Jordan diversifies natural gas sources to end reliance on Israel, Egypt
Amman - As Jordan’s energy costs surge, the kingdom is frantically looking for ways to alleviate energy-related pressure on its budget deficit of more than $30 billion.
Jordan’s energy needs have been hit hard by inconsistent natural gas supplies from Egypt and by having to pay top dollar for oil usually supplied from Iraq at preferential prices.
To diversify its reliance on the limited and problematic energy sources, the kingdom commissioned its first liquefied natural gas (LNG) terminal at the southern seaport of Aqaba. On June 23rd, BAM International completed construction of the $72.8 million Sheikh Sabah Al Ahmad Terminal for the state Aqaba Development Corporation.
The firm, along with partners BAM Contractors from Ireland and Jordan engineering company MAG, handed over the project two months ahead of schedule.
Jordan’s liquefied natural gas terminal, one of the Middle East’s first such facilities, is slashing the kingdom’s energy costs for the production of electricity by at least 30% for a country that imports almost all of its energy needs.
The terminal in Aqaba enables Jordan to receive about 13.9 million cubic metres of natural gas per day and serves as a key pillar in addressing Jordan’s pressing energy situation, which consumes about 19% of the country’s gross domestic product.
Importing LNG from several markets is about 30-35% cheaper for Jordan than relying on diesel and heavy fuel oil for power generation. Amman was forced to use fuel oil more frequently after the 2011 uprisings in Egypt caused disruptions in natural gas supplies.
“The terminal is a key asset for Jordan. It is a major boost in energy infrastructure in the country,” said Haidar Gammaz, spokesman of the Ministry of Energy and Mineral Resources.
Gammaz said the LNG terminal “is helping the country in diversifying its gas resources, which is part of our energy strategy that also seeks to decrease reliance on non-renewable energy from 97% to 60% by 2020”.
The spokesman said Jordan has already received the first shipments of LNG and the terminal is supplying about 8.7 million cubic metres of LNG to the country’s power stations per day.
“Nineteen more LNG shipments will arrive in the second half of this year. The terminal is helping reduce the losses of the National Electric Power Company, whose losses due to reliance on more expensive heavy fuel for power generation exceed $5.6 billion at present,” Gammaz added.
Jordan, which signed an agreement in 2014 under which Shell Oil Company would provide LNG for Jordan for five years, is planning to offer several tenders in the next few months to import additional LNG.
Abdel Fattah al-Daradkeh, director general of the state-owned National Electric Power Company (NEPCO), told The Arab Weekly that the terminal “will play a key role in reducing the company’s losses”.
Other energy officials said the terminal would be able to provide excess quantities of gas to Egypt in case of shortages in the neighbouring country, which has had repeated cuts in electricity production because militants’ attacks on pipelines regularly disrupt gas service.
For lawmaker Jamal Gammoh, the opening of the terminal, financed with a grant from the Arab Gulf countries, will not only lead to a lower energy bill but will rid Jordan of the burden of buying gas from Israel.
NEPCO signed a letter of intent with Noble Energy Inc. in 2014 to import natural gas from Israel, a move that was heavily slammed by activists and triggered nationwide protests against the deal. Some activists flatly reject doing business with Israel, which many consider an enemy bent on usurping Palestinian lands and killing Palestinians, while others said such an agreement would hold Jordan’s energy sector hostage to Israeli political moves.
NEPCO’s deal with Noble Energy, which owns 39% of the Leviathan natural gas field in Israel, entails buying gas over 15 years at a cost of $15 billion starting in late 2017. But the deal was halted after the Israeli Antitrust commissioner rescinded an agreement with Noble Energy and Delek Group that would have allowed the firms to retain majority stakes in Israel’s two biggest gas fields even though it would leave them controlling more than 90% of the country’s gas reserves.
“The opening of the terminal is good news for us and bad news for Israel. We do not need the Israeli gas anymore. Although natural gas is cheaper than LNG, with the terminal we can buy from all over the world,” said Gammoh, who is head of the Lower House Energy Committee.
Although Jordan and Noble Energy signed a letter of intent in 2014, no progress has been made and no further positive developments were expected in this regard, Gammoh explained.
“There have been no meetings at all between the two sides. We do not need the gas from the enemy [Israel]. I do not think that a deal between the two sides is expected anytime soon,” added the deputy.
Jordanian energy officials have repeatedly stressed that they do not oppose importing natural gas from Egypt, whether for power generation or for private sector companies and industries.
The Jordanian government allowed Arab Potash Company, which has headquarters in Amman, to sign a deal with Noble Energy to import Israeli gas at preferential prices. Noble Energy is to supply 1.8 billion cubic metres of gas to Arab Potash and its affiliate Jordan Bromine at facilities near the Dead Sea. A pipeline is being constructed to provide Israeli gas to the company under the $771 million, 15-year deal with Noble Energy.
Raied T. Shuqum