Forget the US, forget Saudi Arabia: Could Jordan's development of oil shale be the true game changer here?
Legends say that divine fury resulted in fire and brimstone pouring down and decimating the Biblical towns of Sodom and Gomorrah, which apparently stood in what is the Dead Sea today.
The presence of bituminous marls, commonly known as oil shale, could prove to be a godsend to Jordan, which currently imports 97 per cent of its energy needs.
Modern interest in oil shale began during the First World War, east of the Jordan River, especially in the Yarmouk Region, when deposits were exploited on a small scale, according to a report by Jordan’s Natural Resources Authority. But it was not until the 1970s that commercial scale interest in the reserves, which are said to cover about 60 per cent of Jordan’s land area, began.
Oil shale, not to be confused with shale oil, is an organic fine-grained sedimentary rock from which oil can be extracted by heating the organic matter in situ.
Jordan, according to the World Energy Council, sits on the world’s eighth largest proven reserves of oil shale estimated at more than 40 billion tonnes. In a country as hungry for energy as the Hashemite kingdom, it has the potential to be a gamechanger.
But of those reserves, ten per cent are extractable. This is equivalent to more than 29 billion barrels of oil, says Dr Mamdouh G Salameh, an international oil economist and World Bank consultant on oil and energy.
Jordan is under pressure to address its energy shortages. The country, which has long hosted refugees fleeing various conflicts in the Levantine region, is now facing a massive influx of migrants from Syria. The United Nations estimates the cost of hosting the refugees will amount to $3.2 billion this year. That also puts tremendous strain on energy and water resources.
Amman, meanwhile, accepted $2 billion from the International Monetary Fund (IMF) last year to pay its energy import bill, which stood at $6 billion, accounting for 20 per cent of its gross domestic product (GDP).
The terms of the IMF loan required Jordan to gradually ease its electricity subsidies over the next four years, which means that by 2017 the selling price would match the cost of production.
Jordan hopes that successful recovery of commercial-scale quantities of oil from its shale formations will help address a shortage of feedstocks for its power stations. Egypt is contracted to supply 240 million cubic feet per day of gas to the kingdom for its power stations, or 80 per cent of its needs, but actual deliveries are less than half this figure due to militants in Egypt blowing up pipelines in the Sinai Peninsula.
The Jordanian government is in the process of building its first nuclear power plant, with Russian technology, which is expected to supply 12 per cent of national energy needs by 2020.
“Developing the oil shale reserves will enable Jordan to save the import bill, thus removing the biggest financial annual burden on its economy and also earn some revenue from exporting the surplus shale oil amounting initially to 80,000 barrels per day with an estimated revenue of $3.3 billon per year,” says Dr Salameh.
The Jordanian government is speeding up the process of awarding oil shale concessions to foreign oil companies. One is Enefit Jordan, part of the Attarat Power Company, an Estonian-Malaysian consortium which has a contract to explore and develop oil shale resources and built the world’s second-largest oil shale-fired power plant - a 500MW facility - by 2017.
Oil shale-to-energy technology was pioneered in Estonia more than a century ago. Attarat Power Company therefore hopes to replicate in Jordan the success it has achieved in meeting Estonia’s domestic electricity needs, as well as exporting electricity to four neighbouring countries.
Enefit, which is the world’s largest oil shale-to-energy company, says it is instrumental in helping attract international interest in Jordan’s oil shale reserves.
“We have also paved the way for others to come in several ways. Currently we are one of four companies in Jordan that have a long-term concession agreement with the government,” says Enefit chief executive Sandor Liive.
“It is not just about opening a mine and constructing a power plant, it is about establishing a totally new industry for the kingdom.
“For example, the government had to create a new regulation to regulate the oil shale industry, which is a very important foundation for the developers.”
Royal Dutch Shell, through its wholly-owned subsidiary Jordan Oil Shale Company (JOSCO), is currently conducting an appraisal to determine how the country’s oil shale reacts to the firm’s In-situ Conversion Process (ICP) technology. The conversion process requires “neither excavation nor mining,” said JOSCO country chairman Thomas Meijssen on the sidelines of the Jordan International Oil Shale Symposium held last month.
“Oil shale is heated by thermal conduction using horizontal electric resistance heaters. The heaters raise the formation temperature over several years to approximately 325 degrees Celsius, at which point the kerogen, the fossilised organic matter in the oil shale, is converted to oil,” he explained.
The ICP technology converts kerogen to oil much faster than the natural conversion process, taking a few years instead of a few million years.
Oil consultants such as Dr Salameh are hopeful that Jordan could channel the money it saves from a reduced import bill towards expanding its Zarqa refinery or building a new one to satisfy the country’s need for refined products.
However, other experts are not entirely convinced by Jordan’s ambitions to fire its power plants with this newly extracted oil. Saudi Arabia, by contrast, is moving away from oil-fired power to sell more crude on international markets.
“It’s not very efficient and it’s environmentally not at all friendly,” says energy strategist and economist Robin Mills of the oil-fired power technology.
“A lot of carbon dioxide emissions result from that process and I think they’re doing that because the Estonians are doing this and the Estonians have been doing this for many years. It’s kind of well-understood and mature technology,” he adds.
There are other potential environmental concerns with industrial-scale exploitation of oil shale. Depending on the technology deployed, the process uses large quantities of water to heat the rock formations, a resource Jordan has precious little of. The kingdom is one of the world’s most water poor countries per capita. Amman hopes that the $10 billion Red Sea-Dead Sea water project, signed with Israel and the World Bank last year and set to be implemented by 2018, will ease some of its concerns in this regard.
Provision of energy and water are closely linked in Jordan in what is often a vicious cycle of consumption and demand.
“The water sector consumes a quarter of the energy and without energy, the water sector remains the same. Definitely, when you try to invest in oil shale, you need sources of water,” says Munqeth Mehyar, chairman and director for Jordan of the environmental organisation Friends of the Earth Middle East.
Some of the power generated from oil shale is likely to be used to desalinate brackish water, he added.
“Oil shale is a big issue to talk about as it fits the need of the kingdom in importing energy. We find ourselves in a position not to fight this government initiative but minimise the negative impacts of such mining technology."
“The mining of the oil shale will leave a huge environmental impact on the semi-arid areas where the deposits are located.
“We oppose open mines but mining through tunnels to save the top soil,” says Mehyar.
Environmentalists believe that the Jordanian government has not moved fast enough to develop renewable energy the way it has pushed for oil shale development. “There always is a certain environmental cost for development projects. Proper management balances between the benefit and the cost,” says Najib Saab, secretary general at the Beirut-based Arab Forum for Environment and Development (AFED).
“In this case, I tend to believe that measures such as energy efficiency and wide deployment of renewable energy had not been fully exploited before resorting to the nuclear option and oil shale.”
Jordanians won’t stop looking for ways to become less energy dependent, adds Mehyar. While Jordan’s embryonic oil shale industry - first commercial-scale production is expected in 2017 - could have wide ranging impacts on the kingdom’s economy, people and environment, analysts agree that it is unlikely to have major regional ramifications.
Amman’s saving grace will perhaps lie in the fact that with these developments oil, which has long been used as a political tool to coerce Jordan, will diminish, says Mehyar.
With the Jordanian oil shale projects unlikely to be operational soon, the energy yoke still remains a few years from being fully lifted.
- One's catastrophe, another's celebration: Middle East's oil importing states benefiting lower oil prices
- Reading the signs behind plummeting oil prices: Saudi-led price war or simple supply and demand?
- Wishful thinking: is Saudi Arabia slowly, but maturely, winning the global oil price war against the US?
- It came much, much sooner than expected: a new era of oil abundance might just be in the making
- Not Iraq, not Iran: when it comes to oil rivalry Saudi Arabia's biggest contender is right next door