DEAD SEA, Jordan - After midnight on one of Jordan's busiest
highways, only the beaming headlights of vehicles driving between the capital
Amman and the Dead Sea pierce the gloom.
The highway is lined with street
lights as it weaves down from Amman to the valley floor below sea level, but
none are switched on. The government can no longer afford the bill.
resource-poor kingdom, which imports 97 percent of its energy, has in the past
two years seen the annual cost of those purchases soar above $5 billion -
equivalent to about 15 percent of its gross domestic product - after supplies of
cheap Egyptian gas were disrupted by sabotage of a pipeline to
Dependent now on costly diesel and fuel oil, Jordan is
considering wider electricity rationing and is preparing a hike in electricity
prices in June, a politically fraught move in a country which saw street
protests last year over fuel subsidy cuts imposed as a condition for a $2
billion IMF loan.
"Energy is the Achilles heel of the Jordanian economy,
it's a huge vulnerability for Jordan...the biggest drain on the economy," Nemat
Shafik, deputy head of the International Monetary Fund, said during a visit to
Jordan last month.
It is not just cost but capacity which the government
is struggling to manage.
Jordan's failure to modernise its decades-old
oil refinery, which handles 140,000 barrels per day of crude imports but has
only a limited ability to refine high-quality diesel, has worsened the crisis,
Meanwhile, foreign investment in independent power plants,
which produce over 60 percent of the country's installed power capacity of 3,300
megawatts, is barely keeping up with a 7 percent annual rise in consumption,
So in the short term, the government is being forced to
tackle the other side of the supply/demand equation and find ways to reduce
Some steps are relatively painless; last month authorities
asked for bids from firms to introduce 600,000 energy-saving light bulbs in
public buildings, and they plan a nationwide campaign to distribute 1.5 million
of those bulbs to households.
"If you don't have enough generation, you
have to manage demand. One quick solution is energy efficiency in transport and
electricity, where load consumption is high," said Khaled Irani, an energy
consultant and former energy minister, estimating efficiency steps could save $1
Other measures are painful. The government is considering a new
power rationing scheme for this summer, to cope with an expected influx of
tourists on top of over 460,000 refugees from Syria who have fled the civil war
The government also plans to raise electricity tariffs this
summer, a step which could help to curb demand growth while easing the losses of
the technically bankrupt state-owned electricity firm, National Electricity
Reducing the losses at NEPCO, which piled up debts of $2
billion after it was forced to pay independent power producers for energy
generated from costly diesel and heavy fuel, are a key performance criterion in
Jordan's 36-month standby loan deal with the IMF.
IMPETUS FOR INVESTMENT
The disruption of Egyptian gas flows, which once generated 80 percent of
Jordan's electricity, raised the cost of producing a kilowatt of electricity by
as much as 600 percent. Gas flows were hit first by sabotage conducted by armed
Egyptian militants or bandits, then by bottlenecks within Egypt's gas
But the disruption has created an impetus for Jordan to invest
in renewable energy projects which, while they will not end the crisis in the
short term, appear increasingly feasible.
Among the first to emerge was
Shams Maan, an equity partnership between Jordan's Kawar Energy, U.S. firm First
Solar and Italy's Solar Ventures to build a 100 megawatt solar plant in the
southern town of Maan at a cost of $300 million.
Hanna Zaghloul, the
project's chief executive, said the government would now pay 16.9 U.S. cents for
a kilowatt hour of electricity from solar technology, compared to around 24
cents for electricity from heavy fuel and 28 cents from diesel.
why renewable energy is feasible for the government these days," Zaghloul
A year ago parliament passed a renewable energy law setting a
tariff structure for grid connection. The government is soliciting expressions
of interest by April 11 to build a $120 million, 75 MW solar plant at Quwaira in
southern Jordan; at least a dozen international firms have submitted proposals
to build this and other solar projects.
Jordan's ability to proceed with
such projects has been given a boost in recent months by a $5 billion fund
contributed by wealthy Gulf states to support its development amid regional
The fund may also help finance construction of a $100
million liquefied natural gas terminal that is expected to be ready by the
second half of 2014 and receive gas supplies from Qatar.
Jordan plans to build a strategic reserve of 100,000 tonnes of oil to increase
its critically low stockpile, currently at just three weeks of supply.
1,000 kilometre (625 mile) crude oil pipeline is being planned to export at
least 1.5 million bpd of Iraqi crude through Jordan and its port of Aqaba to
other countries. Technical studies have been made and tender documents are
In the very long term, industry experts say
Jordan hopes to find oil shale and natural gas reserves large enough to reduce
its dependence on energy imports.
Oil shale development has already begun
with Estonia's Enefit planning to finance, build and operate a 430 MW power
station using fuel from oil shale by the end of 2016. Royal Dutch Shell has
invested $100 million to explore for oil shale in Jordan's east and
Jordan's oil shale projects focus on obtaining liquid hydrocarbons
from fine-grained sedimentary rock, and are different from the shale oil
industry in the United States, which blasts non-porous rock through hydraulic
fracturing and is revolutionising the U.S. energy outlook.
has invested $260 million in Jordan's Risha gas field near the border with Iraq;
the company has dug a well and plans two more this year.
officials say seismic studies suggest the field could in 2020 be commercially
producing between 300 million and 1 billion cubic feet of natural gas per day,
turning the country into a gas exporter.
Even Jordan's controversial
effort to build a 1,000 MW nuclear plant has seen some progress, although the
financing challenge means completion of the project is by no means certain. The
government is expected to choose in coming weeks between two preferred bidders
to supply the reactor, a French-Japanese consortium including Areva and
Mitsubishi Heavy Industries, and Russia's Rosatom.
For now, however,
Jordan will have no option but to grapple with an energy bottleneck that weighs
on its economy and worsens its political risks.
"We face definitely a
tough situation regarding energy. It will remain an alarming issue for the
coming three or four years, until some of the projects such as oil shale kick
in," said Alaa Batayneh, who led the drive for energy self-sufficiency as energy
minister in the last government.