Introduction
Over the past decade, the sector has faced a series of geopolitical and contractual challenges whose effects are still being felt today.
Providing a reliable supply of electricity has long posed some of the most complex challenges to successive Jordanian governments, with far-reaching and divergent implications. Although some of these challenges have emerged over multiple decades, they were sharply exacerbated by the Arab Spring uprisings. Starting in February 2011, supplies of Egyptian gas were repeatedly interrupted by bombings of the pipeline linking the two countries, which by 2013 was shut down entirely.
Prior to these disruptions, Egyptian supplies had accounted for about 80% of the gas Jordan needed for electricity generation. The supply crisis forced the kingdom to look for quick alternatives to secure its electricity needs. This prompted a return to petroleum fuels, raising the cost of electricity generation as compared to natural gas, a cost that the government was reluctant to pass along to consumers at that time.
Accordingly, Jordan’s National Electric Power Company (NEPCO), which is responsible for purchasing and transporting electricity from generators and reselling it to distribution companies, incurred annual deficits and hence a cumulative debt of some 4.2 billion Jordanian Dinars (about $6 billion) over the period 2011-2014, accounted for by the price gap between purchases (cost of generation) and sales. In response, the government set out to revamp its infrastructure and reached several natural gas import deals, leading to a heavy reliance on oil in order to generate electricity more cheaply. In this way, much of NEPCO’s annual financial deficit was contained.
