US embassy cable - 04AMMAN830

UNCLAS SECTION 01 OF 02 AMMAN 000830 
 
SIPDIS 
 
USDOC 4520/ITA/MAC/ONE/PTHANOS 
PASS TDA FOR STEINGASS/SIGLER 
EXIM FOR ROBERT BOSCO 
OPIC FOR ABED TARBUSH 
 
E.O. 12958: N/A 
TAGS: ENRG, EFIN, JO 
SUBJECT: Jordan, Egypt, Syria and Lebanon Sign Phase Two 
of Arab Gas Pipeline 
 
 
1.  (u)  SUMMARY: The Prime Ministers of Jordan, Egypt, 
Syria and Lebanon witnessed the signing of agreements to 
begin the second phase of a pipeline to supply natural 
gas from Egypt to the other three countries.  This phase 
will extend the current Egypt-Jordan pipeline north to 
the Rihab Power Station in northwest Jordan.  Future 
phases will extend the pipeline to Syria, Lebanon, 
Cyprus, Turkey and other European countries.  Jordan's 
share will be one fifth of the pipeline's 10 billion 
cubic meters a year capacity.  Jordan and Egypt 
inaugurated phase one last summer, linking the offshore 
gas fields in Egypt's Al Arish area to Aqaba.  Aqaba's 
Thermal Power Station is already burning natural gas. 
The project is designed to supply Jordan with its needs 
of natural gas for the next thirty years.  END SUMMARY. 
 
2.  (u)  The Prime Ministers of Jordan, Egypt, Syria and 
Lebanon witnessed the January 25 signing in Amman of a 
$270 million agreement to begin installing Phase Two of a 
$1 billion pipeline to supply natural gas from Egypt to 
the other three countries.  The Phase Two agreement is 
for a 393-kilometre pipeline that will run from Aqaba to 
the Rihab Power Station in northwest Jordan.  Jordanian 
King Abdullah and Prime Minister Faisal al-Fayez told the 
press on Sunday that the Arab gas pipeline project would 
bolster Arab "joint action" and economic performance. 
 
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THE PATH OF THE PIPELINE 
------------------------ 
 
3.  (u)  The $1 billion pipeline, also known as the Arab 
Gas Pipeline, begins at Port Said, in Egypt, and will 
eventually end in the Syrian port of Banyas.  According 
to the plan, the pipeline will connect from there to the 
Lebanese natural gas power plant in Zahrani by 2005, and 
to the Syrian-Lebanese pipeline, called GASYLE I.  From 
Banyas, this will extend to Cyprus and Turkey in 2006. 
According to the press, the pipeline will take advantage 
of Egypt's large proven natural gas reserves (1,656 
billion cubic meters, according to October 2002 figures.) 
 
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THE COMPANIES 
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4.  (u)  An Egyptian consortium of Egypt Holding Gas 
Company, GASCO, Petrojet and Emppi will carry out the 
second stage through al-Fajr Company, a local Jordanian 
firm that groups Jordanian, Egyptian and other Arab 
investors.  Al-Fajr will construct and operate the second 
phase of the pipeline on a build, operate, own and 
transfer (BOOT) basis.  The agreements also sets the 
criteria for purchasing gas from Egypt and selling it to 
the power plants in Jordan to generate electricity. 
 
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PHASE ONE 
--------- 
 
5.  (u)  King Abdullah and Egyptian President Mubarak 
last July inaugurated Phase One; a 265-kilometre pipeline 
that starts from the offshore gas fields in Egypt's al- 
Arish area, traveling to Aqaba underwater from Taba. 
Jordan's Minister of Energy and Mineral Resources, Azmi 
Khreisat, told the local press that Phase One of the 
pipeline currently provides Aqaba Thermal Power Station 
with natural gas to generate around 650 megawatts of 
electricity, which is more than 43 per cent of Jordan's 
current maximum generation capacity of 1,500 megawatts. 
According to the Ministry of Energy and Natural 
Resources, the Aqaba Thermal Power Station is going 
through conversion: currently four out of the five units 
at the station are running on natural gas and the fifth 
unit is still under conversion, a process that may take 
up to three more months to complete. 
 
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Comment 
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6. (sbu)  This pipeline is one of several that have been 
proposed in recent years for transporting Egyptian gas to 
the Levant and eventually to Turkey and the European 
natural gas network.  A route via the Gaza Strip, Israel 
then northward, with an offshoot line to Jordan, is 
impractical for now.  Another path would have served 
Cyprus by a direct marine pipeline from Egypt.  Agreement 
on the Jordan route is good news in terms of diversifying 
Jordan's energy supply sources.  However, although 
increased supplies of natural gas will help Jordan meet 
growing electricity generation needs, they will not 
reduce crude oil imports, which Jordan will continue to 
need to import at a growing rate in order to meet demand 
for gasoline and other refined products.  Jordan will, 
however, have to figure out how to dispose of a surplus 
of fuel oil that was previously used to fire electricity 
turbines and for which it has not found a viable export 
market. 
HALE