In the name of a €1bn project

Photo: Liis Treimann

Eesti Energia preparing to sell majority holding in Jordanian oil shale power station.

Eesti Energia Jordan project development chief Andres Anijalg, do you, by now, possess environmental licences for the oil shale power station?

For two years we have been pushing to get the environmental impact assessment over with. In the first week of May, it was approved.

In Jordan, are such decisions made by the king only?

No. At the Ministry of the Environment, they do have a special committee responsible for approvals of environmental impacts reports. The water ministry also being represented in the committee, so all can have their say.

In which scope have the station’s environmental impacts been approved?

The entire projects, starting with mining. We will have a mine with capacity for 10 million tonnes, and an oil shale power station of up to 500 MW has been approved. Starting with the very beginning till the project ends in 30 years.

So you could begin immediately?

Environmentally speaking, yes. However, we still need the licence to pump water. Plus the building permit and some other minor licences.

Is pumping water the most complicated aspect of the entire project?

Pumping is not complicated. Jordan is a state both happy and unhappy, all at once. Rainfall and surface water is scarce; however, groundwater is abundant, having been accumulated over millions of years.

Underneath our block, we have discovered three layers of groundwater. The deepest is 300 metres thick, its bottom located at depth of 900 metres. Propelled by pressure, the water comes up to 450 metres level.

That not being a peculiarity of our location, all of Jordan having vast water intakes. These are in use already and we have studied it, in cooperation with the French geology service. They have had long-term research made, so we know how much water can be gotten. We will be taking varying amounts of water from various layers.

Pumping water requires a separate licence?

Year. But that is standard Jordan procedure. We do not have the licence because we have not applied yet. It is yet unclear how much water the project will require; the power station builder has presented its indication, mining companies have specified their needs. Right now, we are specifying the amount of water needed.

Both the mine and the power station create huge amounts of dust. How will you solve the dust problem?

Jordan does have other mines, as well, with large quantities of phosphate rock being mined in open quarries. The mine roads need to besprinkled constantly, that is standard Jordanian procedure – as well as in neighbouring Israel, which also has phosphate rock quarries. We will be copying the usual Jordanian model, nothing out of the ordinary.

How will you settle the ash problem?

In initial years, oil shale ash is heaped next to the station, as there is no room for it in the mine. As the open quarry area enlarges, we will be filling it back into it. For the six first years, we will set it aside, close by.

In Jordan, we will do dry ashing i.e. mixing in less water than in Estonia. In Viru County, we are adding 10 or 20 measures of water to one measure of ash. In cooperation with the University of Tartu, we have studied the Jordanian ash to find out when it turns dust-free and transportable. 20-30 per cent of water needs to be added to it.

Compared to Estonia, less water is needed. But – it is still needed. Such technology is also in use at coal power station, ash mixed with water to be carried to deposit sites.

The Jordan project involves a local businessman, with 5 per cent shareholdings. What is his impact?

It is his job to open doors, take us to the right ministers at the right time. Without these, it would be very difficult to get to talk to the right people.

Other than water-pumping, is electricity price agreement with the Jordanian government the main issue?

We need to agree on the tariff with a governmental subunit Nepco, the sole purchaser of electricity from power stations. With them, we have so far discussed a 30-years electricity sale/purchase contract in all points except the price. Other conditions were agreed before we made the bid.

I assume the Jordan station will work at even loads throughout the year.

The oil shale power station becoming the baseload station, Nepco building the grid.

So now the price needs to be agreed?

Price talks will come in July-August. Nepco will need to know the building procurement and mining procurement results, the third component at the talks being project financing. My time is, currently, consumed by talks with banks. Once these conditions are clear, we will enter price negotiations.

How much does electricity cost, in Jordan?

Five times the Estonian price. Jordan has a huge energy problem.

How much does electricity cost for the end user?

About as much as in Estonia, as the government subsidises electricity. In Estonia, the exchange price is about €40 megawatt hour. In Jordan it is €180-200 megawatt hour. To a large extent, the government pays up the difference.

As long as cheap gas flowed from Egypt, all was well. However, Arab Spring brought an end to cheap gas supplies. Egypt needs the gas itself and is unwilling to sell it for low prices.

On the Egyptian side, the Jordanian gas pipeline has been blown up about 15 times. Allegedly the Egyptians – unwilling to fulfil the contract – are blowing it up themselves.

These past months, the pipeline has remained intact but Egypt is not supplying gas – meaning that Jordanian gas power stations are working on heavy fuel oil and diesel fuel. Many of the stations are old, inefficient; electricity produced with fuel oil and diesel is very expensive.

What will be the main price arguments at the negotiations?

The price will depend on the financing of the building of the station, which is not settled as yet. Secondly, we do not want to present their government with too specific an indication.

But will your offer be cheaper than €200 a megawatt hour?

Yes, substantially cheaper than how they are currently producing electricity.

But the main issue is the eater pumping licence?

Should we not be allowed to pump water, then, according to local traditions, water ministry will supply the water to us. This they have also proposed, but we would like to pump it ourselves – this being cheaper that building a water pipeline.

When the project is launched, what will be Eesti Energia’s share in the station?

We will be a minority shareholder. Currently, we own 65 per cent of the project, the Malaysians (YTL Power International Berhad – edit) entered with 30 per cent, a couple of years ago; the local Jordanian partner (Near East Group – edit) having 5 per cent.

In order to finance the project, our own commitment needs to be reduced, selling holdings. By the sales, we hope to cover the capital requirement of our commitment.

The size of our commitment will depend on how much we will be able to earn from selling shares. The Jordanian government desires that, for a time, we maintain a minimum ten per cent holding.

How much will 55 per cent of a power station cost?

It depends on the offer. We have set the electricity tariff so as to offer yields to investors, attractive enough to be able to sell the project.

We hope to finance most of the project by foreign capital i.e. loan capital, own commitment needs to be about 25 per cent. Electricity tariff must ensure a certain level of yields from our own commitment.

The power station costs about €1bn, plus the cost of launching the mine?

Power station building offers are €1bn, more or less – less, rather. Launching the mine will not add much to the cost, as the mining machinery will be brought by the contractor. We have been lucky as they do have the machines. It is an Australian-Jordanian joint venture, our negotiations having entered the final stages. They would be able to bring their machines over from another mine in Africa, which has been put on hold.

Will the workers also come from Africa?

The machines will come from Africa, I know not about the workers. It is an Australian company, up to now into phosphate rock mining; for this project, they sought out a Jordanian partner. But I would not tell you the name yet.

Have you given up oil production plans in Jordan?

It will take time, developing our technology. We have not given up the plan, but currently it is of secondary nature.