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|14 May, 2019

Lebanon to extend deadline for LNG projects

Six of eight entities qualified in the second licensing round on November 21

Image used for illustrative purpose. A liquefied natural gas (LNG) tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan November 13, 2017.

Image used for illustrative purpose. A liquefied natural gas (LNG) tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan November 13, 2017.

REUTERS/Issei Kato

BEIRUT: The Energy Ministry is expected this week to extend the May 20 deadline for reviewing and selecting a consortium to build liquefied natural gas terminals that are designed to supply Lebanon’s power plants with a cheaper and friendlier source of energy, a source at the ministry said. The ministry will ask the companies that qualified in the second licensing round if they would agree to extending the May 20 deadline to give officials more time to evaluate the offers and select the companies that will build the terminals, according to the source, who spoke on condition of anonymity.

Six of eight entities qualified in the second licensing round on Nov. 21.

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Some of the bidding companies formed consortiums to improve their chances of winning the contracts to build the LNG terminals.

Seven consortiums and one company took part in the first licensing round. They were Gas Natural Fenosa; Best on Water, Vitol, Butec, Almabani, Rosneft; Excelerate, Shell, BB Energy; ENI, Qatar Petroleum Int. Ltd; Golar Power Ltd., CCC sal (Gunvor, Exmar, EGC Egypt, Petrojet, Maridive, Primesouth); Total with ZR Energy; Petronas with Unigaz and Phoenicia energy consortium (Gunvor, Exmar, EGC Egypt, Petrojet, Maridive, Primesouth).

But in the second round on May 15, 2018, the ministry disqualified the Golar Power Ltd., CCC sal and Phoenicia energy consortium.

The idea to invite local and international companies to bid for the Liquified Natural Gas Import Terminals Project in Lebanon started in 2002. But the government at that time did not take any action to build the terminals despite the fact that gas could cut electricity bills by at least $150 million a year.

At present, only the Zahrani and Beddawi power plants can run on gas, while the remaining stations only run on more expensive fuel and gas oil.

“Had the LNG project been adopted since it was first discussed by the government [Energy and Water Ministry], and that was back in 2002, Lebanon could have saved up to $2.55 billion over the past 17 years,” one expert said.

The Energy Ministry planned to develop an integrated LNG import supply chain to provide natural gas to current and future power plants in Lebanon. The goal was to secure the development of offshore LNG imports at the three sites (Zahrani, Beddawi and Selaata) through selected bidders.

The electricity deficit is one the most challenging issues facing the government of Prime Minister Saad Hariri. Electricite du Liban’s deficit ranges between $1.5 billion and $2 billion a year, depending on the fluctuations of oil prices in the international markets.

The company or companies that win the contracts will also be responsible for importing LNG from abroad and building storage facilities to receive the gas.

It not yet clear how long it will take the companies to complete the LNG projects.

But experts agree that gas is one of the best alternatives for cheaper and more friendly sources of energy in Lebanon. “The energy minister may have asked for the extension of the deadline because she is very busy dealing with the electricity plan that was approve by the Cabinet,” another source said.

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