Jordan occupies a strategic location in the Middle East, and is an important crossroad for regional energy integration. Jordan also is a potential alternative transit center for oil and gas exports from the Persian Gulf region.
Jordan has no significant oil resources of its own, and relies on Iraqi oil for nearly all of its needs (around 94,000 barrels per day). Jordan's oil imports from Iraq are permitted by the United Nations under a special dispensation from the general U.N. embargo of Iraq.
Jordan's government concluded a new agreement with Iraq on oil supplies in January 2000, with less favorable terms than the previous agreement. Under the new agreement, Jordan will receive half of its oil free of charge, and will pay $19 per barrel for the other half, as long as the market price remains above that level. The previous agreement stipulated a price of $9 per barrel.
Jordan has one refinery, at Zarqa, with a capacity of 90,400 bbl/d. An expansion of the facility to a capacity of 120,000 bbl/d is planned, but has not yet been implemented. Jordan and Iraq had agreed in 1998 to build a pipeline for the transport of Iraqi oil to Jordan's al-Zarqa refinery. This would eliminate the necessity of transporting oil over 600 miles of highway from Iraq with a fleet of 1,500 tanker trucks. The $300-million project was postponed in June 1999, though, because Jordan was not able to assemble enough financing to begin construction. The Jordanian government continues to pursue the project.
Jordan does posess a significant quantity of oil shale resources, possibly as much as 40 billion tons. Canada's Suncor has conducted limited exploration digging in the Lajjun area, southwest of Amman, and is currently negotiating with the Jordanian government on the possible development of an oil shale extraction facility.
Jordan's state Natural Resources Authority (NRA) has been promoting exploration within the country, which has been relatively unexplored until now. In October 1995, the NRA signed agreements with Malaysia's Petronas and Houston-based Trans-Global Petroleum for possible exploration of northern and central Jordan. To help attract foreign investment, the Jordanian government has plans to privatize its oil sector. In October 1995, the country set up the state-owned National Petroleum Co. (NPC) to handle upstream oil and gas exploration and development. In mid-1999, NPC divested its oil-drilling operation, which now operates as Petra Drilling Company. NPC is still active in the natural gas sector.
A comprehensive settlement of the Arab-Israeli conflict could affect Middle East oil flows significantly. Jordan's geographic location between the Arabian peninsula and the Mediterranean coastal states of Israel and Lebanon offers the potential for alternative oil export routes for Persian Gulf oil to the West. At present, these oil exports must travel either by ship (through the Strait of Hormuz), by pipeline from Iraq to Turkey (capacity 0.8-1.6 million bbl/d), or via the Sumed (Suez-Mediterranean) Pipeline (capacity 2.4 million bbl/d).
Utilization of the Trans-Arabian Pipeline (Tapline) could offer another potentially economic alternative. The Tapline was originally constructed in the 1940s with a capacity of 500,000 bbl/d, and intended as the main means of exporting Saudi oil to the West (via Jordan to the port of Haifa, then part of Palestine, now a major Israeli port city). Following the establishment of the state of Israel, the Tapline's terminal was diverted from Haifa to Sidon, Lebanon (through Syria and Lebanon).
Partly as a result of turmoil in Lebanon, and partly for economic reasons, oil exports via the Tapline were halted in 1975. In 1983, the Tapline's Lebanese section was closed altogether. Since then, the Tapline has been used exclusively to supply oil to Jordan, although Saudi Arabia terminated this arrangement to display displeasure with perceived Jordanian support for Iraq in the 1990/1 Gulf crisis.
Jordan has modest reserves of natural gas, 240 billion cubic feet (Bcf), and has developed one gas field, at Risha in the eastern desert near Iraq. The current output of around 30 million cubic feet per day (Mmcf/d) from the Risha field is used to fuel one nearby power plant, which generates about 12 percent of Jordan's electricity.
In June 1998, the Jordanian government awarded a contract to BP Amoco build a natural gas pipeline from fields in Egypt's Nile Delta region across the Sinai and under the Red Sea to Aqaba. The gas was to be used as a replacement for diesel and fuel oil used to generate electricity. In May 1999, however, the Jordanian government announced that the pipeline project had been put on hold pending a review of Jordan's domestic reserves at Risha. It was hoped that further development of the Risha fields could delay the need to import gas.
Results of the survey, which was completed in April 2000, were disappointing. While the Jordanian government still plans to invite bids from foreign firms for further exploration and development in the area, there is not any expectation of a substantial near-term increase in gas production. This development may revive the BP Amoco project for gas exports from Egypt.
The United States Energy Information Administrtion. (Please note: Information contained in this report is valid to June 2000.)
© 2000 Mena Report (www.menareport.com)
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