Jordan and Israel Discuss Gas

Jordan’s Arab Potash Company (APC) [i], one of the world’s largest potash producers, “is in contact with its Israeli counterpart through the American oil and gas firm Noble Energy to examine the possibility of importing gas,” Jordan’s Minister of Energy said in a statement, AFP reported Monday. The Israeli gas would power a potash plant on the Jordanian side of the Dead Sea. The plan is to deliver the gas through the Israeli gas pipeline that serves Israel Chemicals’ plant in Sodom on the Israeli side of the Dead Sea. The operation of linking Arab Potash Works with Israel Chemicals Ltd should be therefore technically simple.

“The gas available in the Dead Sea area is a clean and inexpensive source of fuel and the company seeks to use it for its factories on the Dead Sea. But no agreement has been reached so far,” added the Minister of Energy, dismissing unfounded rumours alleging the secret nature of the talks.

Historically, Jordan and Israel heavily depended on Egyptian gas. Since 2008, Israel had been importing most of its gas from Egypt via an underwater 60 mile pipeline - the Arish-Ashkelon pipeline (sales made by a private company that has been granted the right by the Egyptian authorities to export gas from Egypt to Israel). Given the history of tense relationships with its Arabic neighbours and the constant fear of supply denial from Egypt, Israel happily welcomed the new option of being able to satisfy solely a growing domestic demand. And Israel was right. The contract was unilaterally cancelled by the Egyptians in April 2012 following the Muslim Brotherhood gain of power, but renewed with Jordan.

Jordan on the other hand has been importing around 3 billion cubic meters of natural gas from Egypt – around 80% of its domestic gas consumption with the kingdom importing a total of around 95% of its energy needs – at a cost of nearly a quarter of its GDP via a pipeline through Sinai.

After Mubarak was forced from office and as the street protests in Egypt intensified, anti-Israel Islamists attacked the A-A pipeline for the first time on 5 February 2011. Gas stopped flowing from Egypt for 200 days costing the Israeli economy USD 2.5 million a day and considerably increasing the use of diesel and fuel oil. The gas supply to Jordan has also suffered several disruptions due to Egyptian revolution in spring 2011 (the flow has dropped from 250 million cubic meters to 130 million cubic meters due to attacks to the Egyptian pipeline). Like Israel, Jordan was forced to burn more expensive fuels at its power stations. The total cost amounted to $5.6bln for electricity production, forcing the government to increase subsidies by $1.6 bln to avoid doubling the price of electricity.

By entering talks with Israel, Jordan is seeking a cheaper and more stable alternative that would satisfy its energy needs. Jordan is also considering Qatari and Iraqi gas, as well as the possibility of importing liquefied gas by ship. Alternative solutions might be wise given the political sensitivity of the move. Despite being in a severe energy crisis, the Kingdom must not ignore the possible political problems that an Israeli gas deal would entail.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean