Jordan eyes new refinery at port of Aqaba as it vies to reduce energy imports

The development will receive and process Iraqi crude brought in through a planned pipeline from Basra

Jordan's Red Sea port of Aqaba could receive a million bpd of crude from a planned pipeline that sources oil from Iraq's southern fields in Basra. Bloomberg

Jordan wants to build a refinery at Aqaba, to process Iraqi crude from a planned pipeline linking Basra to the Red Sea-facing port, as the country aims to reduce its energy imports by 2020, its oil minister said on Tuesday.

"Currently the refinery [at Zarqa] is being upgraded. If there will be a pipeline from Iraq, we will be looking to build a new refinery in Aqaba," Hala Zawati said. "[We're building] another one so that white product can be immediately exported through Aqaba."

She did not provide any details on the cost of building the project. White Spirit, commonly known as turpentine, is a by-product produced during the oil refining process.

The Jordanian cabinet in February approved a million barrel per day pipeline that sources oil from southern Iraqi fields in Basra. The country is currently undertaking a $1.6 billion expansion of its sole refinery at Zarqa to boost capacity to 120,000 bpd.

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Ms Zawati said that of the million bpd transported via the planned pipeline, Jordan’s consumption would be around 150,000 bpd.

"[The Iraqis] are excited today about the pipeline as they were excited before, but the political situation did not allow for that to materialise, but we hope that they will mobilise on this project. There will be talks very soon. Jordan cannot use all the capacity of the line,” she said.

Jordan had already begun importing Egyptian gas on an “experimental basis”, with plans under way to increase the offtake in 2019. "There are negotiations on how much will be pumped and we hope that one-third of the country’s requirements will be taken from Egypt,” said Ms Zawati.

The country’s natural gas consumption would be around 350 million cubic per day, much of it met through the liquefied natural gas terminal in Aqaba, as well as from Egyptian gas.

Construction of the pipeline sourcing gas from Israel’s massive Leviathan field is ongoing and would become “operational in 2020”, she said. “It depends on the development of the field and the readiness of Israel to export,” said Ms Zawati.

Tel Aviv and Amman, which have a peace treaty, agreed to transfer $10bn worth of natural gas via a 65km-pipeline from Israel. Once operational, the gas will be connected to an existing line in Mafraq, and then distributed to the kingdom’s power plants to generate electricity.

Jordan's fiscal balance deteriorated as a result of its import bill and dwindling grants and financial aid after oil prices slumped in 2014. In June, the UAE, Kuwait and Saudi Arabia extended a $2.5 billion aid package to the kingdom to help stabilise its economy. The country's unemployment stands at 18.7 per cent of the population, according to rating agency Moody’s.

External debt is equivalent to about 72 per cent of gross domestic product, and the country's economy expanded 2 per cent in 2017. Earlier in 2018, Jordan suffered its biggest protests in years, prompted by price hikes, subsidy cuts and other fiscal measures taken by the government to reduce debt.

Jordan will also look to reduce its energy imports to 84 per cent from 95 per cent by 2020, according to Ms Zawati who cited increased activity in the kingdom’s oil shale programme.

"We will be going from 95 per cent of energy imported today to 84 per cent in 2020, and this is dependent on projects currently being built on the ground,” she said.

Jordan, according to the World Energy Council, has the world's eighth largest reserves of oil shale, which is not to be confused with shale oil. It is formed of organic fine-grained sedimentary rock, from which oil can be extracted through heating. The kingdom wants to lessen the burden of energy imports that continues to widen its fiscal deficit.

Ms Zawati revised up Jordan’s oil shale reserves to fourth-largest in the world and said the country was targeting start-up of a project with an Estonian company by 2020.

"This is what we’re looking for companies and developers that come and invest in oil shale."

Shell has been working in Jordan alongside three other companies. The tech for two of the companies has been identified, and we’re hoping that they would be able to close the finance very soon,” she said.

In February, Jordan's energy ministry awarded a Saudi company 40-year rights to extract two oil shale reserves.

The agreement with Amman's Karak International Oil as well as the Saudi Arabian Corporation for Oil Shale would produce 25,000 bpd and 30,000 bpd of crude respectively, from deposits in the Lajoun and Umm Ghadran areas, with 2,500 bpd targeted at the initial phase, the ministry said at the time.