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Potash company to import Israeli gas at preferential prices

By Mohammad Ghazal - Feb 19,2014 - Last updated at Feb 19,2014

AMMAN — The US-based Noble Energy will provide the Arab Potash Company (APC) with two billion cubic metres of natural gas at preferential prices under a $771 million agreement signed between the two sides on Wednesday.

Under the 15-year agreement, Noble Energy and its Israeli partners will provide the company with natural gas that will help reduce the company’s production costs, according to stakeholders.

APC Chairman Jamal Al Sarayrah said in a statement e-mailed to The Jordan Times that the cost-effective gas will “enhance APC’s competitiveness in the global market and its profitability, improve the prospects for future growth and expansion, and help protect the job security of the company’s employees who number more than 2,000”.

The APC’s statement did not make any mention of Israel. However, sources and reports said the deal entails extending a pipeline from the Israeli Tamar gas field to the south of the Dead Sea and extending it to the APC.

It will take two years to complete the required infrastructure after which natural gas supply is expected to start in 2016, according to the company.

A senior energy official told The Jordan Times that the Cabinet “gave APC the permission to import Israeli gas”.

In a statement on its website, the Israeli Delek Group announced that Delek Drilling Limited Partnership and Avner Oil Exploration signed a deal with Noble Energy to partner with the US company in exporting natural gas from the Tamar project in Israel to APC and its affiliate, the Jordan Bromine Company.

Partners in the Tamar field are Noble Energy, which holds 36 per cent of stake, Isramco Negev (28.75 per cent), Avner Oil Exploration (15.6 per cent), Delek Drilling (15.65 per cent) and Dor Gas Exploration (4 per cent).

Jordan relied for years on relatively cheap gas supplies from Egypt, but since the Arab Spring erupted in the Arab African country, the gas pipe that supplied Jordan and Israel has been subject to sabotage frequently, pushing Jordan to rely on the expensive fuel, leading to crippling the national economy.

The deal, Sarayrah said, will help APC restore its position as one of the lowest-cost producers of potash across the world.

“Up until 2008, APC was ranked among the lowest-cost producers of potash worldwide, giving it a powerful competitive edge in the global market…. our favourable cost structure and solid performance enabled us to contribute millions of dinars in taxes, royalties and fees to the national Treasury annually, and millions more to community development through our corporate social responsibility programmes,” he said.

However, due to the continued rise of tariffs and energy prices over the past few years, the company is at present among the world’s highest-cost potash producers, he said. “This contract represents meaningful action to help improve our competitive position,” he added.

Commenting on the deal, APC General Manager Brent Heimann said the shift from heavy fuel to the less expensive and more eco-friendly natural gas is projected to produce total cost savings of JD235 million, or average savings of JD11 per tonne of potash produced.

“This is essential to maintain our long-term operations and growth as Jordan’s largest private sector earner of hard currency, one of the largest contributors to the Treasury, and one of the largest private sector employers in the country, particularly as we cope with the drop in global potash prices,” said Heimann.

The company’s net profits fell to JD130.7 million in 2013 from JD198 million in 2012 because of a rise in cost of production due to an increase in fuel and energy costs as well as a drop in prices globally, the company said in a recent statement on Amman Stock Exchange website.

Heimann said: “APC conducted extensive studies which showed that the conversion to natural gas is the optimal energy solution, and after exploring realistic possible source of gas, the deal with Noble Energy emerged as the most reliable and cost-effective option available.”

He added that the agreement is strictly between the APC and Jordan Bromine Company on the one hand, and on the other NBL East Mediterranean Marketing Limited, which is owned by Noble Energy of Houston, Texas.

The agreement with APC is the second natural gas agreement in the region involving Noble Energy. In January 2014, the energy company signed an agreement with the Palestine Power Generating Company for the supply of natural gas.

Among the APC’s stakeholders are Potash Corporation of Saskatchewan, which owns 27.96 per cent, the Ministry of Finance (26.88 per cent) and the Arab Mining Company (19.92 per cent).

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