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Waiting for oil

December 2006
Oula Farawati looks at what is impeding the flow of oil to the Kingdom months after Jordan and Iraq signed an oil agreement.
Iraqi and Jordanian officials have voiced concern that the security situation on the highway route between Amman and Baghdad would impede tankers carrying much needed oil, especially that the long desert route is not well-patrolled.

Mid-November, the pro-government Al Rai daily, quoting official sources, said that Iraq would start transporting oil to Jordan within two days. It quoted sources as saying that 1,370 tons of oil daily will be transported via tankers owned by the Iraqi-Jordanian Land Transport Company. "Jordan and Iraq have agreed on a barter mechanism for payment through which Jordan will be paying for oil by exporting much needed commodities to Iraq. The oil was calculated on a preferential price agreed upon by the two countries," the sources had said. Oil supplies for Jordan would come from Biji, 180 kilometers north of Baghdad. The area has the country's biggest refinery with a daily production of 200,000 barrels per day.

However, shortly after publication, the government announced that transportation was still too dangerous. Iraq and Jordan signed the agreement during a visit last August by Jordanian Prime Minister Marouf Bakhit to Baghdad. The two countries are still discussing laying a pipeline between them.

"It is still too difficult...all has to wait until a mechanism is in place...we cannot jeopardize lives and resources," one official source said.

Other sources said the inability of the Iraqi government to supply the oil was also due to internal differences between the government and the State Oil Marketing Organization (SOMO) . Iraqi oil supply to Jordan was disrupted after the start of the war on Iraq, prompting Jordan to temporarily rely on oil grants from Saudi Arabia, Kuwait and the United Arab Emirates, which were also stopped last year. Since the 1991 Gulf war, Baghdad has been exporting around 80,000 barrels of crude oil per day to Jordan, part of which are charged at market prices and the rest at undisclosed concessionary terms. It also supplied Jordan with fuel oil, gas oil, lube oil and the accord has been exempted from the United Nations trade sanctions imposed on Baghdad for its 1990 invasion of Kuwait.

Meanwhile, Ministry of Energy and Mineral Resources said in November that it had completed marketing of all oil exploration areas in the Kingdom.

In a statement, the ministry said that it had signed seven agreements and memoranda of understanding with National Petroleum , Petrel Resources , Global Petroleum, INA, Sonoran, Transglobal and Falcon Petroleum.

The ministry also granted National Petroleum a 50-year monopoly to extract natural gas from al Reisha field.

To tap the 8,750-square kilometer Sharq al Safawi area, which is located northeast of the capital Amman and believed to have oil potential, the ministry is negotiating with Irish oil company Petrel Resources .

Global Petroleum has studied the 8,850-square kilometer Gharb al Safawi area and is expected to start exploration there once Jordan's Lower House of Parliament approves the memorandum of understanding the company has signed with the ministry. As for the Croatian firm INA, the ministry said it will sign an agreement with the oil company to study the Northern Heights area.

In addition, "six companies have submitted bids for a tender in Al Sarhan area," the statement said. The tender closed on November 19, but the winner has yet to be announced.

The government had already signed an agreement with American company Sonoran Energy to explore for oil in Al Azraq area. The agreement was returned by the Lower House of Parliament to the ministry after deputies objected to some of its articles. The agreement is expected to be resubmitted to the House when it reconvenes in the coming few weeks, pending a Royal Decree.

Transgloabal's Dead Sea exploration ends in August next year, but no tangible results have been made public so far. "Falcon Petroleum also expressed interest in studying the Al Jafer Area, which also has oil potential," the statement said.

According to the Natural Resources Authority (NRA) , to date, the petroleum resources of Jordan have not been adequately tested. "There are numerous oil and gas shows throughout Jordan , even in wells that are not located on valid structures, and there is an abundance of surface indications of hydrocarbons in the form of seeps, asphalt impregnations, and near surface deposits of rich oil shales," according to the NRA Web site.

Oil was discovered in and produced from reservoirs in the 1980s in Hamzeh oil field and the Azraq basin, yielding up to 600 barrels per day.New insights into the subsurface geology of Jordan, gained by recent seismic work and reprocessing of old seismic data, reveal the existence of deep basins with attractive structural styles that are essentially untested.

© Jordan Business 2006