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Jordan refinery project delay is major setback

20 June 2024

Vital oil and gas projects in Jordan are witnessing little to no progress in the absence of a stable and effective project finance structure required to support the sector’s growth. 

Jordan imports more than 90% of its oil, gas and refined product needs and therefore has a strong economic case for developing projects to boost its domestic hydrocarbon infrastructure.

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 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 April 2017, when it signed two separate agreements with the US’ Honeywell UOP and KBR to facilitate the expansion project, but the project has been starting and stopping ever since.

Under the terms of the 2017 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 situation around the Zarqa refinery’s fourth expansion turned positive last May 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. As per the latest information gathered by MEED Projects, Tecnimont has pulled out of the project due to its uncertain future.

As one of Jordan’s most significant and vital projects, the Zarqa refinery is a bellwether for the health of the kingdom’s overall oil and gas sector – and based on how hamstrung this project has become, the prognosis is not good.

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Indrajit Sen

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