All subsidies for petroleum products in Jordan will be withdrawn with the liberalization of the energy sector by 2008, according to an official of the Jordanian Ministry of Energy and Mineral Resources, Khaldun Qutaishat. The liberalization will take place over the next three year, with domestic prices aligned to international oil prices and a competitive market. Mr Qutaishat said the switch to Egyptian gas in electricity generation had already begun at the 'Aqaba power plant, with a saving in energy costs estimated at $80mn based on 2004 oil prices and $120m on today’s prices. He added that the 360mw power plant at Rehab and the 360mw power plant at al-Samara are due to switch to Egyptian gas via the Arab Gas Pipeline (AGP) at the beginning of 2006. Mr Qutaishat also noted that the ministry had introduced certain mechanisms to rationalize the use of energy in various fields, in accordance with the strategy adopted in 2004 by the Jordanian government.
Before the latest cabinet reshuffle announced on 3 July, Jordanian Prime Minister 'Adnan Badran indicated that his government would shortly launch a scheme to cut government subsidies on petroleum products by JD120mn ($170mn) from the current JD360mn ($509mn). He explained that this cut was part of a larger plan to liberalize the energy sector within three years – a move that was essential to tackle a large budget deficit, internationally soaring oil prices and a drop by half in foreign assistance.
The newly-appointed Deputy Prime Minister and government spokesman Marwan Mu'ashir echoed this view on 6 July when he said Jordan expected a record budget deficit of JD950mn ($1,340mn) in 2005 and that it was inevitable for the government to raise fuel prices. Dr Mu'ashir added: “In the past 15 years we used to rely on oil grants from Iraq or the Gulf countries, but we did not honestly do enough to cure the chronic deficit in the state budget, and now it’s time to do so.” He also said that Jordan had received oil grants from Kuwait and the UAE in 2003, which were not renewed. Saudi Arabia had granted Jordan 51,000 b/d of crude in 2004, but the grant was reduced and is paid in cash of around JD200mn ($282mn), he added.
