Jordan: Planning for the future

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Regional events are forcing Jordan to look past its traditional sources of energy, both in terms of feedstock and physical location. Disruptions in the supply of natural gas to the kingdom coupled with rising costs, mean it may look elsewhere for feedstock, while also pushing forward with its own nuclear energy programme.

Jordan consumes in the region of 3bn cu metres of natural gas per year and only a small amount of that is produced domestically with 80% of the country’s electricity supply is generated by natural gas secured from Egypt. The kingdom’s natural gas-fed electricity power plants produce 1880 MW per year, fulfilling only around 20% of domestic demand, according to the 2009 annual report from the Ministry of Energy and Mineral Resources, the most recent information available.

Natural gas deliveries from Egypt are expected to increase to more than 7.1m cu metres per day in early July, from 2.8m cu metres per day in mid-June, according to Khaled Toukan, the minister of energy and mineral resources. However, this is significantly lower than the 8.8m cu metres Egypt shipped to Jordan in 2009. The decrease is the result of recent political unrest and attacks in Egypt’s Sinai region that have disrupted the flow of natural gas.

Though the kingdom is currently in talks with Egypt regarding the quality and price of imported natural gas, it is possible that Jordan could look to Israel to also supply the feedstock that fuels the majority of its electrical power plants, according to reports from Israeli financial firm Clal Finance. Israel’s Tamar offshore field, located about 90 km west of Haifa, has an estimated 246bn cu metres of natural gas. The field is expected to eventually provide for Israel’s domestic production and turn the country into a natural gas exporter within several years, the Jerusalem Post reported in June.

“In our estimation, the lack of faith in Egyptian gas will force Jordan to purchase at least 1bn cu metres of gas from Israel each year,” Yaron Zar, an analyst at Clal Finance, wrote in early June.

But the kingdom is also looking inwards to meet increasing energy demand and to quell an energy bill that takes up 20% of the state budget at a cost of $4bn. Like many others, Jordan is not giving up on its nuclear programme, which it considers an essential part of its energy plan. The country has plans to build two reactors in the next decade, and two additional reactors are planned for the next 25 years.

June 30 is the deadline for offers by potential operators and investors for the first reactor, a $4.5bn, 1000-MW nuclear plant. Jordan is also expected to receive bids for the technology that would be used in the nuclear station by the same date. The country’s atomic commission has pre-selected possible technologies from Atomic Energy of Canada, Russia’s ZAO Atomstroyexport and Atmea, a joint venture between France’s Areva and Japan’s Mitsubishi Heavy Industries. It will take about five months to review the proposals and a selection should be made by the end of the year, Toukan said.

Emphasising the nuclear power plant’s safety in the international press, Toukan said that energy generated from oil, gas, wind and solar power will not be enough to cover the kingdom’s growing demand, though the country is expanding its efforts in those areas as well. The country hopes to attract $14bn in investment in renewable energy, oil shale and nuclear power to meet rising electricity demand, which is expected to double to 5000 MW by 2020 and to reach 10,000 MW by 2030.

Jordan has been keen to court foreign investment of late, particularly in the energy sector, particularly given that the kingdom imports 90% of its oil and spent JD641m ($902.8m) on crude oil imports between January and April after the flow of Egyptian gas slowed. This forced the Kingdom to switch to more expensive imported diesel to meet its electricity needs.

Jordan’s finance minister, Mohammad Abu Hammour, said in June that the economy is on track to see 3.5% growth this year, despite a substantial decline in investment in the first five months of the year due to knock-on effects from regional unrest. Foreign and domestic investment until end-May declined 58% from the same period last year, from JD805m ($1.1bn) in 2010 to JD336m ($473.3m) in 2011, according to the Jordan Investment Board’s CEO, Samer Asfour. Foreign investment alone fell from JD163.5m ($230.3m) to JD64m ($90.1m), and domestic investment from JD641.4m (903.4m) to JD272m ($383.1m).

It will be a long road to get Jordan to a place where it can become self-sufficient in power, but enticing investment in local production will be the first step. Even though the kingdom will likely need to pay more for imported Egyptian natural gas or look elsewhere for its supply in the short term, the country must focus on realising its long-term goal of managing its own secure supply.

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