go to Iraq and swap the fuel oil with diesel that meets the specifications of Lebanon’s power plants.

These companies also have the option to take the Iraqi oil and refine and process it in another country before shipping it to Lebanon.

But both the Lebanese and Iraqi side will scrutinize every step these companies take.

The implementation process was supposed to develop a procedure to prequalify the bidding companies so it can be approved by the Iraqi side.

“The Iraqis needed to approve the companies, the procedures, the tendering process and every single step of the process. The whole idea is to be transparent, clear and compliant to the Iraqi and Lebanese procedures,” the source explained.

He added that the Lebanese side developed the procedures which the Iraqis approved and contacted the companies which the Iraqis approved. The companies also sent their prequalification, which was approved by the Iraqis.

“The Iraqis have already approved three companies out of five that showed interest. The process is a lot more complicated than people think,” the source said.

He added that the prequalified companies have to go to Iraq and get the Iraqi fuel quantified and give them an equivalent amount of HFO Grade (A) and / or HFO Grade (B) and / or Gasoil.

The source stressed that the Iraqis insisted in dealing with reputable, international transparent companies.

Last month, the Lebanese government, represented by the Energy and Water Ministry, and the Iraqi government, represented by the of Oil Ministry entered into a term agreement to secure on Government to Government (G2G) basis a yearly quantity of 1 million metric tons of Iraqi Quality Specifications High Sulphur Fuel Oil (HSFO) divided into 12 months.

“This is to inform all potential bidders to provide the Directorate General of Oil / Ministry of Energy and Water of Lebanon; their interest to partake in a SWAP agreement whereby supplying Electricité Du Liban (EDL) with HFO Grade (A) and / or HFO Grade (B) and / or Gasoil under the terms and conditions and mechanism that will be published in due course,” the of Energy Ministry announced on its website.

 

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