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The government has divided the country into 8 exploration blocs, 6 of which were already licensed. Exploitation of oil shales is the second option on which Jordan is counting.
Jordan: Energy Concerns
by Oxford Business Group
Prime Minister Nader Dahabi faced Jordan's lawmakers on July 30, as Parliament expressed concerns about the continuing high price of fuel.
Dahabi was ostensibly present to discuss the government's Decent Housing for Decent Living initiative, which aims to provide 200,000 low-cost housing units for underprivileged Jordanians in the next five years. However, during the session, he was forced to respond to fears expressed by parliamentarians that rising prices were causing a deterioration in living standards in the kingdom.
Several MPs urged the government to quickly reduce the cost of fuel in light of the recent drop in the price of oil, which is currently down over $20 on its early July peak of $147. Deputy Saad Srour told Parliament he hoped "the government will reduce prices as quickly as it raised them", while Deputy Atef Tarawneh claimed "the government is unfairly charging citizens extra, and this needs to be resolved". Several members argued that the government method of pricing oil - using international indices - failed to take into account the reduced cost of oil to Jordan due to the nation's proximity to suppliers. MP Yousef Qarneh claimed the government had generated JD180m ($254m) in the past few months from fuel sales.
Dahabi responded by arguing the government had liberalised prices to reflect the international market, while the price of a 12.5 kg gas cylinder would remain fixed at JD6.5 ($9.16) to insulate the most vulnerable from price shocks. The PM further added that the government's social safety net - which aims to increase the salaries of pensioners and public sector employees - now stood at JD391m ($551m). Dahabi's government, which entered office last November, has steadily removed fuel and energy subsidies in an effort to balance the budget, arguing that subsidies benefit the wealthiest most, and that efforts to help the poorest should be better targeted.
Unlike most other states in the Middle East, Jordan has very little by way of proven hydrocarbon resources. Domestic fuel production is currently limited to 22m cubic feet of gas a day, and around 25 barrels of oil from an old test well in Azraq (equivalent to around 185,500 tonnes of oil equivalent (toe) a year). Conversely, demand for energy in Jordan is growing at around 3% a year, and currently stands at an estimated 7.6m toe. The shortfall, some 7.415m toe a year, must be imported from Jordan's neighbours: principally Iraq and Saudi Arabia for oil, and Egypt for natural gas.
Despite preferential agreements with some of these suppliers (for example, as the first stop on the Arab gas pipeline between Egypt and (eventually) eastern Europe, Jordan has reportedly secured favourable terms for Egyptian natural gas), the current situation leaves the kingdom very poorly insulated against market shocks. As such, the government has been focusing its efforts on encouraging new exploration of the nation's potential oil and gas-bearing formations. The Natural Resources Authority (NRA), the government body responsible for licensing geological exploration and mining, has divided the country into eight exploration blocs. Of these, only two remain to be sold; the others have been bought up by small and medium-sized exploration firms, which are currently surveying the country for potential reservoirs.
There are high hopes for a number of areas in Jordan, but the Dead Sea in particular is considered to have potential for oil production. Norwegian land-rig supplier Ability Drilling currently has one of the most advanced exploration rigs in the region searching for oil, having been contracted by Porosity, a company formed and backed by Lebanese billionaire Ayman Hariri. Yet perhaps the greatest anticipation is being generated by oil shale, of which the NRA claims Jordan has the fifth highest reserves globally. Oil shale is essentially hydrocarbon-bearing sedimentary rock, which, when heated above 500 degrees, yields kerogen oil and gas. Jordan estimates it has some 40bn tonnes of this material in current reserves, a figure which NRA Director Maher Hijazin believes could well double in coming years with new exploration.
There are two basic potential uses for oil shale: direct-burning and retorting. Direct-burning, as the name implies, is a method of extracting energy from the shale by simply breaking it down and incinerating it. Jordan currently has a contract with Eesti Energia of Estonia to determine whether such a method of power generation would be feasible in the kingdom - especially in environmental terms (oil shale burning can be heavily polluting). The second use, retorting, is both the most enticing and least practical. It involves heating the rock to yield liquid fuel and gas. The government is currently under negotiations with Shell concerning a new method of retorting, known as below-surface retorting, which involves heating the deposits underground and pumping oil out directly. The NRA expects an agreement to be signed in the fourth quarter of this year, but the experimental nature of the process means viable production would be at least two decades away.
In the meantime, the government will be hoping for one of two things: either the price of oil to drop further, or for crude to be discovered in Jordan's mountains and deserts. One or the other would represent a true relief; neither or both a continuing headache.