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Jordan Oil and Gas
By the late 1980s, a twenty-year-long period of exploration had
resulted in the discovery and exploitation of three oil wells in
the Hamzah field in the Wadi al Azraq region west of Amman that
yielded only a small fraction of domestic energy requirements.
Jordan also had just discovered oil from what appeared to be a
field in the eastern panhandle near the Iraqi-Saudi Arabian border.
Jordan remained almost entirely dependent on oil imported from
Saudi Arabia and Iraq to meet its energy needs. Jordan refined the
imported crude petroleum at its Az Zarqa refinery. In 1985 the Az
Zarqa refinery processed about 2.6 million tons of petroleum. Of
this total, about 1.8 million tons came from Saudi Arabia, 700,000
tons from Iraq, and 2,800 tons from Jordan's Hamzah field. An
additional 400,000 tons of fuel were imported from Iraq. The Saudi
Arabian oil was transported to Jordan via the Trans-Arabian
Pipeline (Tapline). Oil from Iraq was transported by tanker truck.
About 40 percent of oil imports were used by the transport sector,
25 percent to generate electricity, 16 percent by industry, and the
remainder for domestic use.
Jordan's oil bill was difficult to calculate and was subject to
fluctuation as the Organization of Petroleum Exporting Countries
(OPEC) changed its posted price for crude. Since 1985, barter
agreements with Iraq to trade goods for crude oil have removed some
of Jordan's oil bill from the balance sheet. Jordan also varied its
imports of crude oil and other, more expensive fuels, depending on
its immediate fuel demand and its refinery capacity, and cut
consumption through conservation measures and price increases.
The oil bill remained very large, however. A major irony of
Jordan's energy dependence was that despite--or because of--its
proximity to its main oil suppliers, it was sometimes obliged to
pay extremely inflated prices for its oil. In mid-1986, for
example, Saudi Arabia charged Jordan the official OPEC price of
US$28 per barrel at a time when oil was selling on the
international spot market for US$10 per barrel. Saudi Arabia's
motives were perhaps as much political as economic, in that it
wanted to maintain the integrity of the OPEC floor price for oil.
Dependent on Saudi financial aid, Jordan could not alienate its
patron by shopping on the world market. In 1985 estimates of
Jordan's oil import bill ranged between US$500 million and US$650
million. At that time, imported oil constituted approximately 20
percent of total imports and offset 80 percent of the value of
commodity exports. In 1986 and 1987, Jordan's estimated fuel bill
declined considerably, to less than US$300 million. The drop
resulted from barter with Iraq, decreased fuel imports, and OPEC's
reduction of its official price of crude oil to bring it into line
with world market prices. As prices dropped, the Jordanian
government--which had subsidized domestic fuel prices--was able to
cut the subsidy from US$70 million to US$14 million instead of
passing on savings to consumers.
Since 1984 Saudi Arabia has forced Jordan to underwrite the
entire cost of operating the Tapline. This has added more than
US$25 million per year to Jordan's oil bill. During the Iran-Iraq
War, therefore, Jordan tried to persuade Iraq to obtain an
alternative oil outlet by building a pipeline across Jordan to Al
Aqabah. The project foundered because of Iraqi concern that the
line was vulnerable to Israeli attack and embarrassment over
disclosure of Jordanian attempts to obtain a secret Israeli pledge
not to attack the line.
The 1980 discovery of from 10 billion to 40 billion tons of
shale oil deposits in the Wadi as Sultani area raised Jordanian
hopes of greater self-sufficiency, but there were doubts that
large-scale exploitation of the deposits would be commercially
viable in the near future. Since 1985 Jordan has attempted to
interest Western oil companies in exploring for oil. Amoco, Hunt
Petroleum, Petro-Canada, Petrofina of Belgium, and the Japanese
National Oil Company were conducting survey work in Jordan in the
late 1980s. Jordanian planners hoped that potentially extensive
natural gas reserves discovered at Rishah in eastern Jordan could
eventually replace oil for electricity generation, cutting imports
by one-quarter.
Data as of December 1989
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