Rising demand for power and disruptions to gas supplies from Egypt have left Jordan struggling to meet its energy requirements, with imports adding to the economic headache.
Jordan currently buys in around 97% of the energy it consumes. Primary demand continues to grow at an annual rate of around 5.5%. A drive to bolster local energy production is now gaining pace, as Jordan moves to forge new partnerships for a raft of wide-ranging projects that will help it diversify its power mix.
Oil prices take their toll
Jordan has received less than a third of contracted gas supplies from Egypt since 2011, due to the repeated sabotage of the Arab Gas Pipeline. Technical problems on the line, combined with the Egyptian government’s decision to divert supplies for domestic use, have exacerbated the situation, forcing the kingdom to seek alternative fuel oil imports.
Lower international oil prices have pushed down the cost of imported energy in recent months. Nonetheless, Jordan’s energy problems remain complex.
The price of crude edged upwards in late January, prompting speculation that the recent decline in oil prices could now be tailing off. Yet last month also brought a warning from the World Bank that falling oil prices over the medium term could see savings to the kingdom’s economy outweighed by losses in the form of lower remittances from Jordanians working in oil-dependent GCC countries. Lower oil prices could also lead to a reduction in aid from GCC governments.
New projects a priority
However, a raft of new initiatives is paving the way for Jordan to reduce its reliance on energy imports and bolster local energy production regardless of the international oil price environment.
The kingdom’s renewable electricity plans received a major boost at the end of last year when the European Bank for Reconstruction and Development (EBRD) and the French Development Finance Institution, PROPARCO, announced they would provide loans totalling $100m for solar energy projects. In early January, the Minister of Energy and Mineral Resources Mohammad Hamed said the country will expand the capacity of the national electricity grid by 1000 MW to around 5300 MW using these funds. The government expects work to begin on the project before the end of March and is targeting completion within two years.
It is hoped the move will pave the way for the relaunch of its third renewable energy tender. The government sought applications from investors last year to build 100 MW solar or wind plants, but put projects on hold when attempts to allocate GCC funding for distribution capacity constraints proved unsuccessful.
Some projects have been more successful. The authorities issued a renewable electricity licence – its thirteenth – in early January to Falcon Maan for Solar Energy for the construction of a 21 MW solar farm in Maan in the south of the country, at a cost of $51m.
Hamed said last year that around 1800 MW of renewables capacity should be connected to the national grid by 2018, equivalent to almost half of the kingdom’s 2013 electricity production of 3566 MW.
Boosting supplies a priority
Jordan has also moved to secure replacements for disrupted Egyptian gas supplies. A $65m liquefied natural gas (LNG) terminal, which is under construction at the port of Aqaba and scheduled for completion by July, will allow the kingdom to diversify its gas supplies. Further down the line, Jordan is looking to lock in supplies from recent gas discoveries in the nearby Eastern Mediterranean.
In late January, Hamad said the authorities are looking to reach an agreement to import around 150m standard cu feet per day (scfd) of gas from Cyprus by the middle of the year. The gas is expected to be delivered in LNG form via the Aqaba terminal. Shortly afterwards, Hamed said the authorities are also in talks with BG Group to import gas from Gaza offshore waters, where the UK firm has a production concession called Marine Field.
Last year, Jordan reached an agreement with Israel that will allow the kingdom to begin importing $500m of gas for its potash and bromine plants on the Dead Sea from the Tamar field over a 15-year period starting 2016.
Jordan had also entered into discussions with Israel on the subject of importing around $15bn of gas from the neighbouring Leviathan field. However, in early January, the authorities said talks had been suspended over uncertainty about who would develop the field. Purchasing gas from Israel has proved to be politically controversial for the kingdom, with the majority of MPs voting in December against proposals to import from the Leviathan field.
The deals will support Jordan’s bid to meet domestic demand for power in what remains a challenging regional climate. In the long term, production of both Palestinian and Cypriot gas could play a key role in boosting much-needed regional supplies once operations begin.
Read More from OBG
