Jordan's Electricity Sector Prepares to Meet Increasing

UNCLAS SECTION 01 OF 03 AMMAN 002752 SIPDIS USLO TRIPOLI AMEMBASSY TALLINN SENSITIVE SIPDIS STATE FOR NEA/ELA, NEA/RA, AND EEB/ESC E.O. 12958: N/A TAGS: ENRG EPET ECON JO SUBJECT: Jordan's Electricity Sector Prepares to Meet Increasing Demand Sensitive but unclassified; please protect accordingly. Contains proprietary information - not for distribution outside the USG. Refs: A) AMMAN 2442; B) AMMAN 138; C) 06 AMMAN 7695; D) 06 JERUSALEM 4335; E) 06 JERSUALEM 2604 ¶1. (SBU) SUMMARY: Jordan's national electric utility expects the country's electricity needs to grow by 10 percent annually due to increases in real economic growth and population (especially of Iraqis),and a rising standard of living for some Jordanians. To meet growing demand, electricity transformation units were expanded and new ones installed this past year. Other projects are underway to establish new power generation plants. Jordan is also looking to expand energy cooperation with its neighbors and exploit the country's untapped but modest natural resources to generate electricity as it reviews its overall energy strategy (Ref A). END SUMMARY. ¶2. (SBU) National Electric Power Company (NEPCO) Director General Ahmad Hiasat told Econoffs in a June 17 meeting that measures have been taken at Jordan's power generation and distribution plants to ensure a constant supply of power through the upcoming peak summer season and beyond. Hiasat noted that in 2006, the peak electricity load was 1,900 MW. In addition to traditional high demand in July, a new trend emerged last year of having another surge in December due to a consumer shift to electricity for heating after an increase in heavy fuel oil (HFO) prices. Expecting a continuing rise in electricity demand of 10 percent per annum, Hiasat projected that peak electricity load in 2007 would reach 2050 MW. He attributed rising demand mainly to real economic growth and rising wages in Jordan that are driving the purchases of larger equipment and electrical appliances. The growth in population attributed to Iraqis also is fueling demand, as those Iraqis with the financial wherewithal are buying large houses and starting businesses that consume large amounts of electricity. ¶3. (SBU) Hiasat stated that Jordan possesses adequate generating capacity to meet its needs, but currently imports 5 percent of its electricity from Egypt and Syria -- both cheaper sources -- given the high cost of operating HFO- or diesel-fueled power plants. Organization of the Electricity Sector -------------- ¶4. (U) BACKGROUND: Hiasat noted that Jordan's electricity is produced through three entities: 1) Central Electricity Generating Company (CEGCO),whose four main power plants produce 1700 megawatts (MW); 2) Samra Electric Power Generating Company (SEPGCO) which produces 300 MW from the one power station in Al-Samra; and 3) AES/Mitsui's Independent Power Producer (IPP) in East Amman, scheduled to begin producing 370 MW in 2008 (ref B). An additional 300 MW power station at Al-Samra is under construction. Hiasat commented that the GOJ has been pleased with its relationship and work with AES-Mitsui, and therefore is considering extending the contract to include another 370 MW power station as well. ¶5. (U) NEPCO acts as the middle man between the generating and the country's three distributing companies: Jordanian Electric Power Company (JEPCO),covering central Jordan and 70 percent of customers; Irbid District Electricity Company (IDECO) operating in the four northern governorates; and Electrical Distribution Company (EDCO) operating in the south of Jordan. NEPCO also has responsibility for planning, construction, development, operation and maintenance of the electrical transmission grids; purchasing energy from the generating companies and selling this energy to the distribution companies; importing and exporting of the electric power; management of the national electricity grid and the process of transmitting the electricity inside Jordan and to neighboring countries; and purchasing natural gas from the seller and supplying it to the power generating companies. NEPCO provides similar services to Jordan Bromine Co., Arab Potash Co., Jordan Cement Factory, Jordan Petroleum Refinery Co., and Queen Alia International Airport. ¶6. (SBU) Hiasat said that all electricity companies with the AMMAN 00002752 002 OF 003 exception of NEPCO are slated for, or already have been privatized. The GOJ has made a deal to sell 51 percent of CEGCO, and plans to sell 100 percent of EDCO and 55 percent of IDECO. SEPGCO probably will be privatized after the second 300 MW sub-station at Al-Samra is completed, since the project currently depends on financing by the Arab Fund which cannot fund private developments. JEPCO has been completely private since its establishment. END BACKGROUND Other Potential Sources for Generating Electricity -------------- -------------- ¶7. (SBU) In Hiasat's view, Jordan should make better use of its modest natural. He reported that the Risha power station in the Mafraq area of northern Jordan is not able to run at full capacity because of the lack of natural gas supplied from the nearby gas field. Hiasat speculated that the lack of progress to date on U.S. oil company Anadarko's proposal to develop the Risha gas field is due to the inefficiency of the National Petroleum Company. He also commented that Estonia has the technology needed to exploit oil shale, and intimated that the GOJ might seek assistance from Estonia to tap Jordan's oil shale reserves estimated at 42 billion tons by Khaldoun Qutishat, Secretary General of the Ministry of Energy and Mineral Resources (MEMR) (ref A). Hiasat reaffirmed Jordan's plans to build a 400 MW nuclear power plant by 2020 and felt that NEPCO would be able to ensure a high voltage network to support it (ref A). NOTE: The GOJ is also planning to open bidding in the coming months for three wind power projects. END NOTE. Pricing -------------- ¶8. (SBU) Regarding consumer subsidies, Hiasat noted that the first 160 kilowatt hours (KWH)/month enjoy an indirect subsidy because of graduated pricing, since the GOJ considers those who consume less than this amount to be in the poorest income bracket. Rates increase incrementally, and the highest charges are for electricity use over 500 KWH/month. Hiasat personally believes that those who consume amounts over 500 KWH/month can afford to pay the full rate for all KWH, and should not receive the first 160 KWH at a discounted rate. He also stated that the GOJ plans to increase the price of electricity in 2007, but by less than 10 percent. Regional Cooperation -------------- ¶9. (SBU) Hiasat recalled JEPCO's September 2006 agreement with the Palestinian Electric Company for JEPCO to supply the Jericho Governorate with electricity, which is currently being supplied by the Israeli Electric Company (ref D). He indicated that the agreement has been delayed four-to-five months for financial reasons on the Palestinian side. According to Hiasat, the Israelis are currently building the cables and the overhead lines to connect the substations in Jericho with those in Jordan. Hiasat said this project, when finished, will disconnect the Jericho Governorate from the Israeli electrical grid. ¶10. (SBU) Hiasat discussed the Arab Gas Pipeline (AGP) that has been completed through its second stage up to the Jordan-Syria border. About 80 percent of Jordan's power plants now use Egyptian gas to produce electricity. COMMENT: This is in contrast to the 89 percent of Jordan's electricity generated by HFO in 2005. Many of these plants had to be restructured to run off of natural gas starting in 2003 when the AGP began operating in Aqaba. END COMMENT. MEMR has been in negotiations with Egypt for the past year to increase its imports of natural gas further, and to establish new pricing schemes. Hiasat noted that the AGP's capacity is 10 billion cubic meters (BCM) per year, with Jordan currently using 1.7 BCM per year. He estimates that Jordan will need up to 2.5 BCM per year. ¶11. (SBU) Hiasat noted that Jordan's electricity grid is currently interconnected via a 500/400 kilovolt transmission line with Egypt, Iraq, Lebanon, Libya, Syria, and Turkey. On possible future connections with the Gulf Cooperation Council (GCC) countries, Hiasat indicated that the countries were not yet well connected among themselves and Jordan had no immediate plans to interconnect with any GCC country, but was not opposed to the idea. AMMAN 00002752 003 OF 003 Visit Amman's Classified Web Site at http://www.state.sgov.gov/p/nea/amman HALE