Jordan’s Quest for Energy Security
Jordan imports most of its gas from Egypt through the Arab Gas Pipeline (approx.. 3 billion cubic meters – close to 80 percent of its domestic gas consumption from a total of 95 percent – at a cost of nearly a quarter of its GDP). The Arab Spring that forced President Hosni Mubarak from office in 2011 caused several attacks to the pipeline built to carry natural gas to Israel and Jordan. Repeated damage of the Arab Gas Pipeline prompted an increase in imports of expensive fuel products for electricity generation. The rising burden of imported Saudi-Arabian fuel costs obliged Jordan to raise electricity prices. Its total bill jumped by at least 60 percent as a result to around USD 4.5 billion. Jordan launched comprehensive austerity measures to reduce public spending including lifting subsides on consumer energy products
Austerity policies adopted by the kingdom in early 2012 led to a series of protests against the increase in the price of energy. Jordan turned to the IMF who approved on August 3, 2012 a 36-month SDR 1.364 billion (about US$ 2.06 billion) Stand-By Arrangement for Jordan to support the country’s economic program and foster growth.
Today, Jordan is still struggling to meet electricity demand, which is growing by more than 7 percent per year due to a growing population and industrial expansion. The kingdom has been considering several options towards recovery.
Jordan considers external sources
Jordan has recently been in talks with Israel through Noble Energyto examine the possibility of importing gas. 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.
Another possibility for Jordan would be Iraqi gas. Jordan and Iraq are expected to sign commercial and legal agreements to build a double pipeline to supply the Kingdom with crude oil and natural gas. ‘A tender to construct the $18 billion project is expected to be floated in March,’ said Iraqi Business Council (IBC) President Majid Saadi. The pipeline will run from Iraq’s southern oil-producing region, Basra, to Anbar province and then to Jordan’s port city of Aqaba for exportation. The project is expected to satisfy the kingdom’s energy needs and to boost its economy through job creation and revenue generation. Saadi estimates the 1,680 kilometer pipeline will export 2.25 million barrels per day through Jordan. The pipeline will supply Jordan’s sole refinery in Zarqa and will generate around USD 2 billion a year of revenues from transit fees.
Jordan considers internal solutions
Before the US invasion in 2003, Jordan relied on barter deals for cheap oil from Iraq. The current energy crisis is a new incentive for the kingdom to develop its own resources: ‘Jordan hopes that by developing gas and oil shale projects as well as renewable schemes, the country could be become energy self-sufficient or better by 2020,’ Energy Minister Alaa Batayneh said. Jordan has not been explored to date and the new initiatives might be promising. Enefit is developing two parallel oil shale projects in Jordan. Realization of these projects will help Jordan save hundreds of millions of dollars every year through the substitution of expensive methods of electricity with oil shales. Royal Dutch Shell and BP have also invested over USD 100 million and USD 260 million respectively in oil shale projects in the country.
Jordan is also in the process of commissioning two nuclear reactors and will choose which of competing Russian and French-Japanese led consortiums will build two 1GW nuclear reactors near the capital. To put it in perspective, 1GW can power approximately 750,000 homes. The project will cost approximately EUR 12 billion and is likely to be funded by an aid-package from the UAE, according to insiders. Given that the energy shortfall in the kingdom is estimated to reach 6.8GW by 2030, the initiative is certainly paramount.
The Arab Spring was the catalyst to big changes. Recent efforts of Jordan and other Eastern Mediterranean countries towards becoming energy self-sufficient are a strong indication of transformed regional energy security dynamics.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean