The Political Sensitivity of the Jordanian-Israeli Deal

A 15 years, USD 15 billion gas deal made the news last week. Noble Energy, and on behalf of the Leviathan partners, signed on Wednesday 3 September an MOU with the government of Jordan for the purpose of supplying 45 billion cubic meters of gas over 15 years from the offshore Leviathan field to Jordan's state-owned National Electric Power Co. The deal, expected to be sealed by the end of 2014, was applauded by the United States’ Department of State in a statement highlighting the importance of energy as a “tool in the amelioration if the stability and cooperation in the region”.

Jordan’s Energy and Mineral Resources minister Mohammad Hamed commented on the agreement stating that it should not be perceived as a deal between the two states of Jordan and Israel but as an accord between the US-based company Noble Energy and Jordan’s state-owned company. He insisted on the non binding character of the agreement while adding that the details of the deal such as pricing were yet to be determined.

Hamed’s concerns and reservations find their justfication in a history of tensed relations between Israel and its Arab neighbours. While the political class of the Hashemite Kingdom may want to pursue the cheapest and most efficient solution to address the severe energy crisis the country is facing, the people of Jordan would still view any collaboration with Israel with apprehension. Jordan has been historically supportive of the Palestinian cause and the large majority of Jordanian people are of Palestinian descent.

But Jordan has a pressing need to solve its energy issues without delay. The disruptions in Egyptian gas supply due to the sabotaging of the Arab Gas Pipeline as a result of the 2011 events that led to the ousting of President Moubarak had a tremendous strain on the country. The Kingdom was forced to purchase expensive fuel products to make up for the difference, which caused its energy bill to reach a historic high. 99% of Jordan’s electricity is generated from either oil or gas, 96% of which is imported. Its energy vulnerability led to efforts to develop indigenous resources and diversify the sources of supply.

Jordan’s energy advisory committee formed by royal decree to address the country’s energy problem issued recommendations that include national projects aimed at developing oil shale, natural gas and nuclear resources as well as taking advantage of the long hours of sunshine and the speed of wind to increase the use of renewables in the country’s energy mix. But there is a pressing need to import a cheap and reliable source of energy in the meantime. Israeli gas looks like the solution for the Jordan government, given that it could be easily imported via pipeline to substitute the disrupted Egyptian gas. However, political sensitivities remain and the success of an Israeli-Jordanian deal will largely depend on how the idea will be introduced to the Jordanian people.  

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics.  Email Karen on karen@minoils.com.  Follow her on Twitter: @karenayat