Egypt’s Natural-Gas Cuts May Cost Jordan $300 Million This Year

The cuts in Egyptian natural-gas deliveries twice this year because of sabotage attacks will cost Jordan a total of $300 million, or 1 percent of gross domestic product, analysts at Citigroup said.

Power plants in Jordan were forced to switch to more expensive fuels after the attacks in February and again on April 27 disrupted gas exports from Egypt.

More than 75 percent of Jordanian electricity is generated from Egyptian gas, which is subsidized by the government through a fixed tariff schedule for domestic consumption, it said in an e-mailed statement.

The Jordanian government’s electricity subsidy is likely to double in 2011, “given the disruption in supplies of Egyptian gas earlier in the year, and the need for Jordan to switch to higher-cost alternatives for generation, mainly oil and diesel,” it said.

Egypt’s gas deliveries decreased from 310 million cubic feet a day in 2009 to 210 million cubic feet a day before dropping further after the sabotage attacks this year.

Egypt and Jordan agreed to raise the price of natural-gas shipments to $4 per million thermal units from $1.50, Cairo- based Al Masry Al Youm newspaper reported June 21, citing unidentified Egyptian Oil Ministry officials.

“This represents a gain of almost $200 million per year to Egypt,” according to the Citigroup report. “The flip-side, naturally, is that this represents an equal loss to Jordan.”

Source: Bloomberg


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