Jordan follows rocky road to oil shale development

After many years of incubation, Jordan’s dream of producing oil from its large near-surface shale deposits is showing signs of transforming from desert mirage into hydrocarbon oasis, set to yield the Hashemite kingdom’s first domestically produced crude within five years.

That is because a Saudi enterprise appears to have advanced an eight-year-old preliminary agreement to develop a commercial project using Russian technology. Appearances, however, can sometimes be deceiving.

Jordan’s official Petra News Agency announced in mid-March that Amman had signed a $2 billion agreement with Saudi Arabian Corporation for Oil Shale, or Sacos, for the right to extract and develop oil shale resources from an 11 sq km area of Jordan’s Attarat Umm al-Ghudran region.

Under the concession agreement signed March 13 by the country’s minister of energy and mineral resources, Sacos has committed to a four-year pre-development phase to include detailed technical, engineering, environmental and feasibility studies. To ensure that the work gets done, it has also agreed to provide $30 million in bank guarantees.

If the study results are favorable, a 40-year development and production phase would commence in 2019 with 2,650 b/d of initial oil output, ramping up to 30,000 b/d by 2025. The project would also generate 600 MW of electricity for Jordan’s national grid.

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Sacos has also agreed to make annual payments to Jordan’s Natural Resources Authority of $100,000 for capacity building and $75,000 to fund sustainable development projects for local communities. It has further pledged to pay a $250,000 bonus to the government of Jordan after four years and another $10 million after commercial production starts.

“The cost of the project including the shale oil upgrading facilities is estimated to be $4 billion,” Petra reported.

But what does such Saudi involvement really signify? Why the insistence on financial commitments that would be peanuts to a company backed by Riyadh?

Public information on Sacos is thin on the ground, but the company is not among the known affiliates of state-owned Saudi Aramco or Saudi Arabian Mining Company (Maaden), or state-controlled manufacturing conglomerate Saudi Basic Industries Corp., any of which might be interested in participating in shale oil projects overseas. It does not have a corporate website; its backers are not advertising their identities and seem likely to be private investors.

The Petra statement, as well as Jordanian government publicity for a mid-April international oil shale symposium, states that Sacos’ president is Maher Hijazin, who is also president of Jordan’s Natural Resources Authority, a senior government position he has held for the past 10 years.

NRA officials were not immediately available to provide further information on the corporate structure of Sacos or its relations with Jordan’s government.

Probably Sacos is the same entity as, or a close affiliate of Saudi Arabian International Corporation for Oil Shale Investment, or Incosin, which in November 2006 signed a memorandum of understanding for evaluation of Jordan’s El-Lajjun and Attarat Umm al-Ghudran shale resources. The Jordanian government approved the concession agreement on March 3, some 10 days ahead of Petra’s announcement.

Incosin reportedly has an agreement with Russia’s Atomstroyexport to utilize the Soviet-developed Galoter above-ground retort process for producing synthetic crude from the organic matter in oil shale. The project as proposed in 2006 was to build a 30,000 b/d oil shale plant which would start production in 2019, which matches the agreement signed by Sacos.

The Galoter process is currently used commercially at Estonia’s 10,000 b/d Narva Oil Plant, operated by Eesti Energia. That company also operates the nearby Eesti Power Plant, which burns oil shale to generate electricity.

In 2010, the Eesti Energia was awarded a Jordanian Attarat Umm al-Ghudran oil shale concession to develop a 36,000 b/d synthetic crude plant utilizing a modified Galoter process. Construction was slated to begin by 2015. The Estonian company is also expected to develop a 460 MW shale-fired power plant in Jordan with start-up scheduled for 2017.

The extensive Russian connection with Jordan’s planned oil shale development would be a deterrent to Saudi government involvement, given Riyadh’s cool relations with Moscow over the Syrian conflict. That is not to say that Sacos’ backers, whoever they may be, necessarily lack deep pockets or serious commitment, but there are no guarantees.

Jordan also has a formal agreement signed in 2009 with Royal Dutch Shell on oil shale development, but the oil major has said it is unlikely to make a decision to invest in a commercial project before the late 2020s. The government has another concession agreement with the Karak International Oil unit of state-owned Jordan energy and Mining for a 15,000 b/d oil shale plant using Canadian technology, with construction due to start in 2015. Amman has additionally signed MOUs for shale oil production with Russia’s Inter RAO and the UAE’s Abu Dhabi National Energy Company, or Taqa.

Inter RAO has further agreed to build a small shale-fired power plant in Jordan, while Jordan and China signed a deal in September 2013 to build a large 900 MW power plant at an estimated cost of $2.5 billion.

Apart from Russian involvement, the thread that seems to tie everything together is Jordanian government determination to pursue oil shale development, come what may. The cost per barrel is likely to be far higher than for conventional oil projects, while the arid country’s ground water could be at serious risk of contamination from large oil-shale surface mines.

But Jordan is dangerously dependent on hydrocarbon imports from politically unstable countries, including oil trucked through restive western Iraq and Egyptian gas delivered through a frequently sabotaged pipeline across the Sinai Peninsula. Following BP’s withdrawal in January from the Risha gas project after exploration wells yielded poor results, the county is running out of options.

Jordan’s best hope for continued gas supplies may now lie in a Qatari proposal to develop an LNG import terminal at Aqaba, on Jordan’s narrow strip of Red Sea coast. However, analysts have questioned whether the country can afford to import LNG at international prices.

Likewise, developing oil shale will not come cheap. The 40 million mt resource is not to be confused with the prolific tight oil reservoirs embedded in US shale formations. Rather, it consists of flaky rock interspersed with organic matter that can either be burned directly for power or cooked (above or below ground) to yield oil. The US federal government funded a number of pilots for such oil shale projects in the 1980s, but they were not pursued to commercial development.

Sadly for Jordan, this means the recent concession award to Sacos may represent more wishful thinking, with the country’s dream of energy security remaining a tantalizing mirage.

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Comments

  1. Jeremy Boak at April 5, 2014 11:52 am

    I would be pleased to discuss with the author some of the of this very interesting article covering a good deal of ground on the oil shale developments in Jordan. Would there be any chance you would be at the Symposium in Jordan in ten days? The resource in Jordan is estimated at between 40 and 100 billion barrels.

    Jeremy Boak, Director
    Center for Oil Shale Technology and Research
    Colorado School of Mines
    Golden CO 80401

     
    • Tamsin Carlisle at April 10, 2014 12:51 pm

      Dear Dr. Boak,
      I would be delighted to talk to you about this article. Unfortunately I will not be able to attend the symposium in Jordan as I have a conflicting engagement, so we will have to speak on the phone. Perhaps you would be good enough to contact me by private email at tamsin.carlisle@platts.com so that we could make the appropriate arrangements.

      Tamsin Carlisle
      Senior Editor
      Platts – Dubai

       

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