Executive Summary

·   The 2007-2020 Updated Master Strategy of the Energy Sector builds upon the 2004 National Master Strategy during which various challenges were faced that impeded the implementation of several projects detailed below in key findings

·   The major current challenges that Jordan is experiencing in the energy sector include:

o   Difficulties expanding the crude oil refinery due to the Jordan Petroleum Refinery Company's inability to attract a strategic partner

o   Limited electricity generation capacity

o   Difficulties securing the necessary investments to meet growing demand for electricity

o   Limited quantity of natural gas available for import from Egypt

o   High cost of renewable energy projects/systems for electricity generation

o   Regulatory/ legislation issues including lack of legislation for renewable energy projects covering facilities, customs exemptions and necessary tax

o   Need for updating and restructuring current Natural Resources Authority (NRA) legislation

o   Risk of oil shale investor companies not succeeding in developing the necessary technologies

·   Jordan's top priority is achieving energy supply security and diminishing dependence on imports while meeting the growing demand for primary energy. Alternatives for meeting demand for primary energy are identified and considered. Those include:

o   Increasing the productive capacity of the Petroleum Refinery

o   Adding a number of electricity generation units

o   Setting up natural gas distribution networks in Aqaba, Zarqa and Amman by the private sector

o   Exploitation of abundant oil shale reserves

o   Ensuring renewable energy contributes to about 10% of the total energy mix by 2020

A number of alternatives for each sector/domain are identified for which a total of $14-18 million is required for key projects over the 2008-2020 period

Key Findings

·   Demand for primary energy will continue to increase by an expected 5% between 2007 and 2020

o   The downstream oil sector will witness growing demand of 6% for primary energy

o   The electrical power sector is expected to continue witnessing accelerated growth of 7% over the period covered by the strategy

o   Natural gas is expected to be discovered, which would reduce dependence on imports

o   Renewable energy is expected to witness the highest growth of 22% over the period

 Various obstacles and updates emerged during the implementation of the previous strategy projects and programs for the key sectors/domains. Key examples are provided hereafter:

Downstream Oil Sector Domain

·   Jordan Petroleum Refinery Company failed to attract a strategic partner for refinery expansion

·   No progress was made on the agreement between Jordan and Iraq regarding the supply of crude oil

·   Delays in completing the downstream oil sector restructuring program and market liberalization

Electrical Power Domain

·   Growth in unexpected demand for electricity and the challenge in securing the necessary investments to meet such demand

·   Lack of access to natural gas in quantities required for future electricity generation projects affecting the execution schedule and increasing power generation costs

·   Absence of programs for using nuclear technology in electricity generation expansion programs

 Natural Gas Domain

·   High demand for natural gas to meet the existing and new power generation stations, existing and new industries and natural gas distribution projects

·   Egyptian request to increase the prices of natural gas for any additional quantities required

 Renewable Energy and Energy Efficiency

·   High investment cost resulting in high electricity generation cost for renewable energy systems

·   Difficulty in securing wide areas of land needed for renewable energy projects

·   Lack of special legislation to govern renewable energy projects

 Local Energy Domain

·   Need to update and restructure the Natural Resources Authority legislation

·   Emigration of qualified technical personnel with broad experience in the oil domain

·   Lack of approved rules and sharing conditions for negotiations with companies investing in minerals and oil shale, such as royalty rates, profit sharing percentages, and unified agreements

·   Delays in implementing the Risha field development program by the Natural Petroleum Company

·   Obstacles impeding investment in oil shale including high technology development requirements

Recommended Actions and Initiatives

Downstream Oil Sector Domain

·   Speed up Jordan Petroleum Refinery Company's activities to attract a strategic partner for expansion

·   Construct crude oil pipeline from Aqaba to petroleum refinery in Zarqa

·   Accelerate the completion of the downstream oil sector restructuring and oil market liberalization

·   Accelerate completion privatization programs

·   Liberalize fuel prices and apply the pricing policy established by the Cabinet

·   Issue minerals and oil law to restructure the downstream oil sector

 Electrical Power Domain

·   Carry out expansion projects through building-ownership-operation (BOO) agreements

·   Use oil shale for electricity generation

·   Provide the necessary capacity of gaseous generation units to face peak loads

·   Review electricity tariffs to reflect actual generation, distribution and transfer cost of power

·   Issue general electricity law permanently

·   Reinforce national transmission network by adding substations and high and medium voltage tension lines

 Natural Gas Domain

·   Set up natural gas distribution networks in Aqaba, Zarqa and Amman

·   Complete Arab Gas Pipeline from Rehab northward to the Jordanian Syrian borders

·   Obtain consent from Egypt for additional quantities of natural gas to meet demand

·   Search for alternative natural gas sources from other countries

·   Develop Risha Gas field by speeding up development plans, finalizing negotiations with ANADARCO and tender for international bidding to attract strategic partner

 Exploiting Oil Shale Domain

·   Complete bankable feasibility study to exploit superficial oil shale in areas where it is available

·   Cease negotiations with Shell on the concession agreement related to the deep oil shale exploitation for oil production

·   Conduct direct negotiations with Estonia to construct electricity generation plant

·   Establish a specialized unit for oil shale in Ministry of Energy or Royal Scientific Society/National Energy Research Center

 Renewable Energy Domain

·   Proceed with the issuance of the renewable energy law

·   Proceed with the implementation of wind energy projects for electricity generation based on BOO with generation capacity of 600 MW by the end of 2020

·   Study and research thermal solar energy projects and biogas fuel

·   Carry out electricity generation project using municipal waste

·   Create a fund to aid renewable energy projects

 Energy Consumption Rationalization and Efficiency Domain

·   Create a clear mechanism to apply programs and procedures for energy use rationalization to improve energy use efficiency in all sectors

·   Set operative mechanism to apply thermal insulation rules of the National Building Codes

 Oil and Gas Exploration and Discovery Domain

·   Develop a proper mechanism to market and promote the Jafr area among oil and gas exploration companies

·   Complete a study on restructuring NRA by dividing it into a Mineral and Oil Commission and a Geological Survey Commission

·   Study possible privatization of drilling activities, labs, and supporting services

·   NRA to reconsider the zoning of open exploration areas

·   Issue law of Jordan geological survey commission

Sector Coordination and Regulation

·   Establish supreme body for energy to coordinate country policies, carry out program/projects and monitor performance

·   Establish a uniform commission to regulate the energy sector

 The amount of investments required for different projects in the energy sector for the period (2008-2020) is estimated at US$14-18 billion - about US$ 1.2 billion annually.

Report Name

Date

Timeline

Updated Master Strategy of Energy Sector in Jordan for the Period 2007-2020 – First Part

December 2007

2007-2020

Author

Supporting Donor

Ministry of Energy & Mineral Resources

None

Sector

Lead Ministry

Energy Security

Ministry of Energy & Mineral Resources

Key Topics

Alternative energy – Downstream oil sector – Energy supply security – Natural gas – Natural Resources Authority – Oil shale – Primary energy – Refinery expansion – Renewable energy