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A Natural Choice

January 2006
Oula Al Farawati explains how natural gas will no longer only heat our homes and meals, but also power our factories and cars.
Much-needed clean gas from Egypt has just started to flow in pipes that stretch from southern Jordan to power plants in the north, marking a new era during which Jordan will gradually make the move from using other oil derivatives to using natural gas to fuel its growing economy.

This is the second phase of the Arab Pipeline Project which includes laying pipelines from Al Arish in Egypt that will supply Jordan, Syria, Lebanon, and then Turkey and Iraq with relatively cheap gas from Egypt, a country that enjoys potential natural gas reserves of 70 trillion cubic feet. This project will make Egypt one of the world's top 10 natural gas exporters in the next two years.

According to the director of the Natural Gas Department at the Ministry of Energy and Natural Resources, Marwan Al Baka'in, the project will raise the efficiency of the two major power plants in the north (Al Rihab and Samra) by 50%.

"With the completion of the project inside Jordan, we will start gradually building the networks which will relay cheaper and environmentally-friendly natural gas to factories, houses, and vehicles," said Mr. Baka'in.

Egyptian natural gas is already flowing to Jordan through an underwater pipeline to Aqaba. Under the Arab Gas Pipeline Project signed in 2001, Egypt is to supply Jordan, Syria, and Lebanon with natural gas for 30 years. The entire pipeline is projected to cost approximately $1 billion.

Mr. Baka'in chose not to disclose the potential savings of the project for the national economy. "Everyone knows that the potential savings are huge, and this was the main motive behind the project," he said.

However, the ministry's Secretary General Khaldoun Qteishat told Jordan Business in an interview that "if a plan to switch most major industries to the use of natural gas succeeds, it could cut the Jordanian oil bill by up to 50%."

According to the Ministry of Energy and Mineral Resources, Jordanian energy imports account for a whopping 14% of GDP, with a bill reaching JD1 billion last year, and the demand for energy is expected to increase by 50% over the next 20 years.

The project comes as the government is gradually lifting its long-time subsidies on oil derivatives, pressured by escalating oil prices and the loss of the Iraqi oil grant due to the war in that country.

The first and second stages of the project were carried out on a build, own, operate and transfer (BOOT) basis by the Jordanian Egyptian Fajr Company for Natural Gas Transmission and Supply, which was established by an Egyptian consortium. According to the official, the government signed an agreement with the Egyptian side in April 2005, which allocated 1 billion cubic meters (bcm) of gas to be used by industrial customers. "The pipeline is anticipated to supply gas to most large industrial customers during the second half of 2006.

We have already talked to industries and sent them the draft industrial gas sales agreement for review," Mr. Baka'in said. He added that the J ordan Cement Factories Company Ltd. plant in Rashadeyya, the Arab Potash Company, the Jordan Phosphate Mines Company, and some industrial cities have already agreed to convert their machines to operate using natural gas, expecting more private sector companies to follow suit. "We hope that industries consider the use of natural gas very seriously. The investment that companies will put into converting their operation will be covered in one year because natural gas is much cheaper than fuel oil and gas oil," Mr. Baka'in told Jordan Business. Mr. Baka'in revealed that financial consultants Charles River & Associates International have completed a study on the establishment of a gas pipeline network to be laid in Amman and Zarqa. It will provide natural gas to households and vehicles and is expected to start by the end of 2006, with a projected cost of more than $200 million. A joint venture agreement by Fajr and the Aqaba Development Corporation has also been signed to establish a compressed natural gas station and a workshop for converting cars to use natural gas.

"It costs something like $1,000 to convert one car...the use of natural gas will be more economical for taxi drivers, who will be able to cover the cost of the conversion in less than one year," he said. Several Arab countries have also undertaken projects to reduce their dependence on oil and move to the use of natural gas, such as the United Arab Emirates and Egypt. Natural gas demand has grown rapidly in Egypt as thermal power plants, which account for about 65% of Egypt's total gas consumption, have made the switch. In the UAE, increased domestic consumption of electricity and growing demand from the petrochemical industry have provided incentives for the Gulf state to increase its use of natural gas. Over the last decade, natural gas consumption in Abu Dhabi has doubled, currently standing at nearly 4 billion cubic feet per day.

© Jordan Business Monthly 2006