Interview: Ibrahim Saif
How can Jordan capitalise on lower energy prices?
IBRAHIM SAIF: As Jordan imports 97% of its energy, a drop in oil prices is a welcome trend that reduces the energy burden. It also decreases the cost of generating electricity, which until recently had been reliant on heavy fuel and diesel. In 2014 Jordan consumed almost 50m barrels of oil, so a drop of $1 in price has a considerable effect on the economy. We are using the drop in price to reduce the government’s deficit, particularly regarding electricity. Lower oil prices also help curb inflation, support the trade balance and boost the efficiency of certain sectors. Energy is a key input for Jordanian industry, and lower energy prices translate into lower operating costs for many firms.
Conversely, Jordan’s economy is linked with those of the GCC, and a drop in oil prices could lead to a slowdown in oil-reliant Gulf countries. In anticipation of lower oil revenues, GCC countries may tighten their budgets and invest abroad with more caution. Yet we have not witnessed lower foreign direct investment or remittances from these countries so far. Many Gulf states have substantial sovereign wealth funds and as long as Jordan is able to present attractive investment opportunities, they will continue to invest.
What does the ability to import liquefied natural gas (LNG) mean for Jordan?
SAIF: Importing LNG is a major step in terms of diversifying our energy sources and enhancing supply security. For years we were reliant on importing Egyptian gas to generate electricity, but we decided to alter our strategy after numerous disruptions. Our newly constructed LNG terminal and LNG ship give Jordan access to the global LNG market. The difference in price to what we were paying Egypt is minimal, and LNG is environmentally cleaner and more sustainable. We are pursuing many options to arrange agreements to import gas. Along with the infrastructure, the kingdom has power generation units and factories that provide the necessary demand. Jordan needs 350m-400m cu metres per day and expects this to rise. Annual demand growth for electricity is 5-6% and the population is rising rapidly, suggesting that demand for LNG will grow in the coming years.
What impact has the Renewable Energy and Efficiencies Law (REEL) had on the sector?
SAIF: After the REEL passed, progress was slow as we were laying down the infrastructure. We needed to prepare the legislative and business environment to accommodate renewables projects. We also needed to engage stakeholders in the energy sphere – power generators, National Electric Power Company and distribution firms – to communicate how the government will pursue renewables as a key energy source.
With the bylaws and business environment now set, we currently have projects totalling 600-650 MW either already constructed or contracted that we hope to be connected to the grid before the end of 2016. This will bolster our objective of renewables contributing 10% to the energy mix by 2020. The biggest constraint is grid capacity. In 2015 we will launch the Green Corridor, a project that will reinforce Jordan’s electricity backbone for the integration of more renewable generation capacity. As grid capacity is a pressing issue, the Green Corridor project will be tendered by the end of the 2015, and we are keen to engage with foreign investors on this initiative.
It is also important to note the social impact of renewables. Through the Jordan Renewable Energy and Energy Efficiency Fund we are promoting renewables use by small and medium-sized enterprises, and in collaboration with the international community we are supporting renewables usage in low-income communities, schools, mosques, churches and so on. We want to embed a culture of sustainability in Jordan, which is a long process, but one which we think could benefit the kingdom’s long-term energy strategy.
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