Iraq, Jordan pipelines in the works
Amman - Oil-desolate Jordan will again benefit from Iraqi crude and liquefied gas for power generation, with a planned double pipeline that would help the kingdom reduce a soaring energy bill that has threatened to bankrupt the country.
Jordan, which imports 97% of its energy needs, used to receive crude oil from Iraq before Islamic State (ISIS) militants took control of much of western Iraq in 2014.
Since 2011, energy costs surged in Jordan to about 15% of gross domestic product (GDP) after pipelines carrying cheap Egyptian gas, which once generated 80% of Jordan’s electricity, were sabotaged.
A double pipeline is in the works to export Iraqi crude oil and gas via Jordan and provide the kingdom with its oil and gas needs, estimated at 120,000-150,000 barrels of oil a day.
Construction of an oil pipeline between Iraq and Jordan is expected to start this year, Iraqi Ambassador to Jordan Safia al-Souhail said.
“Our government fully supports this strategic multibillion-dollar project and we expect the final call on bids to be taken this year,” Souhail said.
“Jordan, Iraq and Egypt will be the main beneficiaries of the proposed $18 billion Basra-Aqaba pipeline project, which will help Egypt and Jordan meet their growing domestic energy demand while boosting Iraq’s oil and gas exports.”
Basra is in southern Iraq. Aqaba is a port on the Jordanian shores of the Red Sea.
The project is expected to provide Jordan with its energy needs and the rest of the resources would be exported to international points through Aqaba, generating an estimated $3 billion a year in revenues for the kingdom. Egypt will benefit by using its refineries to treat the crude oil.
The proposed pipeline is projected to export 1 million barrels per day (bpd) of Iraqi crude through Jordan. Nearly 150,000 bpd will go to Jordan’s Zarqa oil refinery. Another tranche will feed Egyptian refineries and the rest will be exported.
The project included another pipeline to export about 7.3 million cubic metres of Iraqi natural gas through Aqaba, feeding the growing demand for natural gas in Jordan and Egypt for power generation.
Jordanians opposing a gas supply deal with Israel have long argued that this pipeline project would be a feasible alternative to dealing with Israel.
“Many opposed the gas deal with Israel, and for Jordan, this is a much better deal. At least we are working towards a mutually beneficial project with our brothers, Iraq and Egypt. We have always had close ties and this will benefit all of us in the end,” economist Issam Qadamani said.
“The money generated for transit fees from the pipeline will save the Jordanian economy and help us to rebuild our economy,” he said. “At the same time, our neighbours are also benefiting.”
A 1,680km pipeline project was initially envisioned in 2013 on a build, operate and transfer basis with the pipeline running through the western Iraqi province of Anbar. In 2014, with most of Anbar under the control of ISIS, security concerns forced the Iraqi government to delay the project.
“Some international firms that had bid for the project withdrew their offers due to security fears,” Qadamani said.
Iraqi government sources said that a safer route for the pipeline would go through Basra, Najaf, the Iraq-Saudi border and then to Aqaba. Crude will then be exported by oil tankers to Egyptian refineries or to other international destinations.
“The adjacent natural gas pipeline will run from the town of Rumaila in southern Iraq to the town of Maan in the south of Jordan. It will then be linked to the existing Arab gas pipeline to feed the Egyptian market,” Qadamani noted.
The first phase of the oil pipeline would export 1 million barrels a day from Basra to Aqaba. The second phase would export a further 1.25 million barrels a day to the Syrian Banias port on the Mediterranean.
“Obviously, the second phase of this project is on hold until Syria gets its security back,” Qadamani said.
The Iraqi Oil Ministry received a bid from a Jordanian-Chinese consortium to build and operate a 1 million-bpd crude oil export pipeline to Aqaba for a service fee and a throughput service charge, compensating for construction and fixed operating costs.
The main firms in the consortium are China Petroleum Pipeline (CPP) and private Jordanian company Mass Global.
Two Iraqi companies have also applied for the project and the applications are undergoing scrutiny.
The consortiums are waiting for a final confirmation from Baghdad to enter into exclusive negotiations and to reach financial close in the first half of 2017.
“The pipeline would deliver a new outlet for Iraq while it focuses on rejuvenating its energy sector and provide an alternative to the Iranian-controlled Strait of Hormuz after Iran last year threatened to block the seaborne waterway if Western powers didn’t ease their pressure over its nuclear programme,” said Qadamani.