Iraq, Lebanon extend fuel supply deal, add crude

Iraq's government has agreed to continue supplying Lebanon's state-owned electricity company with heavy fuel oil for another year and to increase the quantity, in a bid to help partially alleviate an acute power shortage.

The government said it will increase the amount of heavy fuel oil supplied to 1.5mn t/yr (26,000 b/d) from an existing 1mn t/yr, effective from October. Baghdad also agreed to supply Beirut with 2mn t/yr (40,000 b/d) of crude, Lebanon's energy minister Walid Fayyad said. This was confirmed by Iraq's government.

The deal, first signed in July 2021, allows Lebanon to buy heavy fuel oil from Baghdad and resell it for the products it needs. The Lebanese government buys and resells the heavy fuel oil through monthly spot tenders issued by its Directorate General of Oil — in cargoes of 75,000-85,000t — on behalf of main power provider Electricite du Liban. The crude will undergo a similar swapping process, the minister said.

Lebanon's power plants run certain grades of fuel oil and gasoil, but not the sort that Iraq provides. Lebanon sells the Iraqi fuel to private-sector companies, which in return provide on-spec spot cargoes for the Lebanese power sector.

Iraq, in theory, would receive in return services including healthcare. The agreement includes a deferred payment mechanism for six months from the date of receipt, "without arranging any financial interests and at a price that takes competitive international prices into account," Fayyad said.

It is unclear if Lebanon is maintaining its side of the deal, as the country grapples with its worst financial crisis in its contemporary history.

By Bachar Halabi