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Jordan’s oil and gas sector battles sluggish phase

6 June 2023

This package on Jordan’s oil and gas sector also includes:

> Jordanian and Turkish firms to build phosphoric acid plant
> Jordan selects refinery expansion winner
> Contractors await official award for Jordan refinery project
> Construction starts for phosphates plant in Jordan

 

Vital oil and gas projects in Jordan are witnessing little to no progress without the robust project finance structure needed to help the sector’s growth. 

Jordan imports more than 90 per cent of its oil, gas and refined product requirements and therefore has a strong economic case for developing hydrocarbon infrastructure projects.

However, despite the government being willing to push through projects deemed essential for reducing reliance on energy imports, the lack of project financing options and inability to attract foreign investments into the energy industry has led to these projects stalling.

Delays to the fourth expansion phase of the Zarqa refinery complex, Jordan’s only oil refining asset, are a prime example of the sluggish environment in Jordan’s oil and gas sector.

Zarqa refinery expansion

Located in Zarqa governorate, roughly 35 kilometres east of the Jordanian capital Amman, the refinery has a capacity of 60,000 barrels a day (b/d).

The refinery’s first expansion project was completed in 1970, when capacity was boosted to 2,100 tonnes a day. The second expansion was completed in 1973, and the third in 1982, when the refinery’s production was increased to 8,700 tonnes a day.

Jordan Petroleum Refinery Company (JPRC) aims to increase Zarqa’s refining potential by two and a half times to 150,000 b/d. The expansion is also planned to allow the Zarqa refinery to upgrade residual fuel oil into lighter products, in accordance with Euro 5 emission standards, to reduce reliance on imports.

JPRC has been working to double the Zarqa refinery’s production capacity since 2017, but the project has experienced several start-stops.

JPRC signed two separate agreements in April 2017 with the US’ Honeywell UOP and KBR to facilitate the expansion project.

Under the terms of the agreement, Honeywell UOP was to provide manager licensor services, technology licensing, front-end engineering and design (feed) consultancy services and basic engineering designs, as well as catalysts and process equipment, training and start-up services.

KBR was to license its proprietary slurry-phase hydrocracking technology for the project. KBR’s scope of work increased in November 2017 when it signed another agreement with JPRC for the basic engineering design of a residue hydroprocessor to be installed as part of the expansion.

In October 2017, Spain’s Tecnicas Reunidas was appointed feed consultant for the project. Feed work resumed in July 2018 after a temporary suspension, with KBR selected as the new process technology licensor. France-based Technip Energies is the project management consultant.

Prevailing situation

The prospects for the Zarqa refinery’s fourth expansion brightened recently when JPRC was reported to have selected contractors to execute engineering, procurement and construction (EPC) works on the project.

JPRC’s CEO, Abdul Karim al-Alawin, told Jordan’s Arabic-language newspaper Alghad that the state-owned refiner had awarded the project’s main contract, but stopped short of revealing the winner.

MEED learned through sources that JPRC had selected a consortium of Italian contractor Tecnimont and China’s Sinopec Engineering to execute EPC works on the expansion project. According to the sources, JPRC issued a notification in “early May” to all bidders competing for the project, informing them of the selection of Tecnimont/Sinopec Engineering for the project’s main contract.

However, the official EPC contract is yet to be awarded as JPRC continues to secure funding from international credit agencies and other lenders for the project, which is estimated to cost $2.64bn, according to Al-Alawin.

“There is no definite date for this. We are still in the negotiation process for funding. We cannot decide when these negotiations are completed,” the CEO told Alghad.

Oil shale resources

To offset high energy import costs, Jordan is focusing on developing its oil shale resources. The country possesses the fourth-largest reserves of the mineral deposit globally, behind the US, China and Russia, with an estimated 90-100 billion barrels of oil in its shale deposits.

The kingdom has achieved some measure of success in its oil shale development efforts in the past. In June 2021, the first 235MW power generation unit of Jordan’s $2.2bn oil shale independent power producer (IPP) project was connected to the national electricity grid.

Also in 2021, Amman was reportedly planning to launch a hydrocarbon exploration licensing round for nine concession areas across the country – an exercise yet to occur. The proposed licensing round would have focused on the Al-Azraq, Jafr, West Safawi, Sirhan, Sirhan Development, Dead Sea, Northern highlands, Petra and Rum concession areas.

Progress has been made on a project to exploit oil shale reserves in the Isfir-Jafr area, which measures 380 square kilometres and is located approximately 200km south of Amman.

Canada’s Questerre Energy Corporation signed a memorandum of understanding (MoU) with Jordan’s Ministry of Energy & Mineral Resources in 2015 to appraise and develop oil shale in the Isfir-Jafr acreage. According to the latest information gathered by MEED Projects, the partners are preparing the main tender for the project.

Separately, in January this year, the ministry signed another MoU with Al-Majarrah Company for Shale Oil & Natural Resources to extract oil shale in Jordan’s Al-Lajoun area, which spans 15 sq km. Al-Majarrah is said to have begun a feasibility study for the project.

MEED's July 2023 report on Jordan also includes:

> POWER & WATER: Jordan sustains utility infrastructure progress
> CONSTRUCTION: Hospital boost for Jordan construction

https://image.digitalinsightresearch.in/uploads/NewsArticle/10913941/main.jpg
Indrajit Sen

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    https://image.digitalinsightresearch.in/uploads/NewsArticle/15305330/main2239.jpg
    Indrajit Sen