Gas on Tap

It’s only been up and running for around a year, but Aqaba’s LNG terminal has already proved itself indispensable to Jordan’s vital energy diversification drive.

By Dina al Wakeel

With several renewable energy projects under construction and a nuclear plant in the pipeline, Jordan is finally on course to diversifying its energy mix.

But perhaps the project with the most immediate tangible outcome has been the Liquefied Natural Gas (LNG) terminal in Aqaba, which went on-line last July and has since largely replaced the expensive heavy fuel the Kingdom heavily relied on for more than two years to generate electricity.

“The prices of oil are now relatively low, but let’s remember when they were over $100 per barrel,” said Ghassan Ghanem, the Aqaba Development Corporation’s CEO. The project was commended by the IMF, which said it would change the Kingdom’s energy sector and reduce its energy dependence.

The scale of the project’s importance came as no surprise and the impact is clear when figures are cited. According to Ghanem, generating electricity using natural gas, compared to generating the same amount using crude oil is about two-thirds of the price.

NSK

With 90 percent of the electricity generated in Jordan today reliant on natural gas, this will save a minimum of $500 million a year. This amount of saving will further increase rapidly whenever the price of oil climbs higher.

Launched last year, the LNG project took three years between design and construction.

The Engineering, Procurement and Construction of the LNG jetty was awarded in late 2013 to Ireland’s BAM Contractors and its Jordanian joint-venture partner MAG Engineering and Contracting Company. According to the company’s website, the jetty included a 100-meter trestle on steel piles, a concrete off-loading platform, and extensive marine infrastructure. On the ground there are also pipeline facilities, the marine services facilities and harbor, and seven marine services ships—all new and all manufactured to serve the LNG—as well as the pumping stations.

Then there was the renting of the FSRU, or the floating storage regasification unit, with a capacity of around 160,000 cubic meters from Golar LNG.

The terminal cost approximately JD50 million, funded by a Kuwaiti grants, while the harbor and the marine services ships cost another JD50 million. As for the FSRU’s rental rates, a statement by Golar LNG said based on the 10-year contract with Jordan, annual earnings before interest, taxes, depreciation, and amorization (EBITDA) contribution to the company for the first fine years will be approximately $46 million and approximately $43 million per year for the second five-year term.

Shell was selected to become the supplier of LNG to the Kingdom and SPT as the operator of the whole operation; injecting the gas from the conveyor into the FSRU, transferring liquid into gas and into the pipes.

“It means that now we are free to get the gas from anywhere we want, whenever we want and we are also free to export it to whoever we want,” explained Ghanem, adding that we are currently sourcing our gas from South America, Africa, particularly Nigeria, and Qatar.

The gas is distributed along two pipes. One passes through the Kingdom to all the thermal stations that generate electricity, and another that goes to Egypt. Although Jordan is currently not pumping any gas to Egypt, the Kingdom will resume the process every time Egypt requires additional amounts.

“For me it’s a turning point that this pipeline which we used to get gas from Egypt, has now been used reversed,” said Ghanem.

Ghanem said the project was one of the best LNG terminals worldwide, but reaching this point was not without challenges. The main obstacles occurred before and during the construction phase, on top of which was the large number of the stakeholders involved. “You work with the Ministry of Energy, the electricity company, the operator, the supplier, the ADC and ASEZA, the marine authority, and the marine services company, so this means that the more they are the more coordination is needed,” he said.

Another was the certain level of uncertainty surrounding this type of terminals, which are still relatively new to the world and to this date, Ghanem explained that there isn’t many FSRUs in the world.

The lack of proper staffing with enough experience was also a setback to the project. But in a short period of time the staff started acquiring and honing the needed skills and the operator is currently relying on 14 technicians who are all Jordanians.

“But the main challenge was the time,” recalls Ghanem. “There was the time pressure because the price of crude oil was very high when we started … It was estimated that everyday you could save up to $3 million, later on it went down to $1.5 million based on the international prices of crude oil which went down.”

Despite these challenges the LNG terminal is operating smoothly now and there are even plans to develop it further in the future. “The main issue with any LNG terminal is the degasification of the gas, which we can carry out through two methods; one is the floating ship which we have and the other is to have a land terminal which is costly,” explained Ghanem. “To construct and operate a land terminal for regasification you need a minimum throughput of the LNG, which now we don’t.”

The pipeline goes up to the Syrian border with Turkey which means that our gas can also reach Turkey, said Ghanem. He added that if exports resume to Egypt, and we start selling to Syria and Lebanon in the future, only then will it be feasible and justifiable to construct a land terminal.

Although these could be long-term plans, land has already been reserved for that.

Ghanem also unveiled plans to pump some of the gas to help certain industries with operating costs, which builds on commitments to support local and foreign investments in the industry sector that has long complained about expensive running costs, particularly electricity prices.

“We are waiting for the Ministry of Energy and al Fajr company to start constructing the pipeline that goes from the main pipeline to the southern industrial zone, and later on it will go to the north as well,” he said. He explained that this will help increase the competitiveness of Jordanian industries by decreasing running costs. It will also start bringing in bigger investments by attracting bigger industries that particularly care about energy.

Phase two of the project could also see LNG used in houses and cars in Aqaba, making the Red Sea city a pioneer model for other Jordanian cities.

Besides the financial feasibility of the project to the overall economy, using gas is cleaner to produce electricity than crude oil. Ghanem also pointed out that measures have been taken to insure a minimum impact of the FSRU on the surrounding environment, especially making sure that it was not in close proximity to any coral reef.

For the time being, the LNG’s importance to Jordan’s economy remains undisputed.

“The cost of the whole project will be saved in [a short period of time] … and unless there’s a chance to discover some commercial quantities of gas in Jordan, we will continue importing,” said Ghanem.