( bL

Report No. 7984-)0

JordanEnergy Sector Study(In Two Volumes) Volume 1: Main ReportFebruary 7, 1990

Country Department IlIIndustry & Energy Operations DivisionEurope, Middle East and North Africa Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a resuricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTSCurrency Unit Jordan Dinars (JD)JD 1.00 - 1,000 filsJD 0.500 US$1.00 (March, 1989)JD 1.00 US$2.00

WEIGHTS AND MEASURES1 meter (m) 3.281 (feet)1 kilometer (km) - 0.621 mile1 kilogram (kg) 2.205 pounds1 ton (1,000 kg) = 1.102 short ton

0.984 long ton1 barrel (bbl; o.159 m3) 42 US gallons1 kilowatt (kW) = 1,000 watts1 megawatt (MW) 1,000 kW1 kilowatt hour (kWh) = 1,000 watthours1 gigawatt hour (GWh) - 1,000,000 kWh - 1,000 MWh (10 6kWh)1 kilovolt (kV) - 1,000 volts1 kilovolt ampere (kVA) = 1,000 volts amperes1 megavolt ampere (MVA) = 1,000 kVA1 kilo liter (103 liters) - 6.28981 American barrels1 cubic meter - 6.29 barrels1 bbl oil = 0.1349 tons oil1 cubic meter = 6.28976 US bbl1 tonnes 8.17 US1 metric ton = 0.77 cubic meters

GLOSSARY OF ABBREVIATIONSATPS - Aqaba Thermal Power StationEMENA - Europe, Middle East and North AfricaESS - Energy Sector StudyFBC - Fluidized Bed CombustionHTPS - Hussein Thermal Power StationICB - International Competitive biddingIDECO - Irbid District Electricity CompanyIAEA - International Atomic Energy AgencyIOC - International Oil CompanyJEA - Jordan Electricity AuthorityJEPCO - Jordanian Electric Power CompanyJPRC - Jordan Petroleum Refining CompanyLPG - LiqueLied Petroleum GasMAED - Model for Analysis of Energy DemandMEMR - Ministry of Energy and Mineral ResourcesMOP - Ministry of PlanningPCIAC - PetroCanada International CooperationNRA - Natural Resources AuthoritySOE - Statement of Expendituretoe - tons of oil equivalentWASP III - Wien's Automatic System Program Package III

Financial Year - Calendar Year

FOR OFFICIAL USE ONLY

JORDAN

ENERGY SECTOR STUDY

Abstract

The objective of this report is to assist GOJ develop a refined energysector development strategy. It reviews changes in Jordan's energy sector inlight of the macroeconomic situation; institutional changes; current energypricing policies; demand management and conservation needs; energy supplydiversification; and the prospects for developing primary energy resourceswithin Jordan. The report analyzes the following issues: energy demandprojections, the exploration and development of domestic energy resources;institutional and operational efficiency; and energy sector investment andfinancing. It focuses on human resources development, debt reduction and theexpansion of the private sector in energy investment and environmentalprotection. The Rreferrea strategy is a continuation of GOJ's policies:energy conservation; the development of indigenous resources to substitute forimports; economic pricing; efficient investment and operations; and theremoval of institutional rigidities. The report recommends continuingpetroleum products and electricity pricing reforms; restructuring of sectorinstitutions to improve efficiency; and exDanding the role of the privatesector in energy sector development projects.

The study was undertaken as a collaborative effort of the World Bank and theGovernment of Jordan. The World Bank core group for this report was R.Vedavalli (Task Manager), J. Maweni, A. Adamantiades and P. Cordukes (PowerSubsector); U. Kirmani (Oil and Gas, and Oil Shale); and R. Berney (PetroleumRefining). The core Jordanian counterpart team included: R. Aburas (TeamCoordinator and Energy Conservation); A. El-Saadi (Joint-Team Coordinator); M.Zaharan, M. Dabbas and M. Talal (Macroeconomic Prospects); Ali Anani(Renewable Energy), M. Faisal and M. Abu-Aqola (Energy Demand, Energy-EconomyModel, and Petroleum Refining); F. El-Ken-wi, F. Kharbhat, N. Idris, Z. Khamis(Power Subsector and WASP model); M.A. Nabulsi and K.H. Khalidi (Oil and Gas);M. Abu Ajamieh, F. El-Faiz, W. Jaouni, and M. Bseaso (Oil Shale).

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

JORDAN

Energy Sector Study

Main Regort - Volume I

Table of Contents

Page

I. SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . 1

II. ENERGY AND ELECTRICITY D)EMAND PROJECTIONS . . . . . . . . . . . . 12

A. Overall GDP and Sectoral Growth Prospects . . . . . . . . . . 12B. Energy-economy Relationships ................ . 13C. Demand for Petroleum Products ................ . 15D. Electricity Demand ..................... . 16E. Energy Pricing ....................... . 18F. Energy Conservation . . . . . . . . . . . . . . . . . . . . . . 22G. Energy and Electricity Demand Projections . . . . . . . . . . . 23

III. DOMESTIC ENERGY RESOURCE DEVELOPMENT . . . . . . . . . . . . . . . 25

A. Oil and Gas Exploration ................... . 26B. Natural Gas Development and Utilization . . . . . . . . . . . . 28C. Natural Gas Pricing .... . . . . . . . . . . . . . . . . . . 29D. Oil Shale . . . . . . . . . . . . . . . . . . . . . . . . . . . 30E. Renewable Energy .... . . . . . . . . . . . . . . . . . . . 32

IV. ENERGY SECTOR INSTITUTIONAL AND OPERATIONAL EFFICIENCY . .33

A. Institutional Se.ting .................... . 33B. Energy Enterprises - Institutional Arrangements and

Operational Efficiency .... . . . . . . . . . . . . . . 36C. Operational Efficiency in EIectric Power Sector . . . . . . . . 40

V. ENERGY SECTOR INVESTMENT STRATEGY . . . . . . . . . . . . . . . . . 41

A. Planned Energy Investment during 1986-90 .......... . 41B. Future Investment Planning and Financing Strategy . . . . . . . 43

Table of Contents (Con't)

AnnexesAnnex 1 Table - Energy and Electricity ConsumptionAnnex 2 Table - Percentage Shares of Oil Import CostAnnex 3 Table - Energy Consumption by SectorsAnnex 4 Table - Price Structure of Petroleum ProductsAnnex 5 Table - Critical Indications for Generation, Transmission

Distribution, and Commercial OperationsAnnex 6 - A List of Proposed Studies

Charts43931B - Organization Chart: Ministry of Energy and Mineral Resources44503B - Organization Chart: Ministry of Energy and Mineral Resources

(Proposed Status)43031C - Organization Chart: Natural Resources Authority

- Organization Chart: Natural Resources Authority (Proposed Status)43931A - Organization Chart: Jordan Electricity Authority

Mineral Resources IBRD 21349Petroleum Concessions IBRD 21350National Electric Grid IBRD 21351

I. SUMMARY AND CONCLUSIONS

Introductigu

1.01 The __i Rpurpose of this report is to assist GOJ in formulating adevelopment strategy for the energy sector in light of the currentmacroeconomic situation and recent developments in the energy sector. Thereport is organized in o volumes: the first covers the main issues andrecommendations; the gego consists of a set of background papers and annexeswhich deal with the issues in more detail. Volume I consists of fivechapters. Chapter I summarizea the main findings and conclusions. Chapter 1Iexamines the factors influencing the energy and electricity demand to the year2000, including current energy pricing and conservation policies. TheGovernment policy of ex-refinery pricing and cross-subsidization ofelectricity prices is discussed, and a proposed strategy for correctingexisting distortions in pricing is outlined. Chapter III reviews Jordan'senergy resource deve.lopment programs and focuses on the strategies forpetroleum exploration and development, paying particular attent4'rn to thenatural gas development and economic exploitation of oil shale. Chapter IVaddresses the need for institutional reforms and efficiency improvements inenergy enterprises; it recommends streamlining the institutional structure andan action plan for effective efficiency improvements. Finally, Chapter Vreviews the Government investment program for the 1986-90 period and presentsa core program of investment in the energy sector to the year 2000, withfinancing options.

Overview of the Energy Sector and Sector Issues

1.02 The last Bank review of Jordan's energy sectoc was done in 1983.Since then GOJ has successfully implemented a number of sector reforms. Theseinclude: (a) creating a central institutional base by forming the Ministry ofEnergy and Mineral Resources (MENR) to undertake energy planning and formulateenergy strategy; (b) exploring ar.d developing both conventional and renewableenergy resources with interested foreign investors; (c) eliminating energysubsidies by implementing economic energy pricing measures; and (d) promotingJamand management and energy conservation measures to encourage efficiency inenergy use. These measures have contributed to a series of devel'pments inJordan's energy sector.

1.03 Jordan's energy sector at present has significant privLteparticipation. This participation is in the form of private shareholding inthe electricity distribution companies (Jordan Electric Power Company (JEPCO)and Irbid District Electric Company [IDECO) The private sector is veryactive in the oil refining and distribution of petroleum products. Jordan hasalso encouraged private oil companies to explore for oil and gas in Jordan;three private oil companies and two foreign national oil companies arecurrently engaged in oil exploration activities. In parallel, the NaturalResources Authority (NRA), the Jordanian entity, is also active in oilexploration and has made the first commercial natural gas discovery in Risha.NRA has also made some small oil discoveries in the Hamza and Sirhan areas.Efforts to diversify supply sources and promote development in oil shale

-2-

resources and solar and wind energy are well underway. On the demand side,OJ has tried to reduce the rate of growth in energy demand by increasingefficiency in energy use, promoting energy conservation measures, andincreasing energy prices to reflect their economic cost. However, despitethese favorable developments, Jordan's energy sector still faces a complexfuture characterized by considerable uncertainty. Besides the prevailinguncertainty about world oil prices, Jordan must now cope with planninguncertainties about GDP and sectoral growth, including energy and electricitydemand growth and domestic oil and gas availability. The recent slowdown inGDP growth, accompanied by stagnating remittances and the devaluation of theJD against foreign currencies, has increased the debt burden and lessened thefinancial viability of energy enterprises. The impact of the devaluation ofthe JD has also increased the cost of import on Jordanian economy. In 1988,the cost of oil imports amounted to 7.5% of GNP, 20.3% of total imports, and62.8% of export earnings. Consistent with tne structural adjustment of theJordanian economy, the Government should give high priority to the followingmain sectoral issues: (a) energy and electricity demand projections; (b)domestic energy resource development; (c) institutional reforms andoperational efficiency; and (d) sector investment planning and financing.

Energy and Electricity Demand Projections

1.04 Energy consumption increased at an average rate of growth of 13.7Xbetween 1975 and 1984. Electricity consumption increased at an average rateof growth of 20.8z p.a. in the same period. These high energy and electricitygrowth rates reflect high economic rates of growth, rapidly rising incomesstimulated by remittances, and accelerated growth in the manufacturing,transport, household and service sectors. The declining GDP and sectoralgrowth rates during 1984-88, together with the impact of energy pricing andconservation measures, contributed to slowing down the rate of growth in totalenergy consumption to 2.5% p.a.; eleccricity consumption also declined by 55%to 9.4% p.a. during the same period. The future rates of growth of energy andelectricity demand depend on a number of inter-related factors: (a) regionaleconomic conditions; (b) Jordan's overall economic (GDP) and sectoral growthprospects; (c) the changing structure of the economy; (d) energy pricing; and(e) conservation measures. On the basis of a reassessment of these factors,energy demand is projected to grow at 2.8% p.a. through the year 20001;electricity demand is projected to grow at 4.8% p.a. during the same periodV.The rates of grbwth of petroleum products and electricity demand are expectedto decline substantially, i.e., by more than two thirds.

EnLergy PrLicig

1.05 The main thrust of GO's energy pricing policy is to continue to pricepetroleum products and electricity to reflect their economic cost. Atpresent, even after reflecting the full impact of the depreciation of the JD

j/ Energy demand projections were derived using MIT's energy-economy model ofJordan.

2/ Electricity demand projections are based on the Jordan ElectricityAuthority's econometric model.

against the US$, petroleum product prices, on average, are 40X above thecurrent world market prices. Domestic gasoline and LPG prices are 1001 abovetheir border prices. Domestic prices of gas oil and kerosene, used mainly bythe household and transport sectors, are ih the range of 51 to 201 above theirrespective CIF prices. The pre-1988 electricity tariffs, on average,reflected 100l of the long-run marginal cost (LRKC). The adverse JD/$depreciation impact has lowered the average tariff at present to62% of theLRMC. Given that domestic tariff levels rarely reflect the total LRMC,Jordan's pricing policy standard is comparatively higher than the prevailingsituation in the region.

1.06 However, given :hat petroleum products and electricity demandprojections are sensitive to the effects of pricing and energy conservation, afailure to implement economic pricing, and conservation and demand managementmeasures would increase energy and electricity consumption about one and ahalf times above their base case levels. It is, therefore, recommended thatGW continue to puraue its policies of econumic energy pricing (balanced withprograms to ensure the social welfare of poorer sections of the population)by: (i) rationalizing ex-refinery prices of petroleum products and separatingex-refinery prices from taxation; and (ii) removirng the existing economic andfinancial cross subsidies in electricity tariffs. Energy conservation andefficiency improvement measures should be instituted at all levels of energyuse.

Tha TAM2lo22ment e. Domestic Energgy Resources

1.07 The Government has adopted a sound policy to encourage foreign oilcompanies to explore for oil and gas and has succeeded in attracting fivecompanies to undertake petroleum exploration. In parallel, NRA has continuedits oil and gas exploration activities in its own areas where foreigncompanies are not active. NRA's efforts in the last eight years haveestablished the potential for oil and gas in Jordan by making small oildiscoveries at Azraq and the Sirhan basins and a gas discovery at Risha. TheNRA is currently making efforts to evaluate the gas discovery. The futureplanning and investment in the Risha area should be deferred until the long-term testing of the Risha field is completed and a comprehensive diagnosticstudy of the Risha Reservoir is undertaken. In view of the complexitiesinvolved in the evaluation of the Risha area, GOJ should consider permittingforeign oil companies to explore NRA's reserved areas to benefit from thelatest state of the art technology while minimizing investment risks.

1.08 The Government is also currently assessing the potential for using itsoil shale resources to produce synthetic crude oil and to burn oil shaledirectly in power plants. The results of three prefeasibility studiesindticate that the exploitation of oil shale, both for the extraction of shaleoil and as a fuel for direct combustion for power generation, is technicallyviable. However, the results of these studies are based on laboratory testsand some performance tests in the vendor's facilities; neither the retortingtechnology nor the fluidized bed combustion (FBC) technology has been testedin a commercial plant using oil shale. In addition, oil shale is notcompetitive with current crude oil price projections and is thereforeuneconomical in the foreseeable future. In view of the high economic,financial and technical risks of venturing into oil shale power plants orsyncrude projects, GOJ should not commit any public investment resources

- 4 -

to oil shala exploitation until the techno-economic commerciality of oil shaleexploitation is proven elsewhere. In the meantime, the Government shouldcontinue to monitor developments in commercial oil shale exploitationworldwide, but it should only undertake studies which address water resourceavailability, ash disposal, and environmental protection issues.

1.09 The programs for the development of renewable energy resources, suchas solar and wind energy, are progressing satisfactorily. There is, however,still the need for a coo'dinaced action plan to assess the potential ofrenewable energy resources. Even though renewable energy resources could onlymake a marginal contribution to Jordan's energy requirements, appropriateguidelines and an implementation schedule would help maximize theirdevelopment and use and contribute to part of the overall domestic energysupply.

Sector Institutions and Operational Efficiency

1.10 At the ministerial level, major issues include the adequacy ofinstitutional arrangements and the effective coordination of MEMR (which isresponsible for energy planning and policy formulation) and the line energy-operating agencies. Since its inception in November 1984, MEMR hassatisfactorily undertaken overall energy planning and policy formulationfunctions. Jordan's energy sector has now reached a stage where sectordevelopment requires greater comprehensive planning, more in-depth analysis,and the effective regulation, coordination, and monitoring of energy sectoractivities. It is recommended that the Governueat restructure MEMR tostrengthet. its analysis, planning, and evaluation capabilities, as well as itsregulating, monitoring, and coordinating functions.

i.il Analyses of operational efficiency in energy enterprises indicatethat, although these enterprises generally operate efficiently, there is stillroom for considerable improvement in technical, operational, financial andmanagerial efficiency. Efficiency improvements in energy sector enterpriseswould help reduce additional capacity expansion and associated investmentrequirements. In addition, institutional reforms to restructure the energyorganizational structure should be implemented to realize the benefits ofefficiency improvements.

1.12 NRA, responsible for all activities relating to the exploration anddevelopment of minerals and hydrocarbons, has so far carried out its functionsin a satisfactory manner and has contributed to proving hydrocarbon generationprospects in Jordan. However, in view of its present setup as a fully fundedgovernment agency, NRA's operational orientation lacks commercial focus.Efficient operations require rational planning, a flexible approach inconsidering available options, and the freedom to choose the optimum and mostcost-effective option. Given the need to minimize government expenditure onrisky oil-exploration activities, it is necessary to restructure NRA'sorganizational structure to redefine its objectives and role and to improveits operational, technical, financial and managerial capabilities. TheGovernment should undertake an organizational restructuring study to consider

-5-

alternative ways to give NRA a commercial focus.

1.13 Alchough petroleum downstream activities (refinery, storage, transportand distribution) are privately owned and staffed with skilled personnel,efficiency measures are required to cut costu and optimize operating andinvestment decisions. The present system of combining refinery prices withproduct taxes and fixing ex-refinery prices on a cost-plus basis isunsatisfactory as a basis for commercial refinery operations. To improveefficiency it is recommended that ex-refinery prices be set at internationallevels. A revised remuneration formula should separate refinery prices fromtaxation and other retailing activities such as storage, transport anddistribution. It is recommended that the Government evaluate the storage,transport and clistribution of petroleum products and examine alternativeoptions for the future expansion of these facilities.

1.14 The three power-supplying entities in Jordan -- the Jordan ElectricityAuthority (JEA), the Jcrdan Electric Power Company (JEPCO), and the IrbidDistrict Electric Company (IDECO) -- have been an integral part of the rapiddevelopment of the power subsector. They have conducted their plaxning,construction and operations in a timely, efficient, economical andprofessional manner. However, at present Jordan's power utilities faceoperational, financial and institutional efficiency issues. Power subsectorplanning should evaluate improved efficiency and load management as analternative to capacity expansion. Studies completed so far have identifiedefficiener --rprovements to: minimize production costs and reduce systemlosses; a.< kiize utilization efficiency and reduce investments; and optimizesystem performance and reliability. The next step is for the utilities todevelop an implementation plan to identify critical indicators of operationalefficency; define priorities and set specific targets; and monitor results asplans are implemented and targets achieved.

1.15 As a result of the adverse financial impact of the 1988/89 devaluationof the Jordanlan dinar, the power utilities are facing a severe liquidityconstraint in meeting their debt service payments and in financing theiroperations and construction. The debt service commitments of JEA, JEPC0, andIDECO on existing foreign loans have increased by about JD 70 million for theduration of the repayment period. The Government is considering short-termrelief measures such as postponing loan repayments for 3 years, reschedulingoutstanding loans, and increasing tariffs from 1990 onwards. A tariffincrease of 15X in real terms is urgently required in 1990 to help address theelectric utilities' financial problems. In addition to these proposals, othershort-term options that right be considered include: (i) converting someexisting loans to equity (or capital); (ii) treating the revaluation losses,as they are realized, as equity contributions; (iii) refinancing existing debtservice commitments by rollover loans or new borrowing; (iv) temporaryexemption from corporate taxes for JEPCO and IDECO; and (v) tariff increasesto eliminate cross-subsidies in water pumping, hotels and street lighting. Inthe long-term, more permanent solutions may be needed to restore the liquidityand financial viability of the sector. These include: (i) new borrowing torestructure the finances and capital of the companies; (ii) the revaluation offixed assets to increase depreciation and cashflow; (iii) increases in the

6-

structure and level of tariffs to restore long-term financial viability andremove existing tariff distortions; (iv) the development of a foreigr. currencyrisk management program, including proposal: for monitoring debt servicecommitments to minimize losses from future movements in foreign exchangerates; and (v) the institutional restructuring of power utilities, asdiscussed above.

1.16 To cut public expenditures, the Government intends to subject allpublic utilities to civil service laws requiring gov.rnment pay scales and,uther service conditions. Although reducing public expenditure is a desirableobjective, more regulation is likely to work against achieving this objective,as it would erode the morale, efficiency and perforr-nce of JEA staff. It isimportant to preserve institutionatl autonomy and efficiency in order tocontinue to attract and retain competent staff. To improve efficiency, theGovernment could consider several alternatives to increased government controlof power subsector institutions. These alternatives include: corporatizingof JEA; encouraging private sector participation by issuing shares;establishing a completely new national power corporation comprising JEA, JEPCOand IDECO; establishing JEA as a wholly-owned government corporationresponsible for generation and transmission and combining the distributionfunctions of JEA, JEPCO and IDECO under a single corporation. It is necessaryto revise regulatory procedures to ensure greater accountability andcompliance with government policies whe:. reorganizing the subsector.

Energy Sector Investment Strate-y

1.17 Given the scarcity of public investment resources and the Government'sneed to reduce the cost of drbt servicing, GOJ faces the difficult challengeof daveloping a rational investment strategy which promotes optimum sectordevelopment and expands energy supplies at least cost. In the nineties, tomeet the minimum energy demand requirements (para 1.04), a core investmentprogram should include funding for the incremental expansion of 1.4 mtoe ofpetroleum products and associated infrastructure facilities in storage andtransportation; 580 MW of new generating capacity in electric power and acorresponding expansion in transmission and distribution facilities; and theimplementation of energy conservation and efficiency measures. The likelyinvestment requirements in the next decade to finance the core-program areestimated at around $1,500 million, or an average annual investment of about$150 million. Given the need to reduce public funding requirements, thefinancing options would be: to strengthen the organizational structure ofenergy enterprises, thereby encouraging a commercial focus in energyoperations; to increase the self-financing capabilities of energy enterprises;and to find new sources of funding, including expanding the role of theprivate sector in electricity generation and energy resource developmentactivities. Given Jordan's proven record of private sector participation inenergy operations, the Government could promote private sector financing by(i) restructuring JEA as a corporation and issuing shares to equity investors;(ii) allowing the private sector to build new generation facilities and selltheir power to the network through financing schemes, such as Build Operateand Turnover (BOAT) or Build, Operate and Own (BOO); (iii) restructuring NRAwith a commercial focus; (iv) and promoting private company participation on ajoint-venture basis.

- 7 -

1.18 These issues and recommendations are summarized i'm the matrix and arediscussed in greater detail in the following chapters of Volume I and in theBackground Papers of "olume II of the report.

1.19 Based on careful analysis, it is recommended that GOJ give toppriority to the following major issues:

(i) Ascertaining, as quickly as possible, the availability andsuttainability of natural gas to permit its substitution for costlyimported fuels in power generation and other uses.

(ii) Strengthening NRA's capability to deal with various exploration anddevelopment complexities by reorganizing the petw'eu1. and gasoperations with a commercial focus.

(iii)Restructuring the ex-refinery pricing of petroleum products byseparating refinery pricing from taxation and streamlining refineryoperations by separating cost centers for refinery, storage,transport and distribution activities.

Xiv) Implementing an action plan to improve the financial viability ofelectric utilities through organizational'reforms, tariffadjustments, financial and institutional restructuring andefficiency improvements.

(v) Reorganizing MEMR's institutional base to effectively undertakeenergy planning, coordination and regulating functions.

(vi) Preparing a coreinvestment program and financing options for thenext five years. The program should include: (a) the continuedproduction of oil and gas in the Hamza and Risha fields; (b) theevaluation of the Risha gas reserves and other investmentrequirements for the further development of Risha gas; (c) about$80 million per year to provide increased power supply andassociated transmission and distribution facilities; (d) afeasibility study to determine the optimum storage andtransportation facilities for petroleuim products to the year 2000and the constructoin of the first phase of these facilities tosupply the demand for petroleum products to 1995; (e) financing forthe maintenance and rehabilitation of existing intvestments in thesector; and (f) a financing plan to improve the sclf-financinglevels of energy enterprises by: appropriate pricing of petroleumproducts and electricity; restructuring of energy enterprises toallow greater private sector participation in oil exploration andpower generation; and the increasing of incentives to attract newfunding from bilateral, mt.ltilateral and private sector financlng.

Proposed Strateag for Eneray Sector Develooment

I. Energy-Electricity Demand. Prie1nr arid Enerav Conservation

Dbiectivel RecommendationsEnergy Sector Level Enterorise Level

Issues A. Energy Electricity Demand Proiections

Energy and electricity demand Reassess energy and electricity Streamline and strengthen MEMR's Improve JEA's electricity

projections deal with demand projections in light anitlytical capability for demand demand forecasting

increasing uncertainty of macro and sectoral growth analysis and forecasting; and techniques and coordinate

about world oil prices, prospects and the impact of coordinate with line energy with JEPCO and IOECO in pre-

GOP, sectoral growth, pricing and conservation agencies and MOP in preparing paring a consistent subsec-

domestic pricing and policies consistent energy demand toral demand projection.

conservation policies. projections.B. Energv Pricina

Currently. ex-refinery pri- Achieve economically efficier.t Restructure ex-refinery pri Streamline refinery opera

ces are based on a cost-plus ex-rcfinery pricing of petro- COng by (a) separating reft- tions by separating

formula with a guaranteed leum products. nery pricing from taxation: cost centers for refinery.

rate of minimum return, which (b) settinq ex-refinery prices storage. transport and

does not provide incentive at *-ternational levels so distribution activ-ties and

for the refinery to operate that refinery is encouragec by making these operitions

efficiently. Also, the to improve its efficiency. efficient.

present system of combiningtaxes and refinery costs insales prices causes fluctua-tion of taxes with changesin oil product prices and

I

refining costs; it does not o

provide any incentive toreduce costs.

C. Electricity Tariffs

Tariffs for individual con- Implement economic electricity Introduce a framework for Prepare specific tariff

sumer categories reveal pricing by removing economic tariff restructuring for bulk, restructuring measures by

economic and financial and financial distortions in domestic, comuercial, and consumer categories reflec-

cross-subsidies. individual tariff categories, other categories. ting load management efforts

Progressively adjust the and review of time differen-level of tariffs to tiated demand charges and

eliminate the deficits. corrected classification ofconsumer categories.Undertake measures to im-prove operational efficiencyby reduction of losses, re-ceivables and improvingcost control and productivitymeasures.

D. Conservati.nm

Major constraints to energy Improve efficiency in energy Formulate of a package of Establish a framework of

conservation are: (a) the and electricity use to incentives to promote energy priorities for industrial

inability to identify .onserve energy and conservation by providing and transport sector conser-

attractive projects at the coordinate conservation tax incentives, improving vation programs and prepare

individual plant level; policies across industry, industrial legislation and a dated and monitorable

(b) the lack of adequate transport and household coordinating conservation action plan for the

technical know-how in imple- sectors. measures across industrial prioriti2ed programs.

menting Such projects at the transport and household sectors.

plant level; (c) inadequatefinancial and incentive -

framework.

II. Domestic Enerav Resource Develonment

Issues Ob,iectives ReconmendationsEnergy Sector Level Enterprise Level

A. Develonment of Oil and Gas Resources

Low success of exploratory Improve success ratio; maxi- Expand the strategy of attrac- Develop NRA's expertise inwells. Uncertainty as to mize probability of proving ting international oil companies dealing with exploration andthe comnerciality of oil comnercial oil and gas in oil exploration and development complexities;and gas potential. reserves. developennt to include NRA's continue to use state-of-the-

exclubive areas. art techniques and aflexible approach.

Complex stratigraphic and Minimize risks by using state- Prepare goal-oriented Undertake detailed analyaesreservoir conditions of of-the-art industry technique planning and investments on the of goological, geophysical.Risha field increase uncer- to evaluate Risha field to assessment of technical and well test and other data;tainty to determine gas determine proven. probable financial risks, conduct long-ternm well test,reserve potential; mnade- and potential gas reserve integrate all available dataquate planning anid program- scenarios.ming for appraisal drilling and conduct a diagnostic studydrmiling prior to detailed of the Risha reservoir prior toanalyses of seismic, geo- driling more wells.logical and well date eva-luation.

B. Oil Shale

Economic exploitation of Make investment decisions Pobtpone public investment in Continue to monitor developoil shale. on the basis of evaluation of oil shale exploitation as such ments worldwide in the

feasibility studies recently investments are uneconomic in economic exploitation of oilcompleted to produce shale oil the foreseeable future. shale.and use of shale in power-generation.

Deal with technical and Continue to address the Formulate guidelines and NRA/JCA should continue tooperational issues of oil t,..nical and operational codes for oil shale mining, monitor technological break-shale exploitation such as: issues of oil shale ash disposal and environmental throughs. and study the guidewater resources availability, technologies in the lons- protectton; address the water lines and codes for oil shaleash disposal and environ- run. resources availability mining and advise the GOJ inmental protection. issue. formulating the policy

guidelines.

C. Renewable Enerav

Need for a coordinated, Assess the potential for Formulate a policy for renewa- Evaluate ongoing activities,well conceived and measured renewable energy resources ble energy development in formulate a strategyprogram of assessment of and increase the competitive Jordan and prepare a plan of for future development. andrenewable energy technology ness of local solar a 1ion. prioritize specific imple-on the basis of ongoing, collectors manufacturing. mentation tasks.as well as futureactivities. Determinationof economies of scale forlocal manufacturing of solarcollectors and improvementof its competitiveness.

III. Institution and Laerational Efficiency of Enerav Enterorise

,Lssues Obiectives RecommendationsEner4v Sector Level Enterorise Level

A. Central Institution

Fragmentation of energy Develop KE2R as a central Re-evaluate MEMR's institutional Strengthen MEMR's staffingplanning and coordination agency for undertaking: objectives and functions to to effectively undertake infunctions: absence of central comprehensive energy planning: match changing sector needs; depth analysis, policy for-planning and regulation of bndgeting and management; reorganize MEMR's institutional mulation, preparation of aenergy sector activities. base to effectively urndertake regulatory framework, and the

policy formulation; coordina- energy planning, coordination coordination of sectortion; and, the regulation of and regulation, including review- activities.energy sector activities. ing and updating the legislative

framework for energy sectoractivities.

S. Oil and Gas

Currently NRA functions as Restructure NRA to achieve Undertake an organizational Straiithen Nto e *ltaff capn-a Government Authority efficiency comparable to inter- review of NRA to improve bilies to evaluate andwhose activities are fully national oil industry standards. its oerformance. mange oil/gas reserves,funded by the Government. reservoir engineering, and theNRA's present organization monitoring of oil coanyset up lacks commercial focus activities.in petroleum activities.

C. Petroleum Products Supol an3d PLjribsd,or

The need for rationalizing Ensure that future demand for Introduce ex-refinery pricing Assess future pattern ofrefining capacity and mini- petroleum products is met at reforms to encourage more efficient petroleum consumption emi2ing the cost of storage. least cost to the economy. operation of the refinery and and location of demandtransport and distribution to provide incentives for centers. Following thi~facilities, optimizing investment in sto- assessment review option-

rage, transport and distribu- 'or expansion of -efinerytion activities. capacity; and uniertake a

study for determining theoptimal storage.transportation aid d !tribution of petroleum products.

The uncertainty of future Improve load forecasting Undertake an organizational Prepare a plan of action forload growth; the impact of tecIniques. undertake effi- review of JEA to introduce efficiency improvements,1988/89 JD versus foreign ciency improvements, and institutional reforms and prioritize specific measures,currency exchange rate prepare least-cost investment create a regulatory framework to and monitor implementation.movements on utilities strategies and fuel choices. improve efficiency.finances; the need to optimi2e investment optionsoptimi2e future invest- and encourage privatement options in power sector involvement in powergeneration. generation. Consider alternative%

to increased government controlover JEA*JEPCO and IDECO: such a4.establishing a new nationalpower corporation comprising JEAJEPCO and IOECOJ establishinq JEAas a wholly owned government coroorz.t on responsible for generatioN inctransmi%qion and to merge JEP0 imcIDECO "nto a single distributio'i compamyn'oroornting JEA's distributiv'r :,eia.

1,Ssues Ob-iectiv E6eres Sector Level Recommendatios Etersat eonsEnerav Sector Level Enterorise Level

The government's intention to Preserve institutior.al Consider alternative insti- JEA should evaluate thesubject JEA to civil service autono,ny and efficiency to tutional arrangements for corporatization option andlaws requiring Government continue to attract and JEA. such as corporatiza- agree wiLh the Government onpay scales and other retain competent staff. tion and greater a regulatory framework forservice conditions. private sector increasing efficiency and

participation. operational performance.

The development of a rational Evaluate the cost-benefits Coordinate a review of Review the cost-effectivenessdata base management system, and appropriateness the cost benefits of MIS of developing an MIS system.the need for which appears to of developing the manage- development.be premature. ment information system (MIS).

IV. Investment Strateav and Financing OptionsCare Investment ProeramThe need for a core invest- Prepare a sector investment and Formulate a policy framework for Prepare a financing plan forment program for the financing strategy and a core f-nanclng sector investments each of the sectors as wellsector as a whole, as well program as part of the invest- including the expansion of as the core program;

as for each entity. ment strategy. the private sector in energy evaluate financing options,as for each entity. ment strategy. resource development and ivaludin internal cash

power generation including intemal cashactivttles. generation, contribution of

local and foreign loans, andoptions for the expansion ofprivate sector financing.

- 12 -

II. ENERGY AND ELECTRICITY DEMAND PROJECTIONS

Background

2.01 Erergy demand projections are influenced by overall and sectoralgrowth prospects, energy pricing policies, conservation measures, and changingtrends in energy consumption. This chapter examines the influence of thesefactors on Jordan's energy and electricity demand projections, formulates thekey assumptions for future demand growth, and presents energy and electricitydemand projections to the year 2000.

A. Overall GDP and Sectoral Growth ProsRects

2.02 Jordan's economy is vulnerable to changes in world oil prices becauseincome, employment and domestic investment is directly related to incomelevels in the neighboring oil-producing countries in the region. During the1974-82 oil boom, Jordan's economy experienced an economic growth of 10X peryear and operated at full employment. The balance of payments and publicperformarnce remained strong. This high rate of economic growth was sustainedby growing remittances from Jordanians working abroad, the rising demand forJordanian exports, and increased grant-aid. These positive developmentsresulted in significant progress in diversifying the production base andtriggered iutdustrial growth. Between 1974-82 the industrial sector's realrate of growth averaged 102 per year. The real rate of growth of theagriculture sector avereged 7%, and the transport and services sectors eachaveraged 82 percent per year.

2.03 The rapid decline in oil prices and the subsequent slowdown in theregional economy beginning in 1983 affected Jordan's economic growthprospects. Between 1984-88 Jordan's economic growth averaged 2.5X per year.Sectoral growth averaged 0.11 per year for manufacturing and 3.2X per year forservices. Exceptionally good weather in 1986 and 1987, preceded by a longperiod of drought, gave rise to the high growth rate of 11.12 per year foragriculture.

2.04 Given that the regional recession is not a temporary cyclicalphenomenon, the future economic rate of growth is expected to remain lessrobust than in the past. According to World Bank projections, the real rateof GDP growth, after reaching the low of zero percent in 1989, is expected toincrease to 2.62 in 1990 and to 4.0% in 1991. Thereafter, the real GDP growthrate is projected to accelerate to about 4.5% p.a. by 1992 and continue tomaintain this rate of growth through 1997. Manufacturing is expected to grownearly 5.5X p.a. between 1992-1997; agriculture and services sectors areprojected to grow each at 42 p.a. during the same period. Table 2.1 belowpresents the actual and projected macroeconomic scenario of Jordan's economy.

- 13 -

TIble 2.1: Actual and Projected Macroeconomic Scenarios(Percent per Annum)

Actual /a at.. Proiected1984-88 1989 1990 1991 1992-97

GDP 2.5 0.0 2.6 4.0 4.5Agriculture Lk 11.1 1.0 3.0 3.5 4.0Manufacturing 0.1 3.0 4.5 5.5 5.5Services 3.2 -1.3 1.0 3.3 4.0

Source: Jordan - Proposed Industry and Trade Policy Adjustment Loan -Initiating Memorandum, May, 1989.

La Least square growth rates, or average values 1984-88.b Exceptionally good weather in 1986 and 1987, preceded by a long period ofdrought, gave rise to this high growth rate.

B. Energy-economy Relationships

2.05 Historically, the relationship between the growth rate of totalenergy and electricity consumption relative to that of GDP in Jordan hasremained quite high. Between 1975-84 total energy consumption grew at 13.7Xp.a to reach 2.8 toe in 1984. The onergy/GDP elasticity was 1.9. Electricityconsumption during the same period grew at 20.8% p.a., reaching 1,944 Gwh in1984, with a relatively high electricity/GDP elasticity of 2.4. High growthrates of energy and electricity consumption in Jordan are a reflection of higheconomic rates of growth; rapid population growth; rising incomes stimulatedby remittances from Jordanians abroad; increased public access to electricity;the establishment and growth of large energy-intensive industries such ascement, potash and phosphate; and the expansion of the service sector. Thehigh energy/GDP ratio during 1975-84 reflects the unrestricted growth in thedemand for energy and electricity due to the low level of domestic energy andelectricity prices.

2.06 Since 1984, the Government of Jordan has raised domestic energyand electricity prices to reflect their economic cost and also initiatedenergy conservation programs to promote efficient energy use. The impact ofthese pricing and conservation measures together with the declining GDP growthrates of 2.5% p.a. during 1984-88 have reduced energy consumption drastically,to 2.5% per year during the same period. Electricity consumption during thesame period fell by two thirds and the rate of growth of electricity demanddeclined to 9.4% per year. The future rate of growth of energy andelectricity demand is influenced not only by the overall GDP and sectoralgrowth prospects, but also by the Government's energy and electricity pricingand conservation policies and the effects of demand management measures.

- 14 -

PER CAPITA ENERGY CONSUMPTION 1970 - 88

l.1

0.8

0.6

04

0.2 loo X~~~~~~~~~l1970 t910 1664 1966U 1363

TOTAL ENERGY CONSUMPTION 1970 - 1988

3.2

3

2.8

2.6

L2.

2.

I.e

t.6

1.4 /1.2

0.6

06

0.41970 l9o1w t 196 tW

TOTAL ELECTRICITY CONSUMPTION 1970 - 88

2.6

2.6

2.4

2.2

2

I..

1.6

1.4 /1.2

0.6

0.4

0.2

01070 1960 1684 1986 1689

- 15 -

C. Demand for Petroleum Products

2.07 After a decade of a high rate of growth (13.7X p.a.), demand forpetroleum products began to decline in 1984 and has stabilized at presentaround an average rate of growth of 2.2X p.a. The variations in the rates ofgrowth in the demand for individual products reflect the specific developmentsin the respective end-use activities. The negative growth rate for jet fuelduring 1984-88 reflects the direct effect of the depressed regional economicenvironment and the consequent decline in air traffic activity. The low rateof growth in kerosene demand reflects the continued substitution of LPG forkarosene in the household sector. The lower rates of growth of gasoline andgas oil reflect the slowing down of the rate growth of transport sectoractivity; in addition, in the case of gasoline, the effect of taxes on largeengine automobiles, as well as the price effect, contributed to the decliningrate of growth. The rate of growth of fuel oil consumption also showed adeclining trend, 3.6X p.a. compared with 23.51 during 1975-84, indicating theslowing down in electricity consumption. Table 2.2 summarizes the main trendsof petroleum product consumption.

Table 2.2: Petroleum Consumption1975 - 1989('000 tons)

Growth RatesPercentages p.a.

12Z_5 1982 1984 1985 1988 1989 A/ 1975-84 1984-89

LPG 25 67 83 87 111 112 14.3 6.2Gasoline 155 301 331 331 341 345 7.7 0.8Jet Fuel 73 296 245 227 190 233 16.8 -1.0Kerosene 118 170 143 133 159 154 2.2 1.5Gas Oil 229 674 685 737 792 804 12.9 3.3Fuel Oil 138 598 920 962 1,108 1,099 23.5 3.6Others k/ 130 314 354 342 343 327 11.8 -1.6

Total 868 2,420 2,761 2,819 3,044 3,074 13.7 2.2

L/ Preliminary Estimates.hI Includes refinery consumption and losses.

- 16 -

SECTORAL ENERGY CONSUMPTION

10

Go *.N . ,

190 80 15

u" I

t901 lU- 9l

~~am cm w M

D. Electrcity Demand

2.08 High growth rates in electricity consumption, 21% p.a. between1975-84, reflected high investment levels which generated large increases inthe demand for electricity in various sectors. During 1975-84 the householdsector's demand for electricity grew at the very high rate of 21% p.a. Thisgrowth reflected the sector's heavy investment in energy-using householdappliances, made possible by an increase in disposable incomes due to a highlevel of remittances from Jordanians working abroad. The rate of growth ofthe household sector's demand for electricity declined to 8% p.a. during1984-88, a result of saturation as well as of a decline in remittances fromJordanians working abroad.

2.09 Industrial demand for electricity also grew at a very high rate, 20%p.a. during 1975-84, reflecting the expansion and diversification of Jordan'sindustrial base and the setting up of energy-intensive industries such ascement, mining, etc. In addition, the increased availability of cheap powerencouraged the industrial sector to buy power from the grid. In 1971,industry met 61% of its own electricity needs. This share declined steadilyover the years to reach 31% in 1986, a result of the growth in industrialdemand for electric power supplied from the grid. The rate of growth ofindustrial electricity demand declined to 5.8% p.a. during 1984-88, reflectingthe slowing down of industrial activity and the absence of new, energy-intensive industrial investment.

- 17 -

2.10 The average growth in electricity demand in the commercial sector was22X p.a. during 1975-84. This sector includes office buildings, shops,restaurants, and hospitals. During 1984-89, the rate of growth in electricitydemand in the commercial sector declined to 5X p.a., which indicates theoverall reduced growth of the sector.

2.11 A very significant addition to electricity demand in recent years hascome from the water pumping sector. Annual growth rates actually increasedfrom 20X during 1975-84 to 261 during 1984-89. Between 1984-89 this sectoradded 306 Gwh of annual demand or 30X of the total growth in electricitydemand during this period. Water pumping now accounts for 15% of totalnational electricity demand, comnFAred to 81 in 1975.

2.12 The shares of street lighting and other uses in total electricitydemand declined to 3X during 1984-89, compared with 61 during 1975-84. Table2.3 below shows electricity demand by major sectors.

Table 2.3: Electricity Demand by Major Sectors 1975-88(Gwh)

1975-84 1984-89Percentage p.a.

1975 1982 1284 1985 1988 1989 A/ Rate of Growth

Domestic 92 455 604 655 821 844 23.3 6.9Industrial 165 488 851 903 1,040 1,128 20.0 5.8Commercial 40 160 233 268 292 302 21.6 5.3Water pumps 29 98 151 215 446 472 20.1 25.6Street lighting 10 25 38 46 77 90 16.0 18.8others 20 48 67 64 85 122 14.4 12.7

Total 356 1,274 1,944 2,171 2,761 2,958 20.8 8.8Source: JEA

a/ Preliminary estimates.

ELECTRICrIY DEMAND BY SECTORa2 .

26

2~~~~~~~~~16

a i{

l n _a aN \\

- 18 -

E. Energy Pricing

2.13 One of the main thrusts of GOJ's energy strategy is the economicpricing of petroleum products and electricity. Jordan's pricing strategy isaimed at removing energy subsidies by bringing domestic energy and electricityprices in line s.th their respective economic costs.

Petroleum Product Pricing

2.14 Petroleum product prices were increased between 1978 and 1985 toreflect increases in world market prices, to eliminate subsidies, and toprovide a source of revenue for the government budget. In 1988, petroleumrevenues of JD 70 million accounted for 21X of government total tax revenuesand 13X of total revenue receipts. Despite the decline in world oil prices,GOJ has continued to raise domestic petroleum product prices in order tomaintain these prices in real terms; promote efficiency in energy use; andfinally, raise more revenue for the Government in its efforts to reduce thedeficit. Follow!lng the May 1989 price increase, and even after reflecting thefull impact of the depreciation of the JD against the US dollar, domesticpetroleum product prices are 281 above their border prices. However, th.relationship between domestic and border prices varied considerably amongdifferent products, from 281% for gasoline, 991 for kerosene and 98% for gascil. Table 2.4 compares domestic and border prices for petroleum products.The relatively lower retail prices for kerosene, gas oil and LPG, consumedmainly by the household and transport sectors, are in line with theGovernment's attempts to balance economic pricing with equity and socialwelfare objectives.

Table 2.4: Petroleum Product Prices(Fils/liter)

Domestic Prices asMay Percent of Average

1975 1985 1988 1989 1989 World Prices

Super Gasoline 95 210 210 270 281Regular Gasoline 75 180 180 220 251Kerosene 20 65 65 75 99Diesel 20 65 65 75 98Fuel Oil ton 8 50 50 50 86LPG (12.5 kg) 1,050 1,800 1,800 2,000 192Weighted average 128

Source: MEMR.

- 19 -

LOCAL PRICES OF OIL PRODUCTS(7/79 TO 11 /88)

ISO0- .

170 -

160

150IS

140 -

130 -

120 -

110 -

100

300

80 -

70

60

50-

40-

30

20

7/79 2/Q1 11/81 12/84 11/88

GASOLINE 0 + KEROSENE C AS OIL A FUL OIL

Structure of Petroleum Product Prices

2.15 At present, GOJ policy is to set the prices for all petroleum productsat the retail level and to provide a fixed margin for refining, transportationand distribution activities. Under this framework, taxes on petroleumproducts are determined as a residual of gross revenue received for the saleof all petroleum products minus the total costs of crude oil purchases,refining, transport, distribution and retail saies. lhe current pricingformula provides the refinery with a cost-plus, guaranteed-fixed returnbetween 7.5X and 161 on a paid-in-equity of JD 32 million. This system ofrefinery pricing eliminates all potential incentives for the refinery tooperate efficiently. In addition, under the present pricing framework, whichcombines taxes and refining costs in sales prices, taxes fluctuate withchanges in world market crude and product prices as well as with changes inrefining costs. The present ex-refinery pricing approach is, therefore,unsatisfactory as a basis for commercial refinery operations.

Recommended Strategy for the Pricing of Petroleum Products

2.16 A proposed strategy for pricing petroleum products would include thefollowing:

- 20 -

(a) setting ex-refinery prices of petroleum products at internationallevels so that the refinery is encouraged to improve its efficiency;

(b) separating refinery pricss from taxation and other retailingactivities such as storage, transport and distribution to eliminatefluctuations in government revenue receipts and to control costs;

(c) restructuring the tax system for petroleum products so that eachcomponent of the tax is a fixed amount per unit (JD/to..), taking intoconsideration government revenue-generating and equity objectives;and

(d) restructuring downstream operations by setting up separate costcenters for refinery, storage, transport and distributic activities.

Electricity Tariffs

Tariff Structure

2.17 The current tariff structure consists of: (a) demand rates andtime-of-day kwh rates for bulk supply to the distribution companies and tolarge and medium industries; (b) an increasing block rate for domesticconsumers and public buildirgs; (c) flat krih rates for commercial consumers;and (d) a declining block rate for small iniustrial consumers. Large andmedium industries, as well as distribution companies, also pay a penalty forpoor power factor.

E-xisting Tariff Levels

2.18 During 1984-89 tariffs by consumer category have remainedsubstantially unchanged, with the exception of minor downward adjustments in1986 and 1988. Prior to 1988, average tariffs reflected 100% of LRMC.However, taking into consideration the 1988/89 depreciation of JD againstforeign currencies, at present the average tariff represents about 62% of theecoaLomic cost of supply (LRMC). Given that tariffs reflect full economic costin very few countries in the region, Jordan's average electricity tariff levelis better than the level prevailing in a majority of both developing anddeveloped countries. However, the present tariff structure shows severaldistortions in both the economic and financial costs of providing electricity.The bulk tariffs indicate that large consumers are supplied 6X below theeconomic cost of supply. The retail tariff structure contains severaldistortions when retail tariffs are compared to the economic costs ofproviding electric services. Economic subsidies are provided to allcategories of consumers excluding commercial businesses, broadcasting and TV,and the tail-block of the standard tariff applicable to domestic consumers.Large commercial consumers pay electricity prices 18% above the economic costof supply. The rationale for life-line tariffs for domestic consumers below100 kwh consumption is in line with the Government's objective of protectingthe low-income household consumers. However, there is a need to correct theexisting distortion in tariff levels for waterpumping, street lighting andhotels to reflect economic cost, to encourage the conservation of electricityand to improve the financial viability of utilities. Table 2.5 shows thecomparison of existing tariffs with economic costs of supply.

- 21 -

ob-la 2,5: Comparison of Existing Tariffs with Economic Costs of Supply

Average TariffEconomic Costs Average Tariff as % of

Existing Tariffs (fils#kwh) (fils/kwhL Economic Costs

Bulk Tariffs

JEPCO 33.00 21.26 64.42IDECO 35.00 21.36 61.03Large Consumers 31.00 16.93 54.61

Medium Industiv 37.00 22.90 61.89Small Industry 47.00 24.90 52.98

Commercial

Large (MV) 39.00 46.00 117.95Small (LV) 47.00 46.00 97.87

Hotels 47.00 24.00 51.06Water Pumping and Agric. 64.00 21.00 32.81Domestic 50.00 36.30 72.60Institutions 50.00 38.00 76.00Street Lighting 56.00 13.OOL& 23.21

Average 35.69 21.94 61.47

m Applied to consumption above 1988 levels.

2.19 A comparison of the existing tariffs with the average financial cost ofproviding electric services at 25.55 fils/kwh shows that the subsector as awhole was financially viable up to 1988, fully met its debt servicerequirements, and also generated sufficient internal sources of revenue tofinance up to 241 of its financing requirements. However, the relationshipbetween average tariffs and the average f,.nancial cost of supply by individualconsumer category indicates the existence of financial cross-subsidies. Mostcategories of consumers, with the exception of commercial, domestic and -ublicinstitutions, paid prices below the average cost. In fact about 60% ofelectricity sales were made at prices subsidized by commercial and domesticconsumers. JEA is estimated to incur losses on about Q0% of its sales, YEPCOon about 60%, and IDECO on about 85%.

Recommendations on Tariffs

2.20 The existing cross-subsidies between and within consumer categories arenot providing appropriate signals to users and may be encouraginwg theuneconomic use of electricity. Prudent monitoring of the level and extent of

- 22 -

cross-subsidies should be maintained to enable the Government to make informeddecisions about the wisdom of continuing these subsidies. Low rates for smalldomestic consumers may be justified on social grounds, but larger consumersshould be charged to reflect the economic cost. It is recommended that theexisting tariff structure be modified to better reflect the economic cost ofsupply and minimize cross-subsidies between consumer categories. Specificareas which might be considered for review are:

(a) Bulk Tariffs. Bulk tariffs to JEPCO, IDECO and large consumers couldbe reset based on economic levels determined from the long-runmarginal cost model. This may mean slightly lower prices for JEPCOand IDECO, whL.h would improve their financial position, and slightlyhigher prices for JEA's other large bulk consumers. To maintainuniform tariffs in the Irbid district, compensatory payments could bemade directly by the Government from its budget.

(b) DQ=stic 3-axlUa. Domestic tariffs could be modified so that theconcessional block applied onlv to domestic users with consumptionbelow 100 kWh/month. Those consuming above this level would notreceive any concessions.

(c) Commercial Tariffs. The present flat rate for commercial consumersdoes not encourage load management. Commercial consumers could beoffered a two-part, maximum demand/energy tariff which could alsoprovide some overall lowering of rates for the larger, medium-voltageusers. The energy component could incorporate time-of-day rates. Forlow voltage commercial users, a lower flat rate more consistent witheconomic costs could be applied. The commercial tariff category couldalso include hotels and public institutions, thus providing thesecategories with incentives for load management. Tariffs should beadjusted to reflect full economic costs to consumers in thesecategories.

(d) Other. Small industry, water pumping and agricultural tariffs couldalso be reviewed with time-differentiated and demand charges apossibility.

(e) Streetlighting. The cost of free streetlighting should be accountedfor and consideration given to whether it should be financed directlyfrom the government budget.

(f) Discounts. All existing discounts should be identified and accountedfor so that the cost of these concessions could be monitored.

F. Energy Conservation

2.21 A comprehensive national program to promote energy efficiency andenergy conservation is now seen as an indispensable element of the

- 23 -

Government's energy policy. A very important component of such a policy iseconomic energy pricing. As discussed above, it is necessary to continue topursue the goal of economic energy and electricity pricing by eliminating botheconomic and financial cross-subsidies. In addition, conservation effortsshould be actively pursued. Since 1984, MEMR has been involved in a programof energy conservation. This program includes energy audits of majorindustries, a well as a comprehensive study on how to iLAprove efficient energyuse in the transport and household sectors. MEMR has also prepared an actionplan which includes follow-up, detailed energy audits, and specificconservation measures for the industrial, transport and household sectors.The potential for energy savings through conservation efforts has beenestimated to range from 7% to 30% of total energy consumption.

G. Energy and Electricity Demand Proiections

2.22 Energy and electricity demand projections are updated on the basis ofassumptions which take into consideration the trends observed in the growtland pattern of ene gy and electricity consumption, the regional economicclimate, Jordan's GDP and sectoral growth prospects, and the effects ofpricing and conservation measures. The MEMR energy-economy model, developedin collaboration with MIT, was used to derive energy-demand projections basedon the following assumptions.

2.23 Key Assumptions

(a) GDP and Sectoral Growth Rate Projections were taken from the May 1989Initiating Memorandum (Table 2.1). GDP is expected to grow at anaverage annual rate of 4.5% p.a. through 2000. Average sectoralgrowth rates are projected at 4% for agriculture, 5.5% for industryand 3.5% for services.

(b) Energy Pricing and Conservation Policies. GOJ is expected to continueits policy of economic energy and electricity pricing to encourageconsumers to conserve energy; to minimize the cost of petroleumimports on the balance of payments; and to reduce capital expenditureson additions to electric power generation capacity. The impact ofpricing and conservation measures is expected to encourage changes inthe structure of the economy from an energy-intensive base to arelatively less energy-intensive and more energy-efficient one.Energy efficiency is expected to improve over the longterm in responseto government pricing and conservation measures. Consequently, theenergy-GDP coefficient is expected to continue to decline overthe longterm from a historical high of 1.9 to around 0.8 by the year2000. The electricity-GDP co-efficient is expected to decline fromaround 2.4 to 1.4. Price elasticities over the longterm are expectedto improve: -0.2 for energy and -0.3 for electricity.

- 24 -

2.24 Based on the above assumptions, primary energy consumption in Jordanis projected to grow, on average, at 2.8Z p.a. to reach 4.5 Mtoe by the year2000. Details are given in Table 2.6 below.

Table 2.6: Primary Energy Demand Projections 1988-2000(000 Mtoe)

Actual Projections Annual Average1987 1988 1989 ' 1990 2000 Growth Rate to 2000

(percentage)

LPG 116 111 112 130 166 2.9Gasoline 352 341 345 427 487 2.0Kerosene 183 159 154 207 270 3.1Fuel Oil 1,214 1,108 1,099 1,275 1,927 3.9Diesel 769 792 804 921 1,099 2.5Jet Fuel 191 190 233 233 265 2.0Asphalt 127 135 113 155 176 2.0Others I/ 76 -- 214 81 110

Total 3.020 3.044 3.074 3.420 4.500 ;t

fi/Preliminary estimatesLf Includes refinery fuel and natural gas.

2.25 The system's peak demand is projected to grow at 6.1X p.a. between1988-2000, increasing from a level of 525 MW in 1988 to 1,065 KW in the year2000. Based on this forecast and assuming a 301 reserve margin, additionalinvestment for a capacity expansion of 60 MW will be needed in 1993, rising to520 MW by the year 2000. The medium-case forecast of energy sales shows agrowth rate of 4.8Z, rising from 2,761 GWh in 1988 to 4,896 GWh in the year2000. This is consistent with the declining trend observed in electricityconsumption in recent years, i.e., a decline to 91 p.a. from 1984-88.Sectoral growth rates are also projeeted to slow down substantially to 5.11p.a. for households, 3.4Z for industry, 7.11 for commercial, and 7.21 forwater pumping. Lower growth rates in the domestic sector reflect thesaturation of new hook ups, covering 971 of the population, and the completionof the rural electrification program. In addition to the sharp drop projectedin new connections, the combined effects of lower GDP and per capita income,as well as pricing and conservation measures, are expected to reduce loadgrowth rates in the future. With the conversion of existing diesel water pumpsets to electric pump sets by end-1989, the water pumping load is expected togrow at the substantially low rate of 7.21 p.a. Details of electricity demandprojections are given in Table 2.7 below:

- 25 -

Table 2.7: Electricity Demand Projections 1987-2000(Gwh)

Annual AverageActual Preliminary Projections /a Growth (%)

1987 1988 1989 1993 2000 1988-2000

Domestic 743 821 844 954 1,495 5.1Commercial &Services 293 292 302 582 713 7.1

Industry 721 1,040 1,128 1,093 1,543 3.4Water Pump 404 446 472 650 1,000 7.2Streetlighting 66 77 90 97 145 5.4Others 79 85 122 --- --- ---

Totals 2.655 2.761 2.958 3.376 4.896 4.8

R Excludes private industry self-generation which is consistent withi JEA's mediumscenario.

Sensitivities to Demand Projections

2.26 Sensitivity analyses indicate that failure to implement effectivepricing, demand management and conservation measures would increase energy andelectricity consumption by one and a half times their base case levels. Suchan increase would mean an additional foreign exchange requirement of aboutUS$300 million per year to import petroleum products. In an uncertainenvironment characterized by sluggish GDP growth and sectoral growthprospects, the sensitivity factor has important implications for planning newgeneration capacity additions and capital expenditure requirements. GOJstrategy should be to conserve energy and promote its efficient use bycontinuing to implement energy conservation and demand-management measures,including economic energy pricing, and by improving load management andoperational efficiency. Given that the peak load is likely to grow between 5%to 7.5% in the future, GOJ should also focus on how to meet this growingenergy demand at the least costL1. The economic exploitation of Jordan'sdomestic energy resources is a major component of this least-cost strategy.

III. DOMESTIC ENERGY RESOURCES DEVELOPMENT

Background

3.01 Since the oil price increases in the seventies, Jordan has vigorouslypursued a policy to explore and exploit oil, gas, oil shale and renewabledomestic energy reso-urces in order to decrease it reliance on imported oil.Despite declining oil prices and the decrease in international explorationactivity, Jordan was successful in promoting oil exploration by a number of

/ Background Paper 4 on Jordan's power sector review examines in detail theleast-cost strategy and NEMR/JEA energy conservation efforts.

- 26 -

international oil companies. In parallel, the government agency, the NaturalResource Authority (PlRA), also continued to carry on exploration activitiesand has succeeded in making two small oil discoveries in the Azraq and Sirhanbasins, and the first gas discovery in Risha, in 1987. GOJ has also initiated a numberof studies to develop its oil shale resources and is currently executingseveral pilot projects to develop its solar and wind energy resources. Thischapter assesses the efforts made thus far to assist GOJ formulate an.ppropriste domestic energy resource development strategy. It addresses fourkey issues: (i) the exploration and exploitation of oil and gas; (ii)planning for natural gas development; (iii) natural gas pricing; and (iv) thetechnical and economic feasibility of oil shale development.

A. Oil and Gas Exploration

Review of Exploration Activities

3.02 Jordan is approximately 96,500km2 with 78Z of its land (75,000km2)covered by possible oil-bearing rocks. Between 1946 and 1978 explorationactivities by several foreign oil companies included geological andgeographical surveys and the drilling of 14 exploratory wells. Although oiland gas shows were observed in several wells, no commercial oil and gasdiscoveries were made. The companies expecting to find large, m4ddle-eastsize oil fields were disappointed and abandoned their concessions.

3.03 While concerned about the loss of interest shown by the oil companies,the Government remained convinced that past exploration efforts wereinadequate. Consequently, the Government decided to use its own technical andfinancial resources to explore for oil and gas. The Natural Resources Authority (NRA) has been in charge of all exploration since 1981. It firstundertook a revision and reassessment of all past geological, geophysical andwell data. This was followed by additional seismic surveys, the drilling of49 wells, and a re-evaluation of Jordan's hydrocarbon resources. On the basisof its exploration efforts, NRA carried out extensive geophysical andgeological evaluations of irs petroleum acreage. An IBRD loan, 2371-JO,assisted NRA in providing technical and financial assistance in the evaluationand formulation of an exploration strategy.

Strateg~y for Oil and Gas Exploration

3.04 In view of the increasing burden imposed by oil imports, the GOJstrategy for oil and gas exploration emphasizes accelerating the explorationand the development of domestic hydrocarbon resources. The strategy consistsof: (a) promoting private investment through an open-door policy to attractinternational companies. This policy resulted in contacts with more than 40oil companies and the signing of production-sharing agreements with threeinternational oil companies (AMOCO, Hunt and Petrofina); the NRA has alsosigned an assistance agreement with the Austrian OMV to explore the southernSirhan area. In addition, the NRA has signed technical cooperation agreementswith the PetroCanada International Assistance Cooperation (PCIAC) which beganto promote the Risha area to international oil industries in 1989. A similaragreement with the Japan National Oil Company has been signed for thepromotion of the northern Sirhan area; (b) dev'eloping oil reserves in theAzraq area; (c) Evaluating the gas discovery in the Risha area by defining thelimits of the reservoir and estimating reserves; (d) preparing gas development

- 27 -

development and utilization plans on the basis of proven reserves andsustainable gas production profile from the Risha Reservoir; (e) strengtheningNRA/NENR technical expertise by providing: (i) training abroad in state-of-theart exploration, production, gas utilization and planning techniques; and (ii)establishing facilities within NRA for advanced geological, geophysical,geochemical, reservoir, and gas engineering staff.

Review of Current Status and Recommended Future Approach

3.05 GOJ's strategy for oil and gas exploration is basically sound. NRAundertook a reassessment of Jordan's hydrocarbon resources at a time wheninternational oil companies (IOC's) showed little interest in exploring inJordan. Between 1975-88, NRA has spent about US$220 million in oil and gasexploration activities. NRA efforts have established that Jordan's petroleumgeology is favorable to the generation of hydrocarbons. The first oil and gasdiscoveries, despite being small, have generated IOC's interest. NRAexperience has also shown that oil traps found in the Azraq basin are smalland difficult to locate. Similarly, the Risha gas reservoir is known to be ofcomplex stratigraphic traps, making it difficult to determine the size of gasreserves and the rate of sustainable production. The complexity ofstructures, as well as reservoir conditions, require the use of state-of-theart techniques in future exploration and development activities.

3.06 NRA has recognized these difficulties and has taken a number of stepsto overcome them. These include improving data quality by undertakingextensive seismic surveys using vibroseis techniques, and reprocessing andreinterpreting the data from the Risha region with the cooperation ofPetroCanada. NRA has also set up working groups to integrate and evaluate alldata from Risha and Sirhan in order to reach a better understanding of thegeological complexities of these areas. However, considering the extent ofthe sedimentary basins with potential hydrocarbon prospects, a methodicalstep-by-step approach using the latest seismic, drilling, testing andevaluation techniques would be needed to fully assess the hydrocarbonpotential. It is, therefore, important for GOJ to recognize that hydrocarbondevelopment activity has a lead time of seven to ten years, even in the caseof the most profitable discoveries. Any commercial exploitation of gas or oilin Jordan with difficult stratigraphic and complex reservoir conditions wouldbe longer than the industry average of seveu. to ten years. It would,therefore, be prudent for GOJ/MEMR/NRA to take into consideration thefollowing recommendations in formulating a rational policy for oil and gasexploration and development:

(a) Expand the strategy for attracting IOCs in oil exploration anddevelopment to include these areas where only NRA is involved atpresent. This will spread the risk of major capital investment andallow NRA to share in the latest technologies;

(b) Defer future investment in the Risha gas field until comprehensivediagnostic studies have been completed and the reserves are evaluated.Long-term production testing of Risha wells 3, 6, and 8 should becompleted as well, preferably with the assistance of independentconsultants;

- 28 -

(c) Strengthen the NRA role in monitoring the activities of IOCs anddevelop NRA institutional capabilities to formulate long-term planningfor the development of Jordan's hydrocarbon resources by providingon-the-job training to Jordanian staff; and

(d) Undertake the institutional restructuring of NRA with a commercialfocus to make the efficiency of oil and gas operations comparable tointernational petroleum industry standards.

B. Natural Gas Development and Utilization

3.07 The first use of natural gas in Jordan's energy sector started inMarch 1989 with the use of Risha gas for electric power generation. Naturalgas development and its utilization in Jordan are influenced by three mainfactors: (a) the unknown nature of the natural gas reserves; (b) thepotential demand for natural gas as a substitute for oil in power generationand other uses; and (c) the pricing of natural gas.

Uncertainty of Gas Reserves

3.08 Planning for natural gas development is entirely dependent on the sizeof recoverable gas reserves. At present, there is a great deal of uncertaintyabout the size of possible gas reserves in Jordan; even the extent of thereserves in the already discovered Risha gas field is not known. In themedium term, planning for gas development and utilization is dependent on thesize of the Risha gas discovery. Risha wells 3, 6, 8 and 16 are found to beproductive. However, the areal extent of the producing sands is not known.The first estimate of recoverable reserves is expected by mid-1990, but thisreserve figure will be subject to periodic revisions until the entire Rishafield is delineated.

Gas Utilization

3.09 Although vital information about the size of natural gas reserves isstill lacking, this in no way diminishes GOJ's need to formulate a strategyfor gas utilization. GOJ's main strategy is to substitute gas for fuel oil inpower generation. Based on the present consumption pattern, natural gas canbe substituted for fuel oil in electric power generation, and in the cement,phosphate, potash and fertilizer industries. Preliminary studies conducted byMEMR estimate potential gas demand both in the power plants and industries tobe about 350 MKScfd. This is based on the assuxzption that the conversion ofall steam and gas turbine power plants and industrial facilities wouldrepresent a maximum possible peak natural gas demand of 350 MScfd. Thisdemand exceeds even the envisioned maximum reserve; a trillion cubic feet, andthe production scenario for Risha gas of 200 MKScfd.

3.10 On the basis of the available information, GOJ has made a preliminaryassessment of the Risha gas reserves at 58 BCF, with a profile of 20 MM Scfdof production for at least three to four years. GOJ completed theconstruction of 334 km of 132 kv transmission line from Amman to the Risha gasfield and, in March 1989, installed and commissioned 2 x 33 mw gas turbines.GOJ's objective, to make use of natural gas in power generation withoutflaring it during the long-term testing period, is sournd. However, thisdecision entails certain risks, namely, drops in pressure and the difficulty

- 29 -

in sustaininf, gas production. If the long-term test results confirm thecommerciality and sustainability of the reserves, the plans to increase thenumber of gas turbines until the transmission capacity is reached.

Recommended ARproach for Gas Development and Utilization

3.11 Given the uncertainty associated with both the size and the rate ofsustainable natural gas production, GOJ should proceed with caution and adopta scientific approach in planning investments in natural gas development andutilization. GOJ has a pressing economic need to substitute domestic oil andgas for imported oil. However, it is important to understand that hydrocarbonexploration and development is highly risky, capital intensive, and has a longlead time. It is, therefore, recommended that GOJ proceed in three phaseswhile planning natural gas development and utilization. Phase I includes arapid assessment of the Risha Reservoir covering all its stratigraphic andreservoir problems. Followiag the long-term testing of the Risha ReservoirNRA intends to undertake a comprehensive diagnostic study of all availablegeological, geophysical, well test and long-term production test data incooperation with PCIAC. The draft report is expected to be submitted to GOJin April 1990. (The Terms of Reference for such a study is given in Annex1.10 of Background Paper (1)). Additional investments for further fieldappraisal and the development of the Risha field should be considered only ifthe Risha field assessment study is found favorable. Such an evaluation couldlead to the formulation of a Risha field delineation and development plan.Phase I could be completed in 18 to 24 months.

3.12 Phase II could be completed in two to three years and would consist of(a) the delineation and development of the Risha field; and (b) a completeidentification of gas resources. Only when the recoverable gas reserves reachmore than 500 Bcf, with a production profile of more than 100 MMScfd, does GOJplan to consider the construction of a pipeline to bring gas from Risha tousers at Zarqa and Amman. (Phase II would also consider other gas supplyoptions from domestic sources currently under exploration, as well aspotential external sources); and (c) the first phase of a gas utilizationstudy which would include demand forecasts for natural gas and substitutionpossibilities.

3.13 Phase III would consist of the preparation of a national gasdevelopment plan based on the gas utilization, demand forecast and gas pricingstudies completed in Phase II. This plan would reflect the GOJ's policy forgas utilization and pricing and would identify gas investment projects. Itwould also include the preparation of a financing plan and the preparation offeasibility and engineering studies for approved gas investment projects. Inall three phases, a well-integrated approach linking gas supply options, gasutilization and natural gas pricing is seen as the prerequisite for a rationalapproach to gas development and its utilization.

C. Natural Gas Pricing

3.14 An appropriate strategy for natural gas development should be tomaximize the net benefits of exhaustible gas resources. This objective hasthree important dimensions, each of which implies certain pricing principles.First, there must be incentives to promote the efficient use of gas. Gasprices must neither be so high as to inhibit consumption (especially where the

- 30 -

users must incur some cost to switch from other fuels), nor so low as toencourage wasteful use. Second, there must be adequate incentives to explorefor and produce gas. Particularly in cases where governments may be able toattract foreign capital to assist in gas development, the provision of anappropriate pricing and contractual framework is essential. Finally, thegrowth rates of both supply and demand for gas should be rapid and shouldop.imize gas resource development.

Formulation of Gas Tariffs

3.15 Gas produced in the Risha field will be the first Jordanian gas sold.Tariffs could be formulated according to the following principles:

- Domestic gas prices would be compatible with production-sharingagreements (PSAS) with international oil companies to provideincentives to the oil companies to develop gas fields. A gas priceformula has already been adopted with AMOCO and Petrofina; gas pricesfor producers are set at 0.85 of the international market price ofheavy fuel oil with equivalent thermal value. In the shoct term, whenthe size of the gas reserves found is small and gas is substituted forimported fuel oil, domestic gas prices would be linked to the economiccosts of imported fuel oil.

- In the medium to long term, should Jordan discover large gas reserves,delivered prices could be set not lower than the longrun marginal costof supply plus the depletion allowance. With the opportunity cost ofimported fuel as the upper limit, and LRMC plus depletion allowance asthe lower limit, a range of gas tariffs could be formulated fordifferent classes of consumers, e.g., industrial/export-orientedindustries, intermediate goods industries, commercial and householdsectors.

D. Oil Shale

A Review of Efforts in Exploration and Development

3.16 Jordan has potentially very large oil shale reserves of over 40billion tons. The major deposits of commercial-scale interest known so farare estimated at about 1.1 billion tons at El-lajun, 1.2 billion tons atAl-Sultani, and 8 billion tons at Jurfed-Dawarish. The average oil content ofJordanian oil shale is 10 by weight, which is good quality shale, comparableto the higher quality shales found in the US and elsewhere. All thesedeposits are located south of Amman in central Jordan and are easilyaccessible from the desert highway from Amman to Aqaba (see map No. 21349).NRA has done a detailed survey, drilled core holes and performed laboratorywork to determine proven geological reserves, and the quality, oil content andcalorific value of the El-lajun and Sultani deposits. Based on the favorableresults from oil shale analyses of these deposits, JEA commissioned threestudies by Brown Baveri Company (BBC) of Switzerland, Lummus CombustionEngineering of Canada and Bechtel/PyroPower of USA to investigate the techno-economic feasibility of exploiting oil shale deposits. BBC, Canadian (CIDA)and USAID grants financed the foreign exchange cost of these studies,respectively. GOJ/JEA funded the local cost.

- 31 -

3.17 Kloeckner/Lurgi investigated the feasibillity of using El-lajun oildeposits for constructing an oil shale retorting project to produce 50,000 b/dof syncrude and generate 350 MW power from the spent shale by fluidized bedcombustion (FBC). Kloeckner/Lurgi completed their study in two phases andsubmitted their final report to NRA in April 1988. L mmus CombustionEngineering and Bechtel/Pyropower have investigated the techno-economicfeasibility of the direct combustion of Sultani oil shale, using FBCtechnology, to install a 25 MW demonstration pilot power plant.Bechtel-Pyropower has also investlgated FBC technology for constructing 50 and100 MW power plants. The report by Lummus was submitted to JEA in October1988. The Bechtel/Pyropower report was submitted in February 1989. Theseprefeasibility studies concluded that the exploitation of oil shale istechnically viable, both for the extraction of shale oil and as a fuel fordirect combustion in power generation.

Recommended Strategy for Ol Shale E,sp itatioon

3.18 In view of the need to reduce the foreign exchange cost imposed by theoil import bill and given the sulperior quality of 4s oil shale, theGovernment is justified in trying to determine if oil shale exploitation canmeet part of the future demand for energy. However, decisions on whether oilshale exploitation is a viable energy supply strategy, either for theproduction of shale oii and/or in electric power generation, should evaluatethe technical, economic and financial risks of commercial oil shaleexploitation. In addition, in forwulating a long-term oil shale exploitationplan from a national perspective, the Government should address the issues ofwater resource availability, ash disposal and environmental protection.

3.19 Assessments of the feasibility studies and investigations completedthus far indicate that, despite the experience gained in the laboratory testsand mini-research facilities, the viability of commercial-size retortingplants and FBC power plants is still questionable. Since oil shale has notbeen used directly as a fuel in any commercial-based retorting or FBC-basedplant, the technical and financial risks are substantial. In fact, with oilprices declining since 1985 and probably continuing to do so into thenineties, plans to construct commercial-size plants in the industrializedcountries have either been abandoned or delayed. The economic assessments arepreliminary and need to carefully analyze basic plant design, operating costs,the costs of mining and water resources, and the experience of operators ofsimilar syncrude plants around the world. Taking all these factors intoconsideration, using oil shale, either for producing syncrude and/or in powergeneration, seems to be uneconomic. The Government should postpone, at leastuntil 1995, investing its scarce resources to build commercial size oil shaleexploitation plants for either retorting or power generation.

3.20 Beyond 1995, even if oil shale exploitation elsewhere is proven to beeconomically feasible, determining optimal water requirements and availabilityis essential before considering investing in an oil shale exploitation plantin Jordan. Studies on water resources availability have demonstrated thatwater requirements of 22 million/m3 per year for even one oil shale complexcannot be met from existing shallow aquifers in Jordan. Consultants haveindicated alternative water requirements would be about 5 million in per yearif air cooling were used. However, the application of air cooling in such a

- 32 -

plant, and its effectiveness in reducing the temperature of massive amounts ofspent shale, has not been analyzed. So that Jordan is prepared to takeappropriate decisions whenever commercially feasible oil shale exploitationoptions become available, the Government should continue to assessgroundwater contamination risks, dust health hazards, water resourceconstraints, the comparative efficiency of air cooling versus water cooling,and tle potential long-term environmental impact from waste disposal andemission.

E. Renewable Energy

Resources

3.21 Solar, wind and biogas constitute the main renewable energy resourcesin Jordan. Jordan is endowed with a high radiation intensity averaging 5 to 7KWh/m; this is one of the highest solar energy intensities recorded anywherein the world. Jordan has a potential wind regime suitable for electricitygeneration for water pumping. Biogas from animal and domestic wastes isestimated to substitute about 130,000 toe per year.

3.22 Ongoing Activities in Renewable Energy. Current activities inrenewable energy consist of a set of separate projects which are being carriedout mainly through bilateral assistance. These activities include: solarwater desalination, solar water heating, photovoltaic applications, the use ofwind energy for water pumping, and the implementation of a pilot biogassystem. At present, a total of 100,000 solar water heater (Swh) units havebeen installed in approximately 26Z of Jordan's households. Currently, over50 manufacturers are producing solar hot water systems in Jordan. Theindustry has a capital outlay of about $5 million, employs over 500technicians, and has an annual production capacity of about one million squarefeet of collector area (equivalent to about 28,000 household units). The WindFarm in Jordan (4 wind turbines X 80 kW each), financed from a World Bank Loan(2371-JO), estallished the technical feasibility of wind pow-er generation.

3.23 These ongoing activities have afforded access to excellent data,processing equipment, adequate laboratory facilities, and a pool of competentstaff. In addition, research and development efforts undertaken by MEMP andthe Royal S;Aentific Society, in collaboration with bilateral and multilateralagencies and governments, have established Jordan as a regional center fortesting, developing and disseminating Renewable Ener&y System (RES)technologies. Its selection among 60 candidate countries for the design,construction and implementation of a 30 IMWe solar thermal power plant has alsoestablished Jordan as the regional center for solar energy development. MEMRhas formulated an action plan to establish the efficiency of various renewableenergy technologies. The action plan includes: (a) assessing climatic data;(b) establishing the efficiency of RES; (c) improving the cost effectivenessof RES; and (d) increasing the rate of dissemination of established andreliable systems. The action plan, when implemented through ongoing andpotential activities in solar, wind and biogas exploitation, is projected tosupply up to 1OX of Jordan's energy needs by the year 2000. MEMR shouldcontinue to evaluate ongoing activities, coordinate the fragmentedresponsibilities across different agencies and prioritize specificimplementation tasks in the development of RES.

- 33 -

IV. ENERGY SECTOR INSTITUTINS AND OPERATIONAL EFFICIENCY

Introduction

4.01 This chapter examines two sets of issues: the adequacy of sectorinstitutions to undertake energy sector development activities; and the needto restructure energy enterprises to improve efficiency. It evaluates MEMR'scurrent organizational setup and its role as a central agency for carrying outsector planning, coordination and regulatory functions; the chapter alsoexamines the need for strengthening MEMR as the central agency responsible forcomprehensive planning, policy formulation and the regulation of energy sectoractivities and operations. The chapter evaluates the scope for potentialefficiency improvements and recommends measures to improve the institutional,technical, managerial, financial and operational efficiency of energyenterprises in the petroleum and power subsectors.

A. Institutional Setting

4.02 Several agencies are concerned with the operation and development ofJordan's energy sector. At the ministerial level, planning, coordination andpolicy formulation involves the Ministry of Planning (MOP) and the Ministry ofEnergy and Mineral Resources (MEMR).

4.03 MOP reviews the energy sector plans and incorporates them within the g

national planning process. It also coordinates the foreign borrowingrequirements for development projects. Funds borrowed are onlent, usually oncommercial terms. MOP actually executes foreign loans and coordinatestechnical assistance from overseas development assistance agencies. MOP alsocoordinates the supervision of energy projects financed under bilateral andmultilateral funding agencies.

4.04 MEMR, formed in November 1984, is entrusted with a varied mix ofplanning and operational functions. T'hese include undertaking energy planningand policy formulation; handling oil imports and exports; developing renewableenergy resources; improving energy efficiency and conservation; and overseeingthe operation of the petroleum refining company and power utilities.

4.05 The main energy sector operating agencies include: NRA, responsiblefor the exploration and development of domestic primary energy and mineralresources; the Jordan Petroleum Refining Company (JPRC), responsible for therefining, storage, transport and distribution of petroleum products; JEA,responsiblk for the generation and transmission of the public sectorelectricity supply and the distribution of electricity in the areas of itsjurisdiction; the Jordanian Electric Power Company (JEPCO), responsible forelectricity distribution in Amman, Zarqa and the Balqa governorates; and theIrbid District Electric Company (IDECO), responsible for electricitydistribution in the Irbid and Mafraq governorates.

4.06 The private sector plays an izn'ortant role in Jordan's energy sector.Private sector participation currently is in all phases of energy activityfrom the exploration of oil and gas to the refining, storage, transport anddistribution of petroleum products and electricity distribution.

- 34 -

4.07 The unique feature of Jordan's energy sector is that, although bothpublic and private agencies are involved in the operation and management ofsector activities, they are all fairly well staffed and capable of executingtheir responsibilities at standards that are substantially higher than thosefound in the area. By contrast, the central agencies responsible for theoverall planning and coordination are either over-extended (HEMR) orunderstaffed (MOP) and are, therefore, unable to effectively discharge theirplanning, coordination and regulating functions. As a result, Jordan doesnot have a comprehensive lorg-term national plan for energy developmentconsistent with a set of macroeconomic objectives.

4.08 At present, MOP is responsible for coordinating sectoral plans,selecting projects for national development plans, and mobilizing foreign anddomestic financing for these plans. However, its coordinating function isbasi"ally limited to convening a committee to prepare the energy chapter ofthe five-year plan. In fact, this chapter is independently drawr. up by theenterprise or agency responsible, without any assurances that it is part ofthe overall, least-cost strategy for sector development. At present, MOP'sstaff is over-burdened because its wide responsibilities cover all sectors ofthe economw. Given the need for addressing the financial viability of energyenterprises and the importance of mobilizing domestic and external financirgsources for energy sector investment, MOP needs to strengthen its position toensure that all sectoral plans are consistent with overall five-year planpriorities.

4.09 According to its mandate, MEMR is responsible for carrying outplanning policy formulation, energy conservation, renewable energydevelopment, and the importing of crude oil and petroleum products. MEMR hassuccessfully formulated an energy strategy for Jordan. The main elements ofthis strategy focus on: (i) reducing the country's dependence on imported oilby developing domestic energy resources and increasing energy efficiencythrough conservation, demand manegement and pricing measures; (ii) providingeconomic and diversified energy supplies; (iii) adopting pricing policies toensure the economic efficiency and financial viability of energy sectorentities; and (iv) protecting the environment by reducing emissions and thepollution caused by the implementation of energy projects.

4.10 Since its creation, MEMR has sensed the need for a more systematicanalysis of the interelationship between energy and economic growth and hasmoved to fill this gap by commissioning several energy planning, pricing andconservation studies. MEMR has supervised studies on industrial energyaudits; successfully undertaken the survey of energy conservation in smallindustries; and completed a study on energy conservation in the transportsector. MEMR has also launched effective campaigns to encourage householdenergy conservation and to control dampness in buildings. MEMR has developedrenewable energy projects for using solar and wind energy resources. Inaddition, MEMR continues to handle effectively its role as the importer ofcrude oil and petroleum products. To enhance the capability of its staff tohandle its planning, conservation and operational functions, MEMR has providedboth on-the-job training with consultants, funded by bilateral financialassistance programs, anw sent its staff abroad for training in energy planningand operations. Although the list of MEMR's achievements in the last fouryears is impressive for a newly established institution, its presentinstitutional structure is inadequate to effectively undertake all its

- 35 -

sector planning, coordinating and regulating functions.

4.11 The main constraint to HE1R's ability to formulate a comprehensivenational energy plan is the fragmentation of its functions among severalsector agencies. In addition, MEMR staff are over-burdened because of theirmany responsibilities, including energy conservation, renewable energyprojects and the handling of oil import operations; the time devoted by MEMRfor the preparation of the national energy plan is fairly limited. There is aclear need for the Government to consolidate expertise in a single centralizedagency which directs the energy planning, coordination and regulatoryfunctions of the sector as a whole. MEMR therefore needs to strengthen itscapabilities in the areas of planning, demand forecasting, project analysis,and regulatory work. Recognizing the need to reinforce its institutionalstructure, MEMR made a few changes in its organization in September 1989 (soeChart 43931B). However, the issues discussed above require that MEMRreorganize its organizational structutre, as recommended in the proposedorganizational chart (Chart 445C3B).

4.12 Although MEMR has successfully commissioned studies on energy planningand has acquired a number of demand forecasting models, it still needs todevelop the capability to undertake in-depth energy demand analysis. Such ananalysis should be a coordinated effort between MOP, energy enterprises, andenergy users. MEMR should not only develop the capability of running thedemand models but should also develop the analytical capability to evaluatethe energy-economy linkage. It is important for MEMR to develop refinedinsights into the factors affecting the demand for energy and electricity.The demand analysis group should be staffed with an econometrician, who wouldbe responsible for forecasting, and at least two people with an engineering,statistical, operaLional research, and economic background. This group shouldwork closely with those responsible for energy efficiency and conservation.To prepare a rational energy sector investment plan consistent with themacroeconomic priorities, MEMR should develop its capabilities to evaluateproject feasibility studies prepared by line agencies, as well as thoseinitiated under its own supervision. Development of this capability withinMEMR would enable Jordan to screen economically viable projects for inclusionin the five-year plan.

4.13 As the central agency for the promotion of energy sector development,MEMR should strengthen its capabilities to coordinate, monitor and regulateenergy enterprises and their operations. At present, the relationship betweenMEMR and the energy enterprises is very healthy. These agencies carry ontheir day-to-day activities without unnecessary intervention from the centralagency. However, Jordan's changing energy sector requires MEMR to take a moreactive role at the ministry level by undertaking certain regulatory functionssuch as establishing revised regulatory arrangements, ensurkag greaterperformance accountability from energy enterprises, and monitoring compliancewith government policies. In addition, given the scarcity of investmentresources, Jordan needs to develop incentives for greater private sectorparticipation through Build, Own and Operate (BOO) and Build, Operate andTurnover (BOAT) programs. MEMR, in turn, would need to design appropriateregulatory mechanisms and introduce standard industry safety practices, codes,and appropriate regulatory framework for encouraging private sectorparticipation. In this regard, an important consideration is the perceivedconflict of interest of NEMR's role as the shareholder and the regulator.

- 36 -

Any reorganization or restructuring of MEMR's functions should carefullyevaluate the need to safeguard the fairness of the regulatory mechanism andthe confidence of investors.

4.14 Strengthening MEMR's coordinating role would help improve thefinancial planning and management across the energy subsector. MEMR couldthen oversee the planning process as performed by implementing agencies,ensuring consistency and balance with overall policy objectives. Thereorganization of MEMR would strengthen the institution, improve thecapabilities and skills of the staff, and provide dhe right direction andfocus for the energy sector.

B. Energy Enterprises - Institutional Arrangements and OnerationalEfficiency

4.15 Energy enterprises in Jordan generally operate efficiently, far abovethe norm for the region. However, these enterprises are now facing a scarcityof available investment resources. This challenge makes it neces".ary tostrengthen the organization of energy enterprises and to reduce fundingrequirements by improving technical, operational, financial and managerialefficiency.

4.16 The Natural Resources Authority (NRA) is a government agencyresponsible for all activities relating to the exploration and development ofminerals and hydrocarbons. NRA is organized in five technical directoratesand three service directorates: petroleum exploration, geological survey,mining, geophysical survey and laboratories. The petroleum department of NRAoversees all hydrocarbon-related activities in Jordan, which among otherthings includes geological surveys negotiations with foreign firms forundertaking exploration and drilling. The department of geology at NRAsupervises the studies dealing with the development of oil shale. NRA hascarried out its designated functions in a satisfactory manner and hascontributed to improving of the hydrocarbon generation prospects in Jordan.NRA efforts to establish hydrocarbon prospects were instrumental in attractingIOCS who earlier showed little interest in investing in oil explorationactivities in Jordan.

4.17 NRA is guided by the Government's need to substitute oil importsdomestic production. The agency tends to fulfill bureaucratic planningtargets (as to the number of wells drilled and the number of km of seismicsurveys undertaken) rather than follow commercial industry practices. Thisoften results in costly and inefficient operations, such as drilling wellsbefore evaluating the results of earlier exploratory activities andundertaking productiorn activities before evaluating testing and reservoirconditions. Although the operating agencies in Jordan are subjected to fewerbureaucratic constraints than elsewhere in the r-gion, NRA's presentorganizational set up lacks a commercial orientation. Operations are oftenpiecemeal, disjointed and inflexible. This may be the result of trying tomeet unrealistic expectations. Again, it is necessary to titress that oil andgas activities are inherently risky, have a long lead time, and requirecomplex technical capabilities for efficient operation. Efficient oil and gasoperations require rational planning, a flexible approach, and theavailability of optimum, least-cost options.

- 37 -

4.18 NRA needs to improve its present organizational structure which itcould do in several ways. First, it could undertake a review to: (i) redefineits objectives and role; (ii) examine the need for a petroleum law which wouldattract IOCs; (iii) restructure the petroleum directorate of NRA on acommercial basis and (iv) formulate an implementation schedule. Next it couldincrease its technical and operational efficiency by (i) developingtight-gas-reservoir evaluation techniques; (ii) undertaking advanced seismicinterpretation; (iii) integrating various geological, geophysical and welltest inputs; (iv) conducting reservoir evaluation studies; and (v) developingthe capability to monitor IOC activities. NRA could also improve itsfinancial and management efficiency by installing and implementing acommercial accounting system. At present the accounting system is on a cashbasis and all costs are expensed. No revenues are entered in NRA's books.Production wells are not capitalized as fixed assets or amortized based ondepletion rates. Problems are experienced in the allocation of costs betweenexploration and production. A commercial accouating system, includingprocedures for auditing costs of oil companies involved in production sharingagreements, is necessary for the effective management of NRA's current andfuture operations. NRA is currently mounting such a system.

4.19 The Jordan Petroleum Refining. Storage. Transportation andDistribution Comnany (JPRC). JPRC is responsible for the downstream phase ofpetroleum activities such as oil refining, storage, transportation anddistribution. JPRC is a privately-owned company in which the public sectorholds 12X of the total shares. JPRC's operations are regulated by MEMR inaccordance with a concession agreement which ensures the company a fair returnon investment. JPRC operates the only refinery in the country, located 35 kmnortheast of Amman at Zarqa. The Zarqa refinery is also the only distributioncenter for petroleum products. Although petroleum downstream activities areprivately owned and staffed with skilled personnel, much remains to be done toreduce costs and optimize operating and investment decisions. The currentsystem provides the refinery with a cost plus guaranteed income whicheliminates all potential incentives for the refinery to operate efficiently.The present approach of combining the refinery prices with product taxes inthe sales prices, and making the refinery the tax collecting agency for theGovernment, is unsatisfactory as a basis for commercial refinery operations.Ex-refinery prices of petroleum products should be set at international levelsso that refineries are encouraged to improve efficiency. A revisedremuneration formula should separate refinery prices from taxation and otherretailing activities such as storage, transport and distribution. It shouldalso incorporate clear guidelines on future investments, capital structure anddividend policies. A restructuring of downstream operations would requiresetting up separate cost centers for refinery, storage, transport anddistribution activities. Such a restructuring of JPRC's activities couldattract additional private investment.

4.20 To meet the increasing demand for petroleum products, the storage,transport and distribution system needs to be reevaluated. At present, thereis a total of 85,000 tons of storage capacity in the country. An additional200,000 and 700,000 tons of storage will be needed by 1990 and 2000,respectively. Before additional storage facilities are selected, alternativeoptions such as a second refinery, the rationalization of the existingrefinery, and the possibility of substituting natural gas for fuel oil need tobe considered. All petroleum products are now transported by truck.

- 38 -

Transport by product pipeline is an economic alternative which should beconsidered to (a) improve congestion of road traffic; (b) reduce investment innew road construction and maintenance costs; and (c) save on the gas oil usedby road tankers. Bssed on a feasibility study to determine the least-costsolution, GOJ should consider financing options including ways to attract theprivate sector to help expand the infrastructure system.

Power Enterpcrises

4.21 The principal operating entities in the electricity sector are JEA,which is an administraitively autonomous government-owned utility, and twosemi-private distribution companies: JEPCO and IDECO. JEA was established in1967 under a general electricity law (amended in 1976 and again in 1986) tomanage, administer, construct and operate the electric power system in Jordan.It has sole responsibility for the generation and transmission of electricpower. Distribution, however, is carried out in two major concession areas byJEPCO in the Amman and Zarqa governorates; and by IDECO in the Irbid andMafraq governo,ates.

4.22 In 1988, a new civil service law was imposed on all publicenterprises. It was designed to curb the excessive spending which had begunto create financial problems for the Government. Under the new code, allgovernment enterprise staff are subject to civil service conditions andautonomy is severly restricted. JEA has unsuccessfully sought exemption fromthe new law. However, the new code will not become effective for JEA until1991.

4.23 That existing regulatory arrangements are not effective is principallybecause MEMR is inadequately staffed. More regulation is not likely to leadto improved efficiency because the management and staff of JEA are competentand well experienced. If the Government proceeds with its intention ofrequiring JEA to conform to the new civil service code, morale, efficiency andperformar.^e will be severely eroded. In effect, JEA would become a governmentdepartment. The current advancements by JEA in corporate planning andmanagement information systems, and in the extension of its consultancy andmanufacturing activities, could be stifled.

4.24 Operating the electric power industries through governmentdepartmental structures has been shown to be less thar, efficient.Government-owned corporations, which have been given autonomy over their ownday-to-day management, are more easily held accountable for their performancethrough their boards of directors and their management. In Jordan, theelectric power system has proven itself to be an efficient and reliableelectricity supply industry. Its growth and development have been consistentwith successful international utilities operations.

4.25 Several alternatives to increased government control over JEA, JEPCOand IDECO are:

(i) to establish a completely new national power corporation comprisingJEA, JEPCO and IDECO; or

(ii) to establish JEA as a wholly-owned government corporation responsible

- 39 -

for generation and transmission and to merge JEPCO and IDECO into asingle distribution company incorporating JEA's distribution areas.

4.26 Under both proposals, JEA would be corporatized and would operate on acommercial basis, paying corporate taxes and dividends. It would conform togovernment policies and be responsible for achieving the agreed performancetargets set out in its corporate plan. The Government, in turn, would permitJEA to undertake its own borrowing and to set tariffs to achieve itsperformance targets. Private sector participation could be maintained bytransferring the equity of existing shareholders of JEPCO and IDECO to therestructured JEA. In due course, JEA could seek additional equity investorsby issuing shares. These new arrangements would remove the electricitysubsector's dependence on the Government for borrowing and for the monitoringof its day-to-day operations. Personnel policies, procurement and budgetarymatters would be independent of government procedures. JEA, of course, wouldbe able to pursue opportunities for expanding its consulting and manufacturingactivities. These would, however, be established separately as subsidiaryfunctions to ensure that they did not impose any financial burden onconsumers. The unification of all three existing entities in a singlecorporation, with one management structure and information system wouldfacilitate more economic operations.

4.27 Under the second proposal, distribution functions would be combinedunder a single corporation. This would facilitate uniform distributionpolicies and separate the cost of distribution from generation andtransmission. The interests of the private shareholders of JEPCO and IDECOmight be better served by this proposal.

4.28 If either of the proposals for the re-organization of the subsectorwere to be adopted, it would be necessary to review the role of thrGovernment, especially NENR's role, in regulating the sector. This wouldrequire giving greater autonomy to the new entities and revising regulatoryprocedures to ensure greater accountability and compliance with governmentpolicies. At the same time, the existing legislation (i.e., JEA's electricitylaw of 1986) and concession agreements would need to be renegotiated.

4.29 The Imnact of Currency Devaluation on the Financial Viability of PowerSector Entities. As a result of the adverse financial impact of the 1988/89devaluation of the Jordanian dinar, the power utilities are facing a severeliquidity constraint in meeting their debt service payments and in financingtheir operations and construction. The debt service commitments of JEA,JEPCO, and IDECO on existing foreign loans have increased by about JD 70million for the duration of the repayment period. The Government isconsidering short-term relief measures such as postponing loan repayments forthree years, rescheduling outstanding loans, and increasing tariffs from 1990onwards. A tariff increase of 152 in real terms is urgently required in 1990to help address electric utilities' financial problems. In addition to theseproposals, other short-term options that might be considered include: (i)converting some existing loans to equity (or capital); (ii) treating therevaluation losses, as they are realized, as equity contributions; (iii)refinancing existing debt service commitments by rollover loans or newborrowing; (iv) temporary exemption from corporate taxes for JEPCO and IDECO;and (v) tariff increases to eliminate cross-subsidies in water pumping, hotels

- 40 -

and street lighting categories. In the long-term, more permanent solutionsmay be needed to restore the liquidity and financial viability of the sector.These include: (i) new borrowing to restructure the finances and capital ofthe companies; (ii) the revaluation of fixed assets to increase depreciationand cashflow; (iii) increases in the structure and level of tariffs to restorelong-term financial viability and remove existing tariff distortions; (iv) thedevelopment of a foreign currency risk management program, including proposalsfor monitoring debt service commitments to minimize losses from futuremovements in foreign exchange rates; and (v) the institutional restructuringof power utilities, as discussed above.

C. Operational Efficiency in the Electric Power Sector

4.30 Electric power enterprises face the twofold challenge of continuingto provide good quality service to present customers while expand the systemto accommodate new demand. The power sector in Jordan has grown very rapidlyduring the last two decades. An installed generating capacity of about 30 mwin 1970 has grown to 960 mw. system load factor tne gross, including privategeneration, has stabilized at about 62X in recent years. Total system losseshave gradually declined from 15.4% in 1981 to 12% in 1988. The expansion ofthe national transmission and distribution system has kept pace with thegrowth in electricity demand. In addition, under a planned ruralelectrification program, the national grid has been extended to most ruralareas. Approximately 97% of the rural population has access to electricity.

4.31 While all three utilities should be commended for handling thephenomenal growth of the electric power sector, it is important to recognizethat continued improvements are still required. JEA, JEPCO and IDECO havealready completed a number of studies to improve operational efficiency in thegeneration, transmission and distribution system. These studies identifythree main types of efficiency improvements: (a) minimizing production costsby reducing system losses; (b) maximizing utilization efficiency to reduceinvestments; and (c) optimizing system performance and reliability.

4.32 To minimize production costs, system losses need to be reduced withoutendangering system reliability. Transmission losses at 1.4%-2% are somewhatlower than expected, and distribution losses at 10% are greater tharn expectel.Transmission losses are low because the system is loaded below designcapacity. Losses on the distribution systems are aggravated by poor voltageregulation but are mainly due to long and heavily loaded circuits,particularly in the rural areas.

4.33 The main measures to reduce system losses include: (i) improvingsystem voltage by various management procedures; (ii) developing inter-utilitydistribution standards and practices; (iii) implementing an optimal load flowprogram (i.e., developing a station thermal efficiency program [STEP]); (v)enhancing transmission reactive compensation; (vi) computerizing short-termload forecasting; and (vii) enhancing economic dispatch methods.

4.34 To maximize utilization efficiencies, overall energy requirements needto be reduced. This can be accomplished by: (i) implementing HTPSperformance improvements; (ii) improving generation maintenance planning;(iii) improving long-term demand forecasting techniques; (iv) developing a

- 41 -

medium-term forecasting model; (v) developing and implementing a load researchprogram; (v) modifying the tariff design; (vi) implementing street lightingstandards; (vi) encouraging effective consumer lighting; (vii) developing andimplementing risk analysis methods; (viii) implementing water pumping control;and (ix) coordinating self-genera ion.

4.35 Certain measures would help optimize system performance andreliability. These include: (i) introducing transmission planning andoperation criteria, such as transmission testing and preventive maintenance;(ii) improving the transmission fault reporting and investigation system;(iii) implementing an energy management system; (iv) improving distributionplanning and operating criteria; (v) updating consumer safety codes andservice standards; (vi) improving distribution outage classification andreporting; and (vii) developing transmission design standards.

Recommended Action

4.36 Based on the studies completed thus far and the areas of improvementsoutlined above, the next step is for the utilities to develop animplementation plan. This plan should: (a) identify critical indicators ofoperational efficiency; (b) define priorities and set specific targetmeasures; and (c) monitor results as plans are implemented and targetsachieved.

V. ENERGY SECTOR INVESTMENT STRATEG

Introduction

5.01 The austerity program announced by GOJ in October 1988 isexpected to cut deeply into planned capital expenditures in the current1986-90 five-year plan, as well as into future investments. Against thisbackground, the major issue is how GOJ could develop a rational investmentstrategy in an environment of scarce investment resources, while promotingsector development and triggering economic growth. This chapter reviews theinvestment program for sector development for 1986-90 and develops a coreprogram of future energy sector investment and financing options.

A. Planned Energy Investment During 1986-90

5.02 Jordan's planned total investment in the energy sector during thecurrent plan period (1986-1990) amounts to JD 237 million V (US$677 million).The program reflects the emphasis on improving the efficiency of energy use,while continuing efforts to increase energy supplies at least-cost.

5.03 As in the past, power subsector investment accounts for a major share,about 68X, of total sector investment; this includes investmen-. in additionalgenerating capacities, transmission, and distribution facilities, as well asthe rehabilitation of existing distribution systems and rural electrification.About 300 villages are to be electrified during the plan period. The

.L/ In 1985 prices.

- 42 -

allocation for oil exploration accounts for 19% of all planned investment.Oil exploration expenditures have resulted in the small oil discoveries atHamza and Sirhan and the gas discovery at Risha. Retrofitting, to improveenergy efficiency, will be carried out by the individual entities at anestimated total cost of JD 9 million (US$24 million), which is about 3X oftotal planned sector investment. Research and studies on oil shaledevelopment account for 1X of total sector investment (JD 2.7 million). Table5.1 below shows Jordan's energy sector investment in the current plan period(1986-1990).

Table 5.1: Jordan's Energy Sector Investment (1986-90)(1985 prices)

Total 1986-90JD Million Percent of Total

Petroleum exploration 45.8 19.3Oil shale development 2.7 1.1Geothermal exploration 1.8 0.8Transport, storage, anddistribution of petroleumproducts 16.0 6.7

Energy conservation inindustry and the refinery 9.0 3.4

Renewable energy 1.0 0.4Energy planning studies 0.8 0.3Power generation 92.0 38.8Transmission 13.0 5.5Distribution and ruralelectrification 55.1 23.7TOTAL 237.2 100.0

The Financing of Energy Sector Investment

5.04 The financing of the energy investment shows the Government's effortsto increase the participation of the private sector, both local and foreign,especially in petroleum exploration, refining, and petroleum productsdistribution. The private sector is expected to contribute about 25X of thetotal funding requirement, compared to about 32 during the last plan period.About 802 of the expected private sector investment of JD 52 million (US$149million) would be contributed by the domestic private sector; the rest wouldbe direct foreign investment, mainly in oil exploration. Government budgetarysupport for financing, as in previous plans, would continue to be significant.Foreign loans and grants, which represent an important resource transfer toJordan, cover about 47X of total funding requirements. The total expectedcontribution of power subsector entities from their internal sources,estimated at JD 61 million (US$165 million) over the plan period, represents262 of the financing of the sector investment program. DurV.g 1986-88, thepower subsector's internal cash generation financed about 24% of allinvestments. A summary of financing sources is provided below in Table 5.2.

43 -

Table 5.2: Source of Financing Energy Investuent Program (1986-90)(1985 prices)

Total 1986-90JD Million

(1985 Prices) Percent of Total

General budget 33.5 14.1Domestic private sector 42.3 17.8Direct foreign investment 9.7 4.1Internal sources of powersubsector entities 61.2 25.8

Foreign grants 6.7 2.8Local loans 3.8 1.6Foreign 80.O 33.8

TOTAL 237.2 lOO.O

5.05 Actual expenditures between 1986-88 covering the first three years ofthe current plan period account for 70X of the total planned expenditures orJD 160 million. Oil exploration, studies related to oil shale development,renewable energy, transmission, distribution, and ru al electrificationactivities are proceeding as planned. In view of t}a slowdown in the rate ofgrowth of electricity consumption, major investment in the next powergeneration plant is postponed to the next plan. ' wever, investment in therange of US$40 to US$50 million dollars have been made for the installation of2 x 33 MW gas turbines and associated transmission facilities. Plannedexpenditures for energy conservation in industry and refinery activities inthe private sector are expected to be fulfilled in the current plan period.

B. Future Investment Planning and Financing Strategv

5.06 Given the scarcity of public investment resources and the Government'sneed to reduce the debt servicing cost, GOJ faces the challenge of developinga rational investment strategy to promote optimum sector development andthereby meet the minimum energy demand requirements in the next decade. As afirst step, a core investment program should be formulated to includeinvestments in: maintaining and rehabilitating the existing energy supplysystem; expanding the required energy supply and associated infrastructurefacilities; and improving efficiency in energy use through conservation. Thefollowing sections delineate a core program of energy investment in oil andgas, refining, storage, transportation and electric power to the year 2000 andinclude financing options.

Investment in Oil Explorations and DeveloDment

5.07 A core program of public investment by NRA in the oil and gas sectorsincludes: (a) expenditures for continuing oil production in the Hamza field;(b) the completion of long-term testing and the evaluation of the Risha gasfield; (c) expenditures on consultancy services for undertaking well servicesand technical studies; ar.d (d) the continuation of NRA's seismic andexploratory activities in the open areas not under IOC concession. NRA's

- 44 -

planned investment in seismic and drilling activities is estimated to bearound US$15 million per year; planned investment in development andproduction activities is estimated to be around US$5.0 million. The programincludes: (a) a $2.5 million investment in infrastructure to build a smallgathering station and a camp at the Hamza oil field to continue oil production(about 500 bbl/day); and (b) $2.5 million to construct gas gatheringfacilities and a gas treatment plant for the Risha area to supply the powerstation with gas from three production wells.

5.0 8 Overall, NRA's planned investment program is reasonable. It limitsits own efforts in exploration and drilling in open areas while continuing tointerest foreign companies in oil exploration and development activities.Jordan has already signed technical assistance contracts with such foreignnational oil companies as PCIAC and JNOC. PCIAC will provide technicalassistance to NRA in the evaluation of the Risha gas reservoir. In addition,PCIAC and JNOC plan tz invest about US$30 million to carry out extensiveseismic surveys and evaluations of both the Risha an'l Sirhan areas. Followingthis evaluation, GOJ plans to promote these areas to international oilcompanies to accelerate exploration activities. At present, IOC plannedinvestments in oil exploration in Jordan are estimated to be US$10 million peryear over a period of seven years. Exploration activities include geological,geophysical and geochemical surveys and the drilling of twelve exploratorywells between 1999-1995. If a hydrocarbon discovery is made, plans fordevelopment will entail more investment.

5.09 The investment program outlined above is based on the current plansfor seismic and exploratory drilling activities. Additional new investmentrequirements in oil and gas will depend on the acceleration of explorationactivities, the success rate of ongoing explorations, and any new discoveries.Given the uncertainties about reserve assessments, the long lead-times inproject implementation, and delays in exploration and development programs,there could be changes both in the investment program and its priorities.Because of the inter-linkages of natural gas with power, refining and otherindustrial activities, natural gas discoveries affect investment priorities.If natural gas reserve assessments from Risha and other potential discoveriesshow plentiful gas reserves, it would be economical to substitute natural gasfor fuel oil in power generation. If the present exploration efforts succeedin finding oil with associated gas or non-associated gas fields, integratedgas supply and utilization studies should be undertaken to prepare a long-termgas development plan. The economic evaluation of the planned investmentshould be made and related gas prices and other issues addressed.

OiL Shale

5.10 No capital expenditure is planned for oil shale development in thepublic investment program. However, limited expenditures could be made forundertaking selective studies, particularly concerning water resourceavailability, ash disposal and environmental protection. Such expendituresshould be included in NRA's budget for technical studies.

Refinin. StoragS and Transportation

5.11 The core program in the refining subsector is estimated at about US$50

- 45 -

million through the year 2000. These investments are only for repairs andrehabilitation and efficiency improvements. There will be no new refineryconstruction or additions to capacity in the Zarqa refinery unless significantoil and/or gas discoveries are made.

5.12 The present storage and transportation facilities need considerableexpansion to handle the increasing volume of petroleum products, from thepresent 3.0 million tons to 4.4 million tons by the year 2000. If petroleumproducts continue to be transported by road tankers, an additional investmentof $62.5 million in the next ten years will be required to purchase newtrucks. Should the volume, distribution pattern and location of future demandjustify the feasibility of pipeline transport, investment requirements wo!.,ldhave to be revised.

5.13 To handle the projected demand for petroleum products and maintainabout 4 months of strategic in country storage, an additional storage of712,000 tons would be required. Since most of the existing storage is locatedat Zarqa, it would be economical to locate any additional storage nearer themain users.

5.14 Investments for additional storage, estimated at about $88.5 millionwould be shared by both the public and private sector. This would include:

(a) Increased storage at Zarqa 33.9(b) New tankage at Mafraq 18.2(c) Product storage at Aqaba 24.3*d) Product storage at existing

industrial locations 7.3(e) LPG storage at Zarqa 4.8

S88.5

Electric Power

5.15 Assuming the implementation of economic pricing, energy conservationand operational efficiency measures, the rate of growth in peak demand isestimated to be 6.1X p.a. between 1988 and 2000. To meet this demand, JEAplans to add 60 MW and 520 MW of new capacities by 1993 and 2000,respectively. Table 5.4 below shows the capacity balance to the year 2000.

Table 5.4: Summary: Capacity Balance NW(1988 - 2000)

1988 1989 1993 2000Peak Demand 525 570 729 1,065Available Capacity 875 875 923 939New Additions - 60 60 520

Total 875 935 983 1,459

5.16 The core investment program in the power sector for JEA's plannedcapacity addition, with a 30X-45X reserve margin, is estimated to be aboutUS$530 million. The planned investment program is based on the results of the

- 46 -

least-cost investment analysis using the Wien Automatic System Program (WASP).The least-cost generation expansion program assumes Jordan's access to theoutput of the 130 MW oil burning plant on completion of the interconnectionwith the Egypt grid. The "core program" in power generation expansionconsists of two 30 MW gas turbines in 1993 and additional 130 MW steam oilunits in 1996, 1997, 1999 and 2001, for a total addition of 580 MW.

5.17 Since the Jordanian population is concentrated along a majornorth-south axis and since transmission lines have been constructed betweenAqaba, Amman and Risha, the future transmission program is estimated toinclude mainly extensions and reinforcements. The investment program fortransmission and distr'bution by JEA and the investment programs for4istribution by JEPCO and IDECO were reviewed and found to be reasonable andeffective. The total investment in transmission and distribution is estimatedto be about US$270 million between 1991 and 2000. Of the total $800 millioninvestment program, generation accounts for 65X and transmission anddistribution together account for 35X. The balaice among the plannedexpenditures in generati)n, transmission and distribution appears to becorrect, given the present status and future demands on the system.

5.18 Energy Conservation. Investments in energy conservation include thecost of undertaking detailed energy audits, and the implementation of energyconservation measures in specific industries, as well as in the transport,commercial, agriculture and household sectors. The total investment isestimated to be about $100 million. Table 5.5 provides the projected coreprogram of investment in the energy sector to the year 2000.

able 5.5: Energy Sector Investment(1991 - 2000)(1989 Prices)(US$ million)

Core Program Annual Average

1991 - 2000

Oil and gas explorationand development 350 35

Oil refining, storage 200 20and transportation

Energy conservation 100 10

Power generation,transmission anddistribution 80Total 1,450 145

- 47 -

Financing 0otions

5.19 Given the constraints on public investment, there are three possibleways of reducing public funding for energy sector operations. These include(i) increasing the self-financing capabilities of energy enterprises byimproving operating efficiency; (ii) creating strong incentives for energyenterprises to design economically efficient investment programs; and (iii)finding new sources of funding. These options are not mutually exclusive. Onthe contrary, they complement one another, and, in most cases, the mosteffective ways to reduce public funding will be some combination of all three.

5.20 The scarcity of public investment resources, and GOJ's need tominimize the cost of debt servicing, requires increasing the share of internalcash generation to finance power sector investments. Thus far, Jordan'selectric utilities self-financing record is quite commendable. About 24X ofthe subsector's investment requirements between 1984-88 was financed by fundsgenerated from internal sources. However, the depreciation of the JD. and theconsequent increase in debt service obligations in dinars, considerablyaffects the self-financing capabilities of power utilities. Nevertheless,continued efforts to improve operational efficiency should improveproductivity, reduce the size of capacity expansion and additional investmentrequirements, and thus improve self-financing capabilities. MEMR/JEA arealready making efforts to reduce capaci-y expansion requirements byinterconnecting Jordan's grid with those of Egypt, Syria, Iraq, and Turkey.The five-country grid interconnection, when completed in 1995-96, is expectedto reduce the requirement of the reserve margin from 302 to 20% and save about$100 million in investments in additional generation capacity. Despite theseefforts, new investments still have to be made and new sources of fundingfound. It is precisely here that the role of the private sector in energyfinancing becomes so important.

5.21 Jordan has since recognized that there are advantages to privatesector participation in the energy sector. Private enterprises alreadyco-exist with public enterprises in every phase of energy activity. In oilexploration, the Government's policy to attract IOC has resulted in a numberof private companies undertaking oil and gas exploration. In the oilindustry's downstream phase, JPRC operates petroleum refining, storage,transport and distribution activities. In the electric power subsector,private companies operate distribution activities. Only large scale powergeneration and transmission remain the sole responsibility of JEA, a publicutility. However, an even greater role for the private sector in the energysector would help reduce the burden of energy investment on publicexpenditure, ease implementation and manpower constraints, improve operationaland managerial efficiency, and shift risks from the Government to privateenterprises.

5.22 In this context, the corporatization of JEA, currently underconsideration, should be further examined to reduce public fundingrequirements in power generation. This would involve JEA operating on acommercial basis, paying corporate taxes and dividends. JEA should be fullyaccountable to the Government and conform to its policies, responsible, aswell as be through its board and management, for achieving the agreedperformance targets set out in the corporate plan. The Government, in turn,should permit JEA to undertake its own borrowing and allow JEA to set tariffs

- 48 -

to achieve performance targets agreed with the Government. This could be donein conjunction with the financial restructuring to restore viability. Privatesector participation could be maintained by transferring the equity ofexisting shareholders in JEPCO and IDECO to the restructured JEA. In duecourse, JEA could seek additional equity investors through issuing of shares.

5.23 Several policy reforms may be introduced to expand the scope forprivate sector activities. In the power subsector, an innovative experiment,known as the Build, Operate and Turnover (BOAT) is currently underway inTurkey and Pakistan. Under this arrangement, the private sector will build,operate and finance the facilities and eventually transfer these to the publicsector. With increased private sector participation, Jordan would need aregulatory system. There must be no mistake about the rate of return theprivate investor can expect; this return should be on a par with the returnthe same capital would earn under similar conditions of risk in a commercialventure. The country gains little or no advantage if the private sectordemands guarantees that eliminate the commercial risks it normally assumes. Abasic regulatory instrument should also cover (a) tariffs payable by powerconsumers; (b) tariffs payable to power suppliers; (c) minimum guarantees oncapital (including allowable profit margins); (d) entry into and exit from thesector; (e) guarantees to ensure that sector development plans focus onachieving maximum benefits for the country as a whole; and (f) expansion ofservice to less favored areas of the country.

5 24 Expanding the role of private capital in the energy sector has severaladvantages: (a) it introduces competition and improves efficiency by makinguse of widely accepted management performance indicators; (b) it reducespublic funding requirements by allowing the private sector to build generatingfacilities and sell their power to the network; it often lowers kwh tariffsdue to lower construction costs and shorter project execution periods; and (d)it expands capital markets, surely one of the essential components of thedevelopment process. The ability to raise at least a proportion of therequirements in local markets also eliminates the problems of repatriatingdividends and converting of local currencies.

Bank's Role in Sector Development

5.25 The Bank has been instrumental in helping GOJ develop a comprehensivestrategy for energy sector development. While significant progress has beenmade, more remains to be done. GDP growth prospects are expected to be lessrobust than in the past, and public investment resource constraints pose majorchallenges to the efficient use of available resources. The analysis so farsuggests that the Bank's objectives should be to: (a) promote greaterefficiency in energy use, investment and sector operations, particularly inthe areas of pricing and investment decision-making so as to reduce capitalrequireme:ts to an economic level and optimize energy imports; (b) continue tosupport sector adjustment through economic pricing, development of indigenousenergy where appropriate, and economic interfuel substitution; (c) encourageefficient sector and enterprise management and operations, notably byinstitutional strengthening and the clear definition and demarcation of therespective roles of governments and enterprises, whether the latter beprivately or publicly owned; (d) mobilize additional private sector resourcesfor energy investment, including co-financing and portfolio investment where

- 49 -

this is appropriate; and (e) provide technical assistance through the transferof technology and management techniques. These objectives essentiallyrepresent a continuation of present Bank policies in the energy sector.However, a greater recognition of the need for appropriate policies as a basisfor the efficient development of the sector must be emphasized. At the sametime, it is important that the Bank Group continues to assist the governmentstrengthen its energy planning, organization and institutions; improve sectoroperational efficiency; and mobilize alternative sources of financing.

- 50 - ANNEX I

Table 1JORAN

Enoray Sector StudyEnersv and Electxicitv Conuslmtion

Total Energy ConDunption Total Electricity Percapite Percapito Electri-003 ton of oil , Nuvalent ConsuznDtion Gah Enerxv Cons. (kRoe) cttv Cons. KWH

1970 440 173 292 1151075 868 356 479 1971980 1,821 877 821 3951983 2,587 1,623 1.037 6501984 2.761 1,944 1.064 7491985 2,819 2,151 1.046 7981988 2.871 2,323 1,027 8311987 3,020 2,655 1,042 9171988 3,044 2,761 1,017 9201989 3,074 2,958 1,025 956

LI Preliminary estimates

- 51- ANNEX 2

lable2JORDIiN

Energy Sector StudyPercentage Shares of Oil Import Cost

GDP Exorts Imorts

1975 8.0 63 111980 12.4 102 171983 14.6 129 191984 13.7 79 191985 12.1 76 181986 6.8 49 131987 8.8 60 161988 8.9 50 15

- 52 - ANNEX 3

Table 3JflBA

Energy Sector StudyEnergy Consumption by Sectors

(1988)

Transport Industry Electricity Domestic Others Total

LPG 0.0 2.2 0.0 97.9 11.1 111.3Gasoline 341.1 0.0 0.0 0.0 0.0 341.1Avtag 19.6 0.0 0.0 0.0 0.0 19.6Avtur 170.9 0.0 0.0 0.0 0.0 170.9Kerosene 0,0 3.2 0.0 149.2 6.3 158.7Gas Oil 536.2 118.3 12.0 39.4 94.6 800.5Fuel Oil 0.0 269.7 838.0 0.0 0.0 1,107.7

1,067.8 393.4 850.0 286.5 247.2 2,844.837.44X 13.83% 29.88% 10.07% 8.69%

Table 4JORDAN

Energy Sector Study

"24M $Tfus a0 m

~~~~~~~~ . .".. .... .

&u1 4110 m91e t 41, Dtm U. s u "t

seamS a m'm em sueIs Ca"S 026 .0 a

e cia ie *9 *n *n. i. *ni It.. 4- .J i*. .a". ." L _ 4_. _ _ _ -_ _

_sm t u. 15ai.OsOa.meIat.seeiesesflassea.saisoeaaa.sassa *Si.154fl4 1O."Ift 5. 5.14 . oa.o . e.

~~~~~~~-----@-*-*--*-*---- -*v--*-_---__

as. _.m sam. ss. sm s.m2§ *n *2 .am. a.asU t...c s.m. i.e...a"

t n se~N."e 1.em _ ."Oe 4.1me 1.063 1.9u 1.1834 U .4 Um .6

e. iiti ;r.n *..i;; t.m..-.

___M01111 101.61 eSm *1044 ".O* "tne 0004 no-o "O an"isU ISmsu 80.9 tftU .em s eeee te _W4 ee.4 _SS ii._ _ _an ss.4 ee1e_ m. em . .. . . ... t. nnn n.. . e. *... . e. e._Xt * _ ~ ~ 0.Sl .u saga. 5.351 e.ast. eisa, n css easti .masuscss*as,

_,__,,_,___ ,,,,,,,_-, ,, ,,_,_. ___- .__- ..------.--- .- -----.--- - -- -- -- -- - - .-

v n tl5 C 5t5.4.,.L * .tt.So 5cd^ ift_ 1_._ We

1U

- 54 -

ANNEX 5

Crltical Indications for Ceneratioin. Tranaiasign Distributionand Commercial OQnratign=

Transmission and CommercialGeneration Performance Distribution (T6D) Performance

Indicators Performance IIndicators

1. System equivalent 1. Number of T&D 1. Billing lagforce outage rate circuit trip-outs

by voltage levelper 100 circuitkm. and number oftransformerfailures per 100transformers onsystem (by class)

2. System percentage 2. Total unserved 2. Energy theftreserve at peak energy (MVh)

caused by totalT&D failures/totalenergy generated

3. System equivalent 3. T&D labor and 3. Accountsavailability material-related recelvable lag

06& costs/revenues

4. System output 4. Total full-time 4. Bad debt/totalfactor equlvalent T&D revenues

stafflng years/totalenergy generated

5. System annual 5. Number of 5. Inventory turnoveraverage heat rate occurrences in which

limlted transmissionoutlets constrainedeconomical generation

6. System percentage 6. Percentage ofdifference between transmlssion,actual net dependable substation andcapabllity and design distrlbution lossesnet dependablecapablIlty

7. Dispatchperformance

8. Net interchangevalue/total revenues

9. System fuelcost/thermal kWhgenerated

10. Total system costof energydelivered/kWh sold

11. Total full-timeequlvalent generationstafflng years/system14W

- 55 - ANNEX 6

A List of Proposed Studies

(A) Periodical Review

1. Joint review of Energy-Economy linkage and energy demand forecast byMOMP/MEMR.

2. Electricity (Load Forecast) demand forecasting.

3. Review of petroleum product pricing and electricity tariffs.

4. Least cost investment planning for electricity sector and new financingoptions.

5. Energy investment planning and public expenditure review in energysector and financing options.

6. Review of least cost system for petroleum products storagedistribution.

(B) Eew Studies

1. Risha gas reservoir evaluation study.

2. Water Resources availability and environment protection an oil shaleexploitation in the medium and long-term.

3. Institutional restructuring of power sector.

4. Organ tional review of NRA.

5. Preparation of petroleum LAW.

6. Refinery optimization study.

JORDANENERGY SECTOR STWY

Ministry of Energy and LUineral ResourcesCurrent Organization Chart

Director neg Planning AdmInIstratlofioI~ ~~~~~~~~~~~~~~ GIar Uw sral Energ Energy Alreto lsrector nN cer)Eeti

Director General Director GeneralNRA EA

EK/w46348a

JORDANENERGY SECTOR STUDY

Ministry of Energy and Mineral ResourcesProposed Organization Chart

rm~~~~~~~~~~~~~~~~~~~~~~~~U

Rpresendn 76 SecretaryNRA.wJE_ Grtwal

| Director i Se rett

PowerPtoeu e m erN

g Plianing I Astnration

Forcatettietteco

idng arKi Relp OperationKiwDlrectPoXicy d CoorZlton ~~~~Deprtment Prat

_~~~~~~~~Ptdt Petralur Efftergy R= eNula Tecnology i

vataasesuply Pucyand I etmn= t Operations

and Demand PFcn |ilmForecast

EK/w46943b

JORDANENERGY SECTOR STUDY

Natul Roure AutotOrpnlaon Chan

r- l ~~-

1u- ~~~W--f EMowd d P_ _ _ I

_ ... .... ... . .

E X E [E1 ~~~~~~~~~~bE EE I I 2~~~~~~~ oh pI 2I 4I

!w1 1! 1! ~~~~~~la!red F!! !upL

41~~~~~~~om il 2

Olmfbb ex| tT t|t

X~~~~~~~~~~~~~~~~~~~~~~~~TV E fM XE~~~~~~~~~~~~~~~~~~~~Dd s s1

OM~a {9

E im

@3 E~ow*~~~~~~~~~~~~~~~~P [i 0

8E!RQ SECTOR STW

tATURAL RESOURCES AUTHORITY

PROPOSED ORGANIZATION CHART

I I

Corporate Ptezn

0y. Gampl 114nWre Dr. Gws 1 bnmToeheieetFa A i^^io-trotior

bpleratlon OperetloeG ~~~~~~Financ Materials personnel

Iheagar Managr Manage. and Trunaport Department

44usd Hued ~~~~Coordinato? Head Nowd Hood M

!aleg __t. Oe Ice Dep. lolwt Venture om Dep. tal "a Dept. Pro. A Construction Orilliag Dept

IPret. lezI Product I. eb lag laer Isas .e

P hief Chie ITremieo Oletr buti

JORDANENERGY SECTOR STUDY

Jordan Electricity AuthorityOrganIaton Chart

d

DirectorI

Dkeco

Dhe

Fina Tralsmission Producion Tand and adPoei

AMinlstrann DIs)°ibutionDiion Dision 09= Dlon

Intemnal Procuremet ProduclonEieedngwe F~E .Auigt Dand tStorM Eghesknin

DePaimen eafmn 5PtT5it l,=epant Dparr

Puble diitki HsenEcmkVTd* leHdam NWrad SubstEMonsr TP.S. | a De l L Tll

I De _a m I I eramnl DepaMe I Dnt I I Deprtmnt DepI I Cnr

;:;~~~~~~~~~~~A a . t Ovedead Cono"n"io

Department DeardDearment Cno

i]nanceDepartounnI 9 ~ ~ ~ ~ ~ op"

d45A

IBRD 21349

R: L. t LE8AN9N 36- 38e

2' I il G SYRIAN ARAB IRAQ1_ , LflZtT'~ REPUBLIC

To rIberias

Jzo s§9/'/ W - X S~~~~roawlMAN IUGUDA

ISRAEL E sz L M'C1(HAR \

N / J ( - ~~JURF ED DARG\WISH

E L SAUIENERGY SEAOR STUDY>fta'an / MINERAL RESOURCES

SRAEL EL /GHRE OIL SHALE DEPOSITS

ARAB E IA/WiSREP. OF \ |' j S' -'---' "IIIo Ds R 0 GEOTHERMAL PROSPECT

EGYPT / /69NATIONAL CAPITAL AL REFINERY

OCCUPIED TERRITORIES CEMENT PLANT

a'anMINERAL REOSOURATE MINE

I | NATIONAL HIGHWAYS

AQABA kilometersro 198389

JULY 1989

I1

lBRD 21350

hOY L^ AN Nf 26' 38'

ffF$ / f a c, - taflkt,\\ _ .

SYRIAN ARAB IlAQREPUBLIC

Lake A, A1 iA \ og 1'1.T1 If JiN

iberds / | N[Wf'IAC \

A At g 1 g Ijpun Ma fiqlw ha Area i N CArITvA

_32' 30,g \

,~~~~~~~' )t I/['N_ .uSoRrY(g)I,, IOSHN PRODUTO AUGS 198

PERA N PRODUCT IONM

\ / ,> rTafilah < \ PRODUCnON SHASHARNGRAGEEMEN

| ( B \ +< -- AGREEMENTS~~~~AGREMEN

| ) 1 04 ,{ | , \ w~~~~~~~~~~NRVPIA COOPERATION NOV EEMBER198

30 ~ ~ ~~~ ~~~~ 20 40 60 80 10 AGEEEN

eraQh I p I I° i SIA ARIN 4 *

/ , D JNOC COOPERAJION .... MARCH~~~~~~JUL 1989

N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

* 0 l 36- blometels 38-0madab

JULY 1989

A(ATUR-41 RE50URCE5~~~~~~~~~~~~~~~UTHORI TY (NP.4,? j 0 R D A N~~~~~~~~~ISMEL oKarak N 0 C ENERGY SECTOR STUDY~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

IBRD 21351

1 L~ANQ4 3b1 38'

SYRIAN ARAB IQLaAe \ \gREPUBLIC

Tiberijs

g >~~~~~ IRBID

'N \\\\\X\k . - AE-RISHAbi

, ' REHAB

"fl~~~ V .*ZARQA ~~~ROWEISHED32' (Hussein Thermal Power Station) 0 SAFAWI 32'

\>\ ~ QAM AARAQ

AN~~~~~~s

t~ \ SEA 0 R DAISRAELQARAA OR A

I.SRAEL ¾S fQ^TR^NA t¢' ENERGY SECTOR STUDY,' GHORSAFI tEL HASA tib NATIONAL ELECTRIC GRID

.~~~~~~~~~~E HASA,"'

RASHADIYA

c , DIESEL POWER STATIONS IN. ~ , " OPERATION

DIESEL AND GAS TURBINE POWER

' MA'AN ( STATIONS IN OPERATION

GAS TURBINE POWER STATIONS. [II XJr *IN OPERATION

30' 30'

L -' / / _ TRANSMISSION LINES:

ARAB QWEIRA 66 kV IN OPERATION

REP. O - IN OPERATIONUNDER CONSTRUCTIONE\L" GYPT ti"O AL-SHEIDIYA ,s * THERMAL POWER STATIONS IN 230 kV IN OPERATION

EGYPT ,,AQBAOPERATIONA/^ QA 7/ 2 SUBSTATIONS 400kV INTERCONNECTIONTHERMAL TRANSFORMER LINE IN OPERATIONSUBSTATIONS:

Q .n IN OPERATIONp ' .'UNDER CONSTRUCTION & OCCUPIED TERRITORIES

-, GLF Of ' 0 20 40 60 80 100

AQAB. ' ' ' 36' kilometers 38'

JULY 1989