As Egyptian gas supplies stall, Jordan turns to Iraq
Reaching out to Iraq to explore the import of natural gas as the country continues to struggle to meet its rising energy needs. According to Ministry of Energy Secretary General Farouq Hariri, energy officials have contacted Baghdad regarding supplying Jordan with natural gas for electricity generation and domestic use.
Iraqi energy officials are currently studying the feasibility of supplying the Kingdom with natural gas, Hariri said, with energy officials holding out hope for an agreement to be struck by early next year. On the sidelines of the World Economic Forum this week, Iraqi Oil Minister Abdul Kareem Luaiby confirmed that Amman and Baghdad have signed a memorandum of understanding paving the way for the import of Iraqi gas, according to local news reports. Should both sides come to an agreement, it would mark one of the first regional gas deals for Iraq, home to 110 trillion cubic feet in known reserves, with an estimated additional 150 trillion cubic feet in potential untapped reserves.
The move comes amidst increasing concern in Amman over the reliability of Egyptian gas, which the Kingdom relies on for over 80 percent of its electricity generation needs. As of Tuesday, Jordan was awaiting the full resumption of gas supplies from Cairo, which were disrupted in late September in the latest of a series of attacks on the Arab Gas Pipeline in the Sinai Peninsula. "We are in constant contact with the Egyptian side and we hope that supplies will resume as promised as soon as possible," Hariri told The Jordan Times over the phone yesterday.
Although repairs on the pipeline have been completed, the resumption of pumping has been held up over an amended natural gas agreement that brought to an end a favourable pricing structure under which Amman received gas at prices less than half the international rate. While energy officials have declined to disclose the new pricing arrangement, it is believed that prices will "triple" from their current level of less than $2 per 1,000 cubic feet. Under a revised deal reached between Amman and Cairo in August, Egypt is to supply 150 million cubic feet per day this year, a level that is to reach 220 million cubic feet in 2012.
Currently the Kingdom is receiving "well below" the 100 million cubic feet it received prior to September's attack, according to the ministry. The multiple disruptions in supply have forced the Kingdom's power plants onto their diesel and heavy oil reserves at a cost of JD3 million per day and are expected to push the national energy bill to record-highs, well above JD4 billion. The negotiations with Iraq come as part of a wider strategy to secure alternatives to Egyptian gas ahead of the development of domestic energy sources such as oil shale, wind and nuclear power.
As part of the drive for new energy sources, Amman is floating a tender for the construction of an offshore liquefied gas terminal in the port of Aqaba, receiving initial interest from several international firms including Royal Dutch Shell, British Petroleum, GDF Suez and Lemont/General Electric. The Kingdom currently imports 98 percent of its energy needs at a cost of 23 percent of the gross domestic product.