US embassy cable - 02AMMAN7130

S E C R E T SECTION 01 OF 02 AMMAN 007130 
 
SIPDIS 
 
TREASURY FOR MILLS/PIPATANAGUL 
 
E.O. 12958: DECL: 12/04/2012 
TAGS: ENRG, EPET, ETTC, IZ, JO 
SUBJECT: JORDAN'S ENERGY MINISTER ON TANKERS AND PIPELINES 
AND PRICE HIKES (OH MY!) 
 
Classified By: Charge D'Affaires Gregory Berry, reasons 1.5 (b.d) 
 
Summary 
 
1.  (s)  Energy Minister Mohammed Bataineh updated DCM 
December 4 on a number of developments in Jordan's energy 
sector.  The Minister commented on challenges facing the GOJ 
in maintaining a floating oil reserve in a tanker in Aqaba, 
discussed latest developments on the al-Arish-Aqaba gas 
pipeline, and reviewed the kingdom's ongoing efforts to 
privatize the energy sector and to marketize prices for 
petroleum products.  The updates portray a ministry that is 
committed to diversifying and marketizing.  End summary. 
 
Tanker Update 
 
2.  (s)  Following discussions of Jordan's negotiations with 
Iraq on the annual trade and oil protocol (septel), Energy 
Minister Mohammed Bataineh briefed the DCM on developments in 
a range of activities under the ministry's supervision. 
Bataineh said the oil tanker Jordan has purchased as a 
floating oil storage facility is roughly one-third filled 
(80,000 tons out of a capacity of 260,000 tons).  This 
initial inflow had been accomplished by emptying the existing 
storage tanks in Aqaba into the ship.  Additional filling of 
the ship, he said, would be much slower, owing to logistical 
constraints -- the rate at which tanker trucks could off-load 
into either the Aqaba storage tanks or the ship itself, plus 
a recent problem removing 50,000 tons of ballast water from 
some of the tanker's receptacles (in an environmentally 
friendly way) to make room for additional oil.  Bataineh said 
oil for the ship is being received from Iraq at the rate of 
about 3,800 tons per day, meaning it will take at least 
another 48 days before the tanker is fully loaded. 
 
3.  (s)  Complicating this calculation, said Bataineh, is the 
fact that Jordan has only one oil jetty that also functions 
as the sole jetty for vegetable oil, Liquid Propane Gas (LPG) 
and sulpho-chemicals.  Every time another ship needs to use 
the jetty, the tanker must be moved at a cost of $50,000 in 
fuel oil and gasoil (used to fire the inefficient steam 
engines of the tanker).  Bataineh said the GOJ had considered 
"banking" the ships, i.e., holding multiple ships in parallel 
at the jetty and running hoses across the decks of the 
close-to ships out to the outlying ships.  However, while 
this proved a workable solution for vegetable oil, safety 
concerns precluded using this method to load/offload LPG or 
sulpho-chemicals.  Bataineh said the GOJ is now looking into 
transforming an existing jetty currently used for offloading 
timber (south of the main port) into a second oil jetty.  The 
main problem so far, he said, was that the draft at the 
timber jetty was only 6.5 meters, compared to the 12 meters 
needed to house oil tankers.  Bataineh said the GOJ would be 
interested in examining the potential for dredging the timber 
jetty, but did not have the expertise or equipment to do so. 
 
Al Arish Proceeding Apace 
 
4.  (c)  Bataineh said the gas pipeline project between al 
Arish gas field in Egypt and Aqaba was on schedule, with gas 
delivery to the Aqaba power plant planned to begin in June 
2003.  The Aqaba plant generates 40% of Jordan's power needs, 
and currently accounts for 14% of Jordan's oil consumption. 
The next step, said Bataineh, is to negotiate the terms for 
extending the pipeline from Aqaba to northern Jordan. 
 
Price Hikes In The Offing 
 
5.  (c)  Bataineh confirmed that the GOJ is looking ahead to 
raising prices for certain petroleum products in the coming 
months.  Gasoline prices, according to Bataineh, are roughly 
at world market levels (note: $1.45/gallon for leaded regular 
at the pump.  End note.).  Thus the GOJ is focusing on 
heavily-subsidized products, including LPG, gasoil and 
kerosene.  Bataineh said a plan is in the works to phase out 
subsidies for LPG over two years.  Currently, consumers pay 
approximately $3.52 for a bottle of LPG that costs the GOJ 
$4.93 to produce.  The government's aim is to eliminate that 
cost to the government by slowly rationalizing prices. 
However, Bataineh stressed, the GOJ was loathe to undertake 
price hikes immediately in advance of elections (currently 
scheduled for spring 2003). 
 
Privatizations: Rolling, Rocky 
 
6.  (c)  Bataineh said privatization plans for Jordan's 
electrical power generation and distribution operations are 
proceeding as planned.  He expected the GOJ to be ready to 
issue RFP's for the two operations by the end of January 
2003, and noted several multinationals had expressed interest 
(though he did not name them).  At the same time, plans long 
underway to build the al-Samra independent power project 
(IPP) in northern Jordan have fallen into disarray after 
Belgian energy giant Tractebel pulled out of its pledge to 
take on the project at the eleventh hour.  Bataineh said 
Tractebel blamed a 44% decline in its share prices for its 
decision to pull out of the IPP as well as a $2 billion 
refinery project in Abu Dhabi.  The GOJ's back-up plan, he 
said, was to task CEGCO, the government-owned generation 
company, to build the plant.  It was unclear what impact on 
CEGCO's own privatization such a new project might have. 
 
Comment 
 
7.  (s)  Jordan continues to move forward on a number of 
fronts both to diversify its sources of energy and to get the 
government out of the energy subsidy business, which is in 
all cases a loss-making operation.  Bataineh said the GOJ 
would welcome any offered assistance on plans to study 
dredging the timber jetty. 
 
8.  (sbu)  He also said the GOJ would welcome TDA or other 
USG assistance to study Jordan's future energy infrastructure 
- what its capacity would be, how to organize the various 
power generation facilities (oil, gas, wind, solar), and what 
likely national and regional demand is likely to be.  In this 
regard, he praised TDA assistance earlier this year on 
Jordan's wind farms. 
BERRY