LNG

The Kingdom of Jordan and Egypt have signed a wide-ranging energy cooperation agreement under which the Egyptians would be able to use the LNG floating storage and regasification unit (FSRU) berthed at the port of Aqaba.

A statement said that the FSRU would be at the disposal of Egypt during the remaining period of the vessel’s charter contract.

Jordan would still have flexibility to import occasional LNG cargoes while the FSRU is under contract to Jordan National Electric Power Corp. (NEPCO) until 2025.

the Jordanians started importing LNG in May 2015 when the 160,000 cubic metres capacity “Golar Eskimo” FSRU arrived at Aqaba.

The FSRU, now known as the “Energos Eskimo”, is currently operated by Energos, a joint venture owner of a small fleet of vessels and held be New York-based LNG player New Fortress Energy Inc. and the US Apollo infrastructure fund.

Proposals

The vessel at Sheikh Sabah Al-Ahmad Port in Aqaba can receive 500 million standard cubic feet per day with a peaking capacity of 750 million per day.

The Jordan-Egypt agreement followed a meeting in Amman between energy executives and ministers from both countries and analysts said that it signals the start of more regional Arab cooperation in natural gas infrastructure for economic development.

A Jordanian statement said that those in attendance included Amjad Rawashdeh, the Director General of Jordan’s NEPCO and Magdy Galal, the Chairman of the Egyptian Natural Gas Holding Company (EGAS).

Others present included Jordan’s Minister of Energy and Mineral Resources Saleh Kharabsheh and the Egyptian Minister of Petroleum and Mineral Resources Tarek El-Mulla.

“The main objective of the agreement is to benefit from the resources of the two countries with higher efficiency at a lower cost, stressing that the use of the floating vessel in Aqaba will run until the end of its charter contract in late 2025, after which a coastal regasification facility would be completed,” said the statement.

Kharabsheh said that his Ministry was now in the process of issuing tenders for the new import terminal hub and that a perspective on how far the designs meet the needs of the two countries will be in place in the next two months.

Regional pipelines

The bilateral agreement is also part of a plan for Jordan to launch a national natural gas programme to supply industry and homes in Amman and the city of Zarqa backed by Egyptian investments

“Egypt has the expertise in domestic gas applications and will help to maximize Jordan's benefit in this field, and the Jordanian-Egyptian cooperation would be extended to implementing a number of other energy projects,” added the statement.

The agreement comes amid huge development plans for the East Mediterranean, including LNG exports by Israel and Cyprus’s Aphrodite field supplying feed gas to Egypt for liquefaction at an Egyptian plant.

Jordan is also an important market for Israel’s surplus gas and was the anchor for development of the first phase of the Leviathan gas project offshore Israel.

Gas connections

More use is expected to be made in the future of the Arab Gas Pipeline (AGP), a 1,200-kilometre trans-regional gas pipeline originally built to carry natural gas from Egypt to Jordan, Syria and Lebanon.

Another regional natural gas pipeline, the East Mediterranean Gas (EMG) pipeline, supplies Egypt with Israeli gas from its East Med fields, Leviathan and Tamar.

The EMG pipeline runs from Ashkelon in Israel to El Arish in Egypt.

The AGP has four sections and the first section extends from El Arish to Aqaba. Its total length is 265 kilometres (164 miles), including a 15km offshore segment running under the Gulf of Aqaba.

The second section runs 390km from Aqaba to El Rehab, which is situated 30km from the Jordanian-Syrian borders.

The third section is 30km in length extending from Jordan (El Rehab) to Syria (Jabber).

The fourth section constitutes part of the gas network in Syria. It runs from Jabber (Syrian side of Jordanian-Syrian borders) to the Syrian-Turkish borders, ending in Lebanon. 

The Kingdom of Jordan may be on track to become the third Middle East nation after Egypt and Israel to leave the liquefied natural gas market as more regional pipeline gas becomes available.

The only outcome that could stop Jordan no longer being an LNG importer at its facility at Aqaba is the withdrawal of Israeli pipeline gas supplies, which analysts believe is unlikely.

Jordan is an important market for Israel’s surplus gas and in fact an anchor for development of the first phase of the Leviathan gas project offshore Israel, according to an analysis from the consultancy, FACTS Global Energy.

“A short distance pipeline also provides Israel the highest netback for pipeline gas exports compared to other markets such as Egypt, and even Turkey,” said the report.

“The transportation cost for the Israel-Jordan section is estimated to be only US$0.12 per million British thermal units and the current netbacks are around US$5.90-US$6.40 per MMBtu,” added the report.

Jordan National Electric Power Corp. (NEPCO) is currently buying LNG from Shell based on a mid-term contract that expires in 2020.

However, the pipeline contract price agreed with Israel is lower than the LNG price per tonne for the country.

“NEPCO’s contract with Israel’s Leviathan consortium is linked to Brent prices and currently translates to a gas price of around US$6.00-6.50 per MMBtu (at US$70 per barrel Brent price), around US$2.20-2.70 per MMBtu lower than the MT LNG contract prices,” stated the FACTS report.

For Jordan, it makes economic sense to buy pipeline gas that is priced lower than LNG.

Jordan has already committed to import up to 350 million standard cubic feet per day of pipeline gas from Israel from December 2019, when the Leviathan gas project begins operating.

“The construction of a new 65-kilometres pipeline between Jordan and Israel is ahead of schedule and will be completed by the third quarter of 2019,” noted the report.

The Leviathan gas development project is also more than 80 percent completed and is set to start operation by the end of 2019. Jordan is already receiving small volumes of 10-12 mmscf/d of gas from Israel’s offshore Tamar gas field, owned by Noble Energy of the US and its main partners, subsidiaries of the Delek Group of Israel.

Jordan has also resumed gas imports by pipeline from Egypt on the back of new gas supply from the Egyptian Zohr gas field in the East Mediterranean.

The original contract was to import 250 mmscf/d of gas at a price of around US$2.50 per MMBtu.

However, following a gas supply shortage in Egypt, the pipeline flow to Jordan dropped substantially and was finally halted in late 2015.

During 2016 and 2017, NEPCO reversed the pipeline flow, and purchased 10 additional LNG cargoes per year to send to Egypt via the existing pipeline.

In August 2018, Jordanian and Egyptian Energy Ministers agreed to resume gas supply to Jordan and Egypt started sending interruptible volumes of gas to Jordan from September 2018.

“The current price of the Egyptian gas is estimated to be around US$5.00 per MMBtu, which is lower than Israel’s gas prices but the volumes are still negligible,” said the report.

Jordan’s pipeline gas imports from Egypt have been increasing in 2019 and are expected to reach 100 mmscf/d by the end of this year. Post-2020, gas imports from Egypt may reach 200 mmscf/d.

However, given the current supply/demand balance outlook for Egypt, it is difficult to see more gas supply to Jordan.

“Based on our estimates, Egypt will not have more than 200 mmscf/d of gas left for pipeline exports post 2020,” said the FACTS report.

“Interestingly, Egypt will also start importing Israeli pipeline gas from December 2019. Egypt has two contracts to import up to 640 mmscf/d of gas from Israel,” it added.

If everything goes as planned for pipeline deliveries, Jordan will reduce its LNG imports in the next couple of years and they can finally cease.

Jordan would still have flexibility to import occasional LNG cargoes post-2022 as the Golar floating storage and regasification unit contract with NEPCO is expiring in around 2025 and the Jordanians can keep the vessel until then.

“Jordan could decide to keep the FSRU for a longer period and import LNG or simply approach Israel for additional pipeline imports,” said the report.

The Kingdom of Jordan is seeking the supply of more than 30 LNG cargoes in 2018 before the completion in 2019 of the Israeli Leviathan natural gas field that will send offshore pipeline gas to Israel’s Arab neighbour amounting to 35 million tonnes of LNG over 15 years.