Jordan turns to China for energy development

Jordan turns to China for energy development

Despite the conflict in Iraq and Syria at its front door, Jordan is moving forward with plans to develop its energy sector. China is Jordan’s fastest growing partner in this enterprise.

King Abdullah seeks new means to relieve Jordan’s economy. As a hub for refugees from perpetual humanitarian plights and a decline in its role as a regional transit and trade route, Jordan is facing economic shortfalls. It is uncertain how the government’s National Resilience Plan will affect the country’s large and impoverished informal sector. Jordan is also still highly dependent on financial assistance from the Arab Gulf countries.

Ties with China

The Kingdom is 97 percent reliant on energy imports despite holding one of the largest shale reserves in the world. The government is working to secure foreign investment to tap into this resource. China is building close ties with Jordan and is now one of Jordan’s top trading partners.

Binu Pillai, who organized the China Fair Jordan 2013 event in Amman, described market attractiveness for China: “Jordan is a small market, but it can be a gateway to the entire Levant. It’s a hub. It’s also secure, which is absolutely a priority.”

Foreign investment for Jordan’s independent power project (IPP) is approximately $2.4 billion. China is heavily financing the new power facility at $1.4 billion with a loan from the Bank of China. In April, Attarat Power Company awarded the engineering, procurement and construction contract to the Chinese Energy Group company, Guangdong Power Engineering Corporation.

Other countries have also invested. Royal Dutch Shell is utilizing a new method to extract shale oil in eastern Jordan with electricity and heat. Jordan’s shale reserves have a high sulphur level. Yet, the Jordanian Minister of Energy, Mohammed Hamed, explained that producing energy with shale oil is significantly less expensive than regular crude oil. The second phase of Shell’s Harraneh project is expected to yield $400-$800 million.

Jordan has also signed a $2.1 billion deal with Enefit (Eesti Energia), an Estonian firm, for the construction of a 540MW power station. The Saudi Arabic Corporation for Oil Share (Sacos) has a $2 billion contract to extract from the Attarat Um al-Ghudran region. If the exploration phase is positive, production could be in full swing by 2019.

Moreover, Jordan is increasing its capacity for sustainable and renewable energy resources, such as wind and solar as well. Xinjiang Goldwind Science and Technology Company along with China International Water and Electric Corporation have begun to design and build a 300MW wind power station there. Chinese solar technology is also making inroads with Jordan’s demand for alternative energy. Li Jin Fu, the head of Hunan Herui, believes China’s investment for solar projects may top $2 billion.

Jordan’s security dilemma

However, these investments are increasingly exposed to security threats. With Islamic State (IS) taking over the Turabil crossing point, Jordan’s main transit station to Iraq, the Jordanian government has stepped up security measures. This included Jordanian air strikes against militants retreating from the Syrian conflict. The start of a US air campaign against IS will reassure the Kingdom’s officials.

An estimated 3,000 Jordanians are believed to be fighting for IS in Iraq and Syria. This could pose a significant security risk if they should return to Jordan with extensive combat experience. However, the Jordanian military is considered to be one of the most professional forces in the region. Jordan will cannot avoid significant challenges in the coming years due to the fallout of the conflict in Syria and Iraq but should overall remain relatively stable.

China’s relations with Jordan will expand Beijing’s role in the region. The Chinese government has even invested in a $2 billion rail infrastructure project in Israel. Israel’s former ambassador to Jordan, Oded Eran, expressed a desire to eventually connect Jordan’s port city of Aqaba as well. Chinese companies are confident that Israel will eventually begin trading with the rest of the region.

Even the Chinese defense industry is turning to Jordan’s market. The Jordanian Armed Forces received a $4.9 million grant to purchase Chinese armaments. While the ability to wield economic and soft power will increase China’s footprint in the region, it will have to be content with leaving the ever evolving security situation to the United States for the foreseeable future.

About Author

Chris Solomon

Chris Solomon is the GRI Guest Post Editor and a Senior Analyst. He has supported several US government-funded international development programs in the Middle East and Africa throughout his professional career. He has also been a guest lecturer at the University of Maryland’s School of Public Policy on the U.S. strategy to combat ISIS. Christopher holds a master’s degree in Public and International Affairs from the Graduate School of Public and International Affairs (GSPIA) at the University of Pittsburgh. Follow him on Twitter @Solomon_Chris.