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'Egyptian gas cuts to cost Jordan $2.4 billion'

By by Taylor Luck AMMAN -- Ongoing unreliability of Egypt gas supplies is forecast to cost Jordan over $2 billion this year as energy officials struggle to meet the rising costs of electricity generation.

A report issued by the Electricity Regulatory Commission ( ERC ) projects the ongoing unreliability of Egyptian natural gas to cost Jordan an additional JD1.7 billion, some $2.4 billion, by the end of 2012.

Egyptian gas supplies dipped from 220 million cubic feet per day in 2010 to an average of 80 million cubic feet in 2011, a drop which cost the Kingdom an additional JD1 billion and pushed the annual national energy bill to a record high JD4 billion last year.

According to the ERC , the drop in gas supplies and increased reliance on costlier heavy fuel oil have pushed the costs for the National Electric Power Company ( NEPCO ) to sustain electricity generation to 156 fils per kilowatt hour, over three times the 52 fils per kilowatt hour rate the firm sells electricity to consumers.

"We are seeing generation costs rise each day and this is adding to our deficit," said Ghaleb Maabreh, NEPCO director.

Officials say the mounting deficit is placing "added pressure" on the Ministry of Energy to secure alternatives to an energy source that has been the target of both sabotage and diplomatic wrangling over the last 12 months.

"In light of the unreliability of Egyptian gas, the ministry is working to secure alternative energy sources in the shortest amount of time possible," said the ministry's secretary general, Farouq Hiyari.

According to Hiyari, Egyptian gas quantities have yet to resume in full since a November attack on the Arab Gas Pipeline in the Sinai Peninsula that marked the tenth act of sabotage in less than a year.

The stall in resumption of pumping comes despite an amended gas deal signed in Cairo last month ending a favourable pricing structure under which Jordan received natural gas at prices three times lower the international market rate.

NEPCO denied plans to amend electricity tariffs, pledging to maintain subsidies as the country struggles to navigate an emerging energy crisis Maabreh believes will last for "at least two more years".

"For too long we have relied on one energy source and now we are witnessing the negative consequences," Maabreh said.

"We are trying not to pass the cost on to consumers as a service to the country, but if the current situation continues this will become an even greater challenge."

Energy officials have taken a series of recent measures to ease the country's reliance on Egyptian gas, including a visit earlier this month by Minister of Energy and Mineral Resources Qutaiba Abu Qura to Doha, during which he explored with his Qatari counterpart the potential of supplying liquid gas to the Kingdom.

With a Qatari-Jordanian technical team set to issue a report on the feasibility of supplying gas to the Kingdom in March, energy officials say early indicators over a Qatari gas deal are "promising".

Despite the renewed push for alternative energy sources, officials admit that due to infrastructure requirements, it will take up to two years before the Kingdom benefits from any new energy agreement.

One of the prerequisites to securing the supply of Qatari gas is the construction of an offshore terminal in Red Sea Port of Aqaba, which according to ministry estimates will cost JD13 million and require 18 months.

According to industry experts, the ongoing instability of Egyptian gas has transformed the issue of energy independence from a policy matter to an issue of national security for Jordan, which imports 98 per cent of its energy needs at a cost of one-fifth of its gross domestic product.

© Jordan Times 2012