Jordan set to end reliance on Egyptian gas

By Taylor Luck

JORDAN IS SET to move away from Egyptian gas due to the growing unreliability of the country’s main energy source, officials say.

In a statement earlier this week, Minister of Energy and Mineral Resources Qutaiba Abu Qura announced that the ministry is intensifying efforts to secure alternatives to Egyptian gas, on which Jordan relies for 80 per cent of its electricity generation needs, adding that the resource will not factor in the Kingdom’s future energy plans.

The minister’s statement, issued during a meeting of the Lower House Finance Committee, came amidst reports in the Egyptian press that Amman has gone back on its decision to ratify a new natural gas agreement, which was approved by the Cabinet in August and has been pending Cairo’s approval.

Officials denied that Jordan has formally withdrawn its support for the amended agreement, under which Egypt is expected to triple gas prices.

“We have had no developments, either towards ending or signing the new agreement,” Farouq Hiyari, the energy ministry’s secretary general, told The Jordan Times.

Despite the denials, according to a ministry source, frustration over the unreliability of gas supplies and a lack of communication from the Egyptian side has led Jordanian officials to “give up” on an arrangement that at its peak supplied the Kingdom with some 300 million cubic feet per day.

The Egyptian ministry of petrol declined to comment.

Cairo has yet to resume pumping since a Sinai explosion cut supplies on November 28, marking the ninth attack on supply line since the beginning of the year and the third in less than a month.

The most recent attacks came amidst assurances by Egyptian authorities that an increased military presence in the Sinai Peninsula combined with the arrest of several jihadists allegedly behind the spate of attacks would lead to the security of the pipeline.

According to sources at E-Gas, one of the two firms that oversee the 400-kilometre Arab Gas Pipeline - which also supplies Israel - repairs have faced “unexpected” delays leading to the prolonged disruption, which has forced the Kingdom’s power plants onto their fuel reserves at a cost of some JD3 million per day.

Economists say the series of attacks have had a direct impact on Jordan, with the series of disruptions pushing the national energy bill to record levels - over JD4 billion - and expected to widen the National Electric Power Company’s budget deficit to JD1.4 billion by the end of the year.

“For months NEPCO has covered the difference in price between natural gas and heavy oil, but this burden has become unsustainable,” NEPCO General Manager Ghaleb Maabreh recently told The Jordan Times.

According to officials, a ministerial team is to travel to Cairo “soon” to review the issue of gas supplies with their Egyptian counterparts before Jordan formally moves to end its decade-long reliance on Egyptian gas.

Meanwhile, Hiyari said talks are intensifying with Iraq and several Arab Gulf states over the potential of importing natural and liquid gas over the next decade as Jordan attempts to develop domestic energy sources including oil shale and nuclear power.

Despite the renewed efforts to secure additional energy sources, officials say it will take up to two years from the signing of any agreement before Jordan can benefit from a new energy market due to infrastructure requirements.

Should Jordan decide to end its decade-long reliance on Egyptian gas supplies, Hiyari said the government will resort to the international energy market to maintain electricity generation in parallel with its drive to secure additional energy sources.

“We will have no problem meeting the needs of electricity plants needs with oil and diesel during this period,” Hiyari said.

Energy officials privately conceded that the move will impact electricity tariffs as heavy fuel oil and diesel are much costlier than Egyptian gas imports, which Jordan previously received at prices of less than half the international market rate.

Sources claim the government has previously hesitated to formally end the country’s gas deal with Egypt for fear of raising electricity tariffs at a time of popular unrest over a struggling economy and a stalled political reform drive.

“Officials have finally come to the decision they can no longer wait around for the Egyptian situation to improve,” said an energy official who was not authorized to speak to the press.

“They have come to the terms that Jordan can no longer rely on subsidized energy.”

While an added economic burden for citizens, industry observers say the move away from Egyptian gas will serve as a boost to Jordanian oil shale, which experts say is cost competitive with unsubsidized natural gas, and renewable energy, which advocates claim has long been neglected in favor of subsidized fossil fuels.

Despite the recent boost in investments in the alternative energy sector, Jordan will not see the production of electricity from oil shale before 2016, while the first large-scale renewable energy project, a 90-megawatt wind farm south of Shobak, is not expected to come online before 2014.

Observers say uncertainty over Egyptian gas has elevated energy from a policy concern to an issue of national security for Jordan, which currently imports 98 per cent of its energy needs at a cost of 23 per cent of the gross domestic product.

16 December 2011

Source: The Jordan Times.
Link: http://www.jordantimes.com/index.php?news=44360.