The World Folio
April 30, 2015
Energy imports are a major factor behind Jordan’s significant trade deficit. With demand for energy set to double by 2020, the government has layed out an ambitious plan to harness the potential of the kingdom’s solar, shale oil, and nuclear resources
Surrounded by oil-rich nations, Jordan is wealthy in terms of minerals (for example, it is one of just four countries in the world with its own supply of potash), yet it must import most of its energy needs. And with stability in the region in flux, Jordan must seek out new solutions for sourcing power.
The government has developed a strategy to energize its electricity mix through several different avenues, with the aim of turning the country that at one point relied on foreign energy for 97% of its needs into a largely self-sufficient one. 2020 is the deadline for this overhaul.
National Energy Strategy
In 2007, Jordan’s Ministry of Energy and Mineral Resources (MEMR) drafted the National Energy Strategy (NES), which presented a roadmap for Jordan’s energy development through 2020. It calls for major diversification away from imported sources of energy, and recommends the development of domestic oil shale, nuclear power, and renewable energy capacities.
The NES dictates that renewable energy generation reach 7% of the total supply mix by 2015 and 10% by 2020. These targets have naturally attracted attention from renewable energy project developers. More than 60 local and international companies have submitted expressions of interest in establishing solar and wind plants through a direct proposal process that the Renewable Energy and Energy Efficiency Law has opened up.
On the consumption side, efforts are also ongoing to educate consumers and spread the word about the benefits of using renewable energy products. George Hanania, General Manager of Hanania Solar Systems, says, “We are working hand in hand with the Jordan River Foundation to help the Non-Profit Governmental Foundation with the efforts they are taking in conserving energy and the big challenges that Jordan is facing with regards to the energy bill,” he says.
“Hanania Solar Systems will continue to enhance awareness among the local communities in conserving energy and the uses of renewable energy products. Our engineers and technicians will be visiting each community to provide them with solar energy awareness and to train them to operate and maintain their solar energy systems.”
Aside from solar, wind is also predicted to be one of Jordan’s key future renewable sources of energy. Negotiations for the kingdom’s first wind farm are in the final stages. The government wants the facility to be generating 600MW by the end of 2015 and for this capacity to have doubled by 2020. At the same time, the government also hopes to see 600MW coming from solar power generation and 50MW through waste-to-energy technology by 2020.
Solar power, naturally
Abundant solar resources (average peak sun hours in Jordan are 5.8, among the highest in the world), a rapidly growing demand for electricity, and energy security issues surrounding natural gas imports are some of the driving factors for growth in the solar energy sector.
In the past years, several significant deals have paved the way for Jordan’s power authority to begin buying solar electricity from the private sector. For example, U.S.-based First Solar and its affiliated Shams Ma’an Power Generation consortium will provide engineering, procurement and construction services for a 52.5MW solar PV facility earmarked for the Ma’an Development Area. Once completed in 2016, it will be the largest PV facility in the Middle East and could be expanded to produce 100MW.
A second contract has cleared the way for the Jordanian-Spanish-South Korean venture Arabia One for Clean Energy Investments to build a $30 million solar-run power generation plant. The facility, which is also set to be located in the Ma’an region, will have a 10MW capacity and is expected to start feeding power into the national grid toward the end of 2015.
Jordan boasts an abundance of local companies active in solar photovoltaic (PV) industry, including Petra Solar, Kawar Energy, Mustakbal Clean Tech, Nur Solar Systems, KawKabuna, Hanania Solar Systems, ETA Max, Greenland Alternative Energy, and PanMed Energy.
Among these companies, Hanania is Jordan’s oldest solar system manufacturer and provider. Founded in 1973, Hanania has undertaken major solar housing projects for the public and private sectors in Jordan and abroad, in addition to numerous residential, industrial and commercial customized solar utilizations. The company even won a tender for the delivery and installation of more than 2,000 solar thermosiphon water heating systems in low-income households in various communities in Jordan. The $1.8 million initiative was funded by the Ministry of Energy and Mineral Resources in cooperation with the Jordan River Foundation.
Jordan is expected to install a total of 298MW of solar PV capacity over the next five years, and the government is planning to build a new high voltage transmission line connecting Jordan’s south with the large electricity consumption in the north. This would allow for another 300MW of solar PV to be connected.
Although this is small compared to other Middle Eastern nations (Jordan consumes one-fifteenth of the electricity that Saudi Arabia does, for example), it could still be seen as an opportunity for industry participants as utility-scale installations will dominate the market, driven by both the government’s direct proposal framework and the Shams Ma’an project. Additionally, high electricity taxes for commercial users will act as an incentive for users to offset their electricity use through net-metered commercial-scale projects.
One hiccup the industry faces is the fact that the cost to produce electricity from residential systems is significantly larger than the tariff paid by residential customers (90% of which enjoy subsidized electricity rates), which can limit the residential PV market. This is another challenge that will have to be overcome in developing Jordan’s solar energy resource. However, based on the tariff offered in the first round of direct proposals, utility-scale project returns stand to be significant.
An oil shale giant
Oil shale is another significant energy source in Jordan, and one that could potentially lead to energy self-sufficiency in the nation. According to Jordan’s Natural Resources Authority, the kingdom’s oil shale reserves are the fourth largest in the world. Mohammad Hamed, Minister of Energy, believes that the country’s deposits “offer the potential to significantly increase domestic energy resources and reduce the country’s reliance on energy imports.”
According to the National Energy Research Center, near-surface, exploitable reserves are estimated at more than 50 billion metric tons, with extractable crude oil equivalent to about 50 billion barrels of oil. Production of oil from oil shale in Jordan is expected to start in 2018. At first, this will be in small quantities, but it is expected to rise gradually to reach significant quantities by early 2020.
Last year, Jordan signed a $2 billion agreement with the Saudi Arabian Corporation for Oil Shale, or Sacos, for the right to extract and develop oil shale resources from a 4.2-square mile area of Jordan’s Attarat Umm al-Ghudran region. By 2019, Sacos plans to start producing 3,000 barrels of oil per day from oil shale, with production rising to 30,000 barrels per day in 2025.
In addition, Royal Dutch Shell Plc., through its wholly-owned subsidiary Jordan Oil Shale Company (JOSCO), entered an initial appraisal phase in 2013. If this and the consequent pilot phase are successful, and the project is deemed viable, JOSCO should potentially start production in commercial quantities in the late 2020s.
A good deal of Jordan’s oil shale is expected to be used for electricity production, with plans for an Estonian-Malaysian consortium, Enefit, to build a 460 MW oil shale power plant. “The project is going as scheduled and we are in the process of negotiating the price of electricity to be sold from the project to the National Electric Power Company,” Mr. Hamed told Jordanian press recently. He added that the government is expected to sign an agreement to build a $2 billion oil shale-fuelled power plant in the next year with a group of Chinese, UAE and Jordanian companies.
Rising import costs
Jordan’s reliance on foreign imports for its energy needs has cost the country increasing amounts of money in recent years. Jordan had previously relied on Egypt for up to 80% of its gas requirements. According to Mr. Hamed, natural gas supply from this neighboring country has completely halted as the pipeline exporting Egypt’s gas to Jordan has been sabotaged several times. After the cut in gas supply, Jordan switched to heavy fuel for power generation, which costs the kingdom about $7 million per day.
Budget constraints also highlight the need to develop more alternative energy sources, and Jordan is working to meet this challenge. Current losses by the National Electric Power Company (NEPCO) continue to press on the budget, mainly a result of having to buy and import fuel from the open market at a time when prices were high. Finance Minister Dr. Umayya Toukan says the company lost around $4.9 billion last year, accumulating a total debt of $7 billion over the past three years. Jordan spends on energy imports the equivalent of more than 20% of GDP.
In recent efforts to procure energy from more reliable sources, in October 2014 Jordan signed a deal with Israel to begin importing 300 million cubic feet of gas per day from Israel’s newly discovered field, Leviathan. This will commence within three years’ time and will continue for 15 years, bringing the total amount of gas imported to 1.6 trillion cubic feet.
Although liquefied natural gas (LNG) is more expensive than natural gas, it is much more affordable than diesel. With work nearly finished on a new $65 million natural gas import terminal in Aqaba, in January this year, the energy minister announced that Jordan would begin purchasing LNG from Shell in July. The 590 million cubic feet per day will meet approximately a quarter of NEPCO’s daily power needs.
Mining for the power and agricultural sectors
With at least 35,000 tons of uranium ore deposits in its territory, it should come as no surprise that Jordan is also taking nuclear energy seriously. While solar and wind, LNG and natural gas will produce a significant share of power and energy each, by 2030, 30% of the kingdom’s electricity could very well be produced by nuclear power plants.
Late last year, Russia approved a draft deal to build a two-unit plant with a total capacity of 2,000MW. The first unit of what will be Jordan’s first nuclear plant should be operational in 2024, the second, in 2026.
While it is estimated that Jordan will be able to export uranium by 2020, for now, the country has set its immediate sights on building a uranium extraction plant and is studying how to recover the heavy metal as a by-product of phosphate production.
Jordan is among the world’s top producers of potash, phosphate rock and bromine, and has also produced significant quantities of calcium carbonate, kaolin, limestone, silica sand and zeolitic tuff. Potash and phosphates are both used in the production of fertilizers – an agricultural booster that is constantly growing demand – and as such are cornerstones of the nation’s economy.
About 95% of global potash production goes into the agricultural sector – namely for fertilizers – which means that nearly every country in the world has a need for it, yet it is something that only Jordan and 11 other countries worldwide produce.
And Jordan is steeped in phosphates as well. More than 60% of the nation’s area has phosphate deposits at minable depth. The kingdom is the world’s sixth largest phosphate rock producer, holding 4% of the global supply, and is its second-largest phosphate exporter. Jordan is also one of the richest sources of potassium on the planet, producing some 2 million tons of potash annually, as well as sodium chloride and bromine from the eastern side of the Dead Sea.
“Here in Jordan, our biggest natural resource is actually the Dead Sea, which is full of minerals,” says Brent Edward Heimann, General Manager of the Arab Potash Company (APC). “The profitable one has turned out to be potassium chloride (KCl), which is used for fertilizer.”
Such abundant resources combined with Jordan’s Red Sea access put it in a prime position to export to Asian countries where demand is growing particularly strong, which means good news for expanding the country’s potash and phosphate industries.
“Our company has been extracting KCl or potash from the Dead Sea since 1982, and we have grown to produce 2.2 million tons per year, with markets predominantly in Southeast Asia,” says Mr. Heimann. “We have China, India, Malaysia, Indonesia, and now, we have grown our business in the Middle East. We also have more sales in Egypt, Saudi Arabia, and Jordan.”
APC is the eighth-largest potash producer worldwide by volume of production and the sole producer of potash in the Arab world. Established in Jordan in 1956 as a pan-Arab venture, APC operates under a concession from the Jordanian government that grants it exclusive rights to extract, manufacture and market minerals from the Dead Sea until 2058.
In addition to its potash operations, APC also invests in several downstream and complementary industries related to Dead Sea salts and minerals, including potassium nitrate, bromine and other derivatives.
In 1999, it partnered with the Louisiana-based Albemarle Corporation to set up the Jordan Bromine Company (JBC), which exports its varied products to diverse industries in 30 countries worldwide. Chairman of the Board at APC Jamal A. Al Sarayrah comments, “JBC is committed to long-term growth and excellence through customer and supplier partnerships, creating value for all. Our shareholder Albemarle Corporation views its partnership with APC as being strategic and further strengthens JBC’s global position as a key bromine producer.”
APC is one of the kingdom’s biggest exporters and one of its largest earners of foreign currencies. Via the port at Aqaba, it is able to export potash to some of its largest customers cheaper and faster than many of its competitors.
“India and China are some of our biggest importers,” Mr. Heimann adds. “That is where the population growth is going to be. That is the underlying potential of potash. The future demand is going to be even higher in those markets, and we are well poised to serve them.”
Soaring demand and expanding markets are also prompting other major players in the industry to up their game. Last year, the Jordan Phosphate Mines Company (JPMC) announced plans to establish $1.55 billion worth of joint Arab and foreign ventures as part of its strategic plan to gradually raise its phosphate production by 50%, to 12 million tons annually, by 2018.
“Because of the high value added, we plan to maximize the conversion of phosphate mineral to fertilizer products,” adds JPMC CEO Dr. Shafik Al-Ashkar. “In the coming five years some 80% of produced phosphate rock will be converted to fertilizers.”
The company has an $860 million project in place called Jordan India Fertiliser Company (JIFCO), a joint venture with Indian Farmers Fertiliser Co-operative Ltd. JIFCO built a phosphoric acid plant in Eshidiya, Jordan, and production began in May 2014. One month later, the first consignment of 10,000 tons of phosphoric acid – which is used primarily for fertilizer production – was shipped to India.
JPMC’s other major phosphoric acid plant is operated by PT Petro Jordan Abadi, a JV with Indonesia’s Petrokimia Gresik.
According to Dr. Al-Ashkar, JIFCO and the $220 million plant in East Java – which was inaugurated in October 2014 – “will consume about 2.6 million tons of phosphate rock per year, which is why we are increasing our production.
Dr. Al-Ashkar adds that two other projects are under study in Sumatra and Kalimentan. “Once completed, these projects will convert some 2.5 million tons per annum of Jordanian phosphate rock to fertilizer chemicals,” he says.
“We are also seeking new clients, rather than concentrating only on the Indian market. Australia, New Zealand and Turkey were once our major clients, and we’re working to bring them back to JPMC.”
To keep up with growing demand, JPMC Chairman Amer Al Majali says: “We are also now going to expand and modernize our mining facilities and fertilizer manufacturing plants in Eshidiya and Aqaba in order to increase capacity and improve quality.”
JPMC has also recently established two mining companies with major Jordanian mining contractors.
In turn, to keep up with the consequent increase in production, JPMC has built a new $240 million terminal at Aqaba Port, and construction has begun on another jetty for exporting JPMC (and its affiliated companies) and APC’s products.
Challenges and opportunities
Even with the new Aqaba facility and other programs to diversify Jordan’s energy sourcing, the country may still struggle to keep up with the demand for power, driven by a demographic boom and the influx of hundreds of thousands of Syrian refugees. According to energy ministry estimates, electricity requirements are set to double from the present level of 2,000MW to 4,000MW by 2020.
The country needs the private sector to invest in its oil shale, natural gas and renewable energy sectors to meet rising electricity demand.
With the government planning to eliminate electricity subsidies by 2017, it will want to have a cost-effective source of power in place by that time to try to keep price shocks to a minimum. This will help minimize the flow of price increases to the public and lessen their impact on the economy. As such, all renewable energy projects are expected to be linked to the national grid by 2018 and they will significantly increase Jordan’s electricity production capacity.
With all of these power, energy and mining projects in the works, Jordan is certainly teeming with investment opportunities. And although challenges remain, most notably securing financing and keeping up with the pace of demand, the sectors should see major growth in the next two decades.
Therefore, this is a prime opportunity, for example, for U.S. manufacturers and suppliers of renewable energy equipment and technologies to export their products and increase the current 5% share of the market they currently hold. As Jordan continues working hard toward achieving its goals, the industry’s future looks bright in the kingdom.