OBG talks to Alaa Batayneh, Former Minister of Energy and Mineral Resources

Interview: Alaa Batayneh

What measures is Jordan taking to ensure its energy needs are met, and what role will alternative energies play in the sector going forward?

ALAA BATAYNEH: We are facing an energy challenge in Jordan, but it’s important to note that it’s not just a Jordanian problem – it is a regional and global problem. In the medium and long term, however, we have good alternative energy solutions in place, particularly with renewable energy, our oil shale reserves, as well as the prospects for liquefied natural gas. One must keep in mind that Jordan has not really been explored for natural energy resources. It took some time for other countries and international companies to come to Jordan, and I would say that a real surge in international players and exploration only started in 2009. Before this, we had a small budget for exploration. Over the past three years, we have made relationships with BP and Shell, who have invested a combined JD300m ($422m) up to this point with their excavations. We also have one of the world’s largest reserves of shale oil, which is quite promising. In addition, we have emerging partnerships with the Estonian company Enefit, which will be supplying us with electricity from oil shale by 2017.

I think the key to the future will be growing our partnerships with the private sector. We need no less than JD10bn ($14bn) of investment in the next 10 years to keep up with demand. We produce 3000 MW of electricity and we consume it all. The influx of Syrian refugees has also put an enormous amount of pressure on the network; we have an alarming amount of growth in energy consumption at 7.4% per year, compared to international standards of around 2.2%.

What steps is the government taking to ensure a favourable investment climate ?

BATAYNEH: In the past, Jordan always received below-market-price or even free oil, since oil prices were cheap at that time. Now that the price per barrel is over $100, there are lucrative opportunities for the private sector to invest in renewable or alternative energies because they are now economically viable. When you look at our oil shale or renewable projects, they will generate much cheaper electricity for us. A decade ago, we would not have been able to attract private companies because we had cheaper resources, but the global market has made it necessary to attract international companies and partner with the private sector to extract our indigenous natural resources.

With renewables we have the first law in the region that allows for direct proposal submissions by the private sector, giving the government the mandate to directly negotiate with private sector.

In the past few months I have signed 30 memoran-da of understanding for solar and wind projects which will produce a total 500 MW of wind and 500 MW of solar energy. Jordan’s level of solar irradiation is high per square metre and we have 315 days of sun in areas that are flat, without sand and low humidity. We have also made it mandatory for any new buildings over a certain size to have solar water heaters. Lastly, we have exempted all renewable energy equipment from taxes. It is a great formula for the private sector, and we are now seeing a lot of enthusiasm for renewables.

Has the lifting of the fuel subsidies had the desired fiscal impact thus far?

BATAYNEH: Lifting the fuel subsidies has thus far saved JD500m ($703m). Yearly consumption is increasing rapidly, and we had a level of subsidy that was uncalled for. The subsidy mostly went to the commodity, as opposed to the people that needed it. Able Jordanians and guests were subsidised, which should not have been the case. Given all the austerity measures, we are the only country that has implemented a payback scheme. Some 70% of Jordanians are being fairly paid back. It was a matter that had to be faced despite the tough times. When we took the decision the price of oil was around $112 per barrel and now it is around $118; every dollar of oil extra per year adds $40m deficit to our budget, so the impact has been positive.