Importing Israeli gas Jordan's best option - report

Jordanians protest Israel gas imports
Jordanians protest Israel gas imports

Worsening Jordan-Israel relations and regulatory problems in Israel are preventing an agreement says the Marshall Fund.

"Gas imports from Israel are Jordan’s best option… objections to importing gas from Israel… have been voiced by certain political groups and segments of the public. The king and his advisers seem committed to this course," a report on Jordan's natural gas sector published by the German Marshall Fund, a US entity, states. The report warns, however, "They may, however, grow more reluctant if political relations between Amman and Jerusalem continue to deteriorate and if there are further delays in establishing regulatory certainty for the gas industry in Israel.

In September 2014, the Leviathan partnership signed a letter of intent for the supply of gas to the National Electric Power Company of Jordan (NEPCO) - 45 BCM of gas over 15 years. The contract is estimated at over $15 billion, but the debate about the gas plan, which has continued for nearly a year already, has stalled the negotiations between the two countries.

"In business terms, Jordan is an obvious market for Israeli gas. Pipeline distances are short; potential linkages between the Israeli pipeline network and Jordan’s are measured in mere tens of kilometers. The largest prospective customer, NEPCO, is a reliable partner with a reputation for ensuring its customers pay their bills." Furthermore, "In the future, gas supplies from Israel could be supplemented by gas from the Gaza Marine field."

According to the Marshall Fund, the difficulty in signing a final contract is due to two main problems: regulation in Israel and poor relations between Israel and the Hashemite Kingdom of Jordan. "Regulatory uncertainty in Israel has delayed the development of Leviathan and the expansion of Tamar. Meanwhile the political climate affecting relations between Israel and Jordan has deteriorated… The United States and the European Union, which have an interest in regional stability, should continue to exercise discreet diplomacy with a view to seeing that the preliminary agreements on imports of gas from Israel that have been signed are fully implemented… energy cooperation can reinforce political links between Israel and Jordan and help bring a modicum of stability to a troubled region."

The writers of the report also note that the tension in Jordan has increased since more than one million refugees entered the country, mainly from Iraq and Syria, who have increased the population in Jordan by 12%, and aggravated the country's energy crisis.

Jordan has no energy resources of its own, and has therefore been dependent on imports up until now. The country has been burned more than once by its suppliers, however - the supply of oil from western Saudi Arabia was halted in 1990 after Jordan supported the Iraqi invasion of Kuwait. Oil from Iraq replaced Saudi Arabian oil until the fall of Saddam Hussein's regime in 2003. Egyptian gas started flowing that same year, supplying a significant proportion of Jordan's energy needs, but was completely halted in 2013, following repeated bombings of the Arab gas pipeline.

Since then, Jordanian industry has used expensive and polluting fuels, such as diesel oil. These fuels are six times as expensive as what Jordan paid for Egyptian gas. In 2014, imports of refined oil products accounted for 40% of the Jordanian budget.

Jordan has therefore set a target: deriving 39% of its energy form exploitation of local energy resources, compared with 4% at present. Jordan has no access to the Mediterranean Sea and marine gas fields, but has great shale oil potential (kerogen shale oil) on its territory. The Jordanian government asserts that this potential amounts to 51 billion barrels of oil. Jordan has also signed initial memoranda of understanding, which in recent months have become franchises for Shell Oil and Estonian company Enefit.

At the same time, with help from international agencies, Jordan is investing in renewable energy, mainly solar energy and wind energy (the country has set a target of 1.8 gigawatts of electricity by 2020), and there is also a plan to build two nuclear power stations in the next decade, which may or may not be carried out.

Jordan's import options

"Gas imports from Egypt could, in principle, be resumed if Egypt is able to satisfy its own domestic demand," the report states, but continues, "This is unlikely to occur, however, until the mid-2020s at the earliest, even after Eni’s large gas discovery in the offshore Zohr field."

The researchers say that another option, but an even less likely one, is importing gas from Iraq to Jordan. The report states, "Despite the advance of ISIS forces from northern Iraq to the border with Jordan, a proposal continues to exist for the construction of 2.5 million barrels per day (b/d) oil pipeline, and a parallel gas pipeline… Originally proposed in 2012 with financing from the Chinese state-owned CNPC… However, this option is unlikely to be implemented in the foreseeable future in light of the political situation in Iraq."

A third option is the Marine gas reservoir off the Gaza Strip coast. Discovered in 2000, the reservoir contains 32 billion BCM of gas, and is owned by British Gas (60%), CCC (30%), and the Palestinian Authority (10%). The parties have been negotiating since the beginning of the year for the importing of 1.5-1.8 BCM of gas from the reservoir. "One option for exploitation is to export the gas to Jordan via a pipeline across Israel but this seems a distant prospect given the current political tensions between Israel, the PA, and Hamas," the report asserts, and also mentions that the future of this reservoir is unclear following the acquisition of British Gas.

A fourth and final possibility is importing gas from the Aphrodite reservoir off the Cyprus coast. In September 2014, Jordan and Cyprus signed a letter of intent for energy cooperation, and Jordanian Energy Minister Muhammad Hamed has already declared that a letter of intent for the purchase of natural gas from Cyprus would be signed by the end of the year. "Despite the attractiveness in principle of exports from Cyprus to regional markets, including Jordan and Lebanon, a number of significant political, commercial, and technical obstacles would first need to be overcome," the researchers write.

Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Jordanians protest Israel gas imports
Jordanians protest Israel gas imports
Twitter Facebook Linkedin RSS Newsletters âìåáñ Israel Business Conference 2018