In September 1995, Iraq and Jordan reportedly agreed to build an oil refinery, with an initial capacity of 140,000 b/d, at the Jordanian port of 'Aqaba. In addition, the two countries discussed construction of a joint oil pipeline with an initial capacity of 100,000 b/d, eventually reaching 350,000 b/d. Currently, Jordan receives nearly all its oil from Iraq, mainly via trucks across the border. The proposed pipeline would carry oil from Iraq to the existing Zarqa refinery near Amman, as well as the new refinery in 'Aqaba. In early December 1995, this pipeline proposal appears to have been put on hold due -- at least officially -- to financing difficulties.

Jordan's state Natural Resources Authority (NRA) has been promoting exploration within the country, which has been relatively unexplored until now. In October 1995, the NRA signed agreements with Malaysia's Petronas and Houston-based Trans-Global Petroleum for possible exploration of northern and central Jordan. To help attract foreign investment, the Jordanian government has plans to privatize its oil sector. In October 1995, the country set up the state-owned National Petroleum Co. (NPC) to handle upstream oil and gas exploration and development. The intent is for NPC to operate as independently as possible, and eventually to be privatized.

A comprehensive settlement of the Arab-Israeli conflict could affect Middle East oil flows significantly. Jordan's geographic location between the Arabian peninsula and the Mediterranean coastal states of Israel and Lebanon offers the potential for alternative oil export routes for Persian Gulf oil to the West. At present, these oil exports must travel either by ship (through the Suez Canal or around the horn of Africa), by pipeline from Iraq to Turkey (capacity 1-1.2 MMBD, currently closed), or via the Sumed (Suez-Mediterranean) Pipeline (capacity 2.4 MMBD).

Utilization of the Trans-Arabian Pipeline (Tapline) could offer another potentially economic alternative. The Tapline was originally constructed in the 1940s with a capacity of 500,000 b/d, and intended as the main means of exporting Saudi oil to the West (via Jordan to the port of Haifa, then part of Palestine, 0now a major Israeli port city). The establishment of the state of Israel resulted in diversion of the Tapline's terminal from Haifa to Sidon, Lebanon (through Syria and Lebanon).

Partly as a result of turmoil in Lebanon, and partly for economic reasons, oil exports via the Tapline were halted in 1975. In 1983, the Tapline's Lebanese section was closed altogether. Since then, the Tapline has been used exclusively to supply oil to Jordan, although Saudi Arabia terminated this arrangement to display displeasure with perceived Jordanian support for Iraq in the 1990/1 Gulf crisis.

Despite these problems, the Tapline remains an attractive export route for Persian Gulf oil exports to Europe and the United States. At least one analysis indicates that oil exports via the Tapline through Haifa to Europe would cost as much as 40 percent less than shipping by tanker through the Suez Canal. Recently, Bahrain, Kuwait, and Qatar have approached Israel regarding the possibility of using Israel as a transit center for oil shipments to Europe.

ELECTRICITY

In July 1995, energy ministers and officials from Turkey, Egypt, Jordan, Syria and Iraq discussed a $590 million project to link their electric power grids. According to at least one estimate, such a linkage could save Jordan up to $250 million a year in investments and running costs to meet seasonal peak electric power demand. Plans for a $370 million system linking the electricity networks of Jordan, Egypt, Israel and Palestine have also been discussed.

As with other areas of its economy, Jordan is moving to privatize its electric power sector. In addition, Jordan hopes to diversify its electricity generation options by burning oil shale directly (instead of turning it into oil first). A feasibility study has concluded that this could be an economically viable operation.

ECONOMIC OVERVIEW

ENERGY OVERVIEW

OIL AND GAS INDUSTRIES