Lebanese prosecutor considers investigating energy company over noncompliant fuel

Laboratory tests showed the sulfur content did not comply with the required specifications

BB Energy's building in Beirut, Lebanon, in 2016. Reuters

A Lebanese prosecutor has considered opening an investigation against a major energy trading company owned by an influential Lebanese family for allegedly importing tainted fuel to state-owned company Electricity du Liban (EDL), judicial documents seen by The National showed.

Mount Lebanon prosecutor Ghada Aoun has considered the case against BB Energy and its managing director Khaled Bassatne, who allegedly "fraudulently sold (...) quantities of adulterated fuel to EDL", loaded on six tankers, according to a letter she wrote to first investigating judge Nicolas Mansour.

Two judicial sources confirmed to The National the investigation.

"It was found as a result of the laboratory tests conducted on samples of the fuel loaded on these ships that the sulfur content did not comply with the required specifications," which she said caused damage to generators' power plants and posed an environmental threat, including the potential "for acid rain".

When contacted, BB Energy said the company "has not been notified of any lawsuit, complaint, or date of the hearing".

“BB Energy has not been notified of any lawsuit, complaint, or hearing in relation to this case. Regarding the alleged tainted fuel case from 2020, BB Energy, nor anyone representing the company, was indicted in any legal files related to the case. BB Energy strongly rejects all the allegations made in this report and is currently considering all available options,” the company told The National.

It builds on an earlier investigation in 2020 by the Lebanese judiciary that alleged a corruption scheme in which staff at the Ministry of Energy and laboratories were said to have received bribes in exchange for falsifying fuel quality tests.

As a result, Lebanon ended up paying a high price for compromised fuel delivered as part of a 2005 contract signed with a subsidiary of Sonatrach Petroleum Corporation (SPV) to import fuel for its power plants.

Those contracts were highly lucrative, with the cost of fuel supply to all EDL plants surpassing $1.6 billion in 2018, World Bank data shows.

The contract was executed by ZR Energy DMCC, owned by Lebanese brothers Teddy and Raymond Rahme, and BB Energy DMCC, owned by the Bassatne family, through a secret sub-contract.

Following an initial investigation in Lebanon, charges were brought against ZR Energy and Teddy Rahme for bribery.

Ms Aoun is now expanding the scope of the proceeding.

Mr Mansour has been appointed to head the new investigation and determine whether to include BB Energy in current proceedings or drop the case.

The move comes as the US Treasury imposed sanctions on the Rahme brothers for contributing to "the breakdown of the rule of law in Lebanon", and to "pass off their dangerously compromised fuel product by blending it with other fuels".

Lebanon is facing an unprecedented economic crisis which has taken a toll on the electricity sector, already plagued by corruption and reeling infrastructures.

The Rahmes and Bassatnes are both influential families in Lebanon, with important businesses across the world.

'This is not fuel, this is garbage'

The tainted fuel scandal was exposed in 2020 after an operator of EDL power plants raised concerns about the fuel being non-compliant.

"We have had issues regarding fuel quality for years," said Yahya Mawloud, chief operating officer at MEP, a private operator for two EDL power plants in Zouk Mikael, north of the capital, and Jiyeh, to the south.

"The production had to be halted several times to prevent irreparable damage to the power plants.

"I kept sending reports to EDL, but they accused me of not being co-operative, so we had to do tests ourselves several times, in addition to the regular quality tests. Each time it showed that the fuel was not compliant.

"But they still wanted me to burn it, because burning the fuel is burning the crime."

In September 2019, Mr Mawloud sought the assistance of a German engineer from the company that manufactured the power plant to inspect the quality of the fuel.

"He said 'This is not fuel, this is garbage'," Mr Mawloud said.

EDL denied the accusations, saying they had always maintained that the operator should only run the engines at Zouk and Jiyeh safely and without compromising the safety of any equipment, adding that the responsibility for testing the fuel was outside their purview and that each shipment should have also been inspected by the user prior to its utilisation for "fuel specification compliance." However, it said it had tasked consultants to check the complaints by MEP and halted the use of tainted fuel once it was found to be defective.

"EDL prepared a more than 600-page detailed report regarding the fuel issue and all the measures it had taken ... [and] on May 27, 2020, EDL through its attorney, filed a legal claim in front of the chief examining magistrate in Mount Lebanon against the supplier ... under the charges of fraud in fuel oil supplied to its plants in Sou and Jiyeh," the power company said in a statement.

"EDL has done its utmost and fulfilled its contractual obligations and in the spirit of good co-operation with the operation, EDL intervened in order to ensure the safe operation of the powerplants," they added.

Seperatly, Ms Aoun initiated a preliminary investigation in April 2020, after a complaint by lawyer Wadih Akl, a member of the Free Patriotic Movement (FPM) Political Bureau.

The case was entrusted to Mr Mansour, who led a preliminary investigation, which was leaked to the public.

It uncovered a network that spanned multiple years with both importers allegedly implicated.

According to testimonies collected, the director of the fuel inspection company would ask employees from the energy minister to alter fuel quality tests done for BB Energy to "have the results compatible and within norms".

In exchange for their services, the employees were offered cash payments.

"BB Energy used to send him and the employees in-kind presents, that the sums he used to cash ... were presumably from BB Energy", one of the employees said in his hearing seen by The National.

But at the time, the legal proceeding was focused on a single tainted shipment, the Baltic, that had been delivered by ZR Energy DMCC and did not implicate BB Energy and its owners in the trial opened in 2021, which is yet to yield a verdict amid judges striking and delays in the judicial process.

"I did not understand why it was only focusing on the specific shipment when I have been having problems for a long time with the fuel," Mr Mawloud said.

"Anyway, the trial is stalled in Lebanon. It's a shame we had to wait for the US sanctions to get accountable." - Article updated after publication to include a full statement from BB Energy and clarification from EDL.