Lacking oil and gas deposits and eager to scale back its reliance on energy imports, Jordan is taking a chance on one unconventional resource it has in abundance. The kingdom has inked a $1.8 billion concession agreement with Karak International Oil (KIO), which will produce enough oil shale to meet more than half of the country’s fuel needs by 2026. The first of its kind for the Middle East and North Africa, the agreement could provide a model for energy self-sufficiency for countries with oil shale deposits.
Over the past five years, KIO, a subsidiary of British firm Jordan Energy and Mining Ltd (JEML), has been conducting feasibility studies at the Al Lajjun field, 110 kilometers south of Amman. In March, the company signed a deal with Jordan’s Natural Resources Authority for what will be the country’s largest oil shale extraction project. One of 26 identified deposits, the 35-square-kilometer field represents just a fraction of Jordan’s oil shale reserves — estimated to be the world’s eighth largest at around 34 billion barrels, according to the World Energy Council, while JEML holds that figure to be as high as 70 billion.
In May 2010, Estonia’s Eesti Energia inked a concession agreement to produce 36,000 barrels per day (bpd) at Attarat um Ghudrun, as well as to conduct feasibility studies for a power plant fired by burning oil shale, while Royal Dutch Shell had already signed on to explore shale deposits in 2009. These deals place Jordan at the vanguard of international oil shale exploration, with only three other countries opting to exploit this resource on a commercial scale thus far. Estonia utilises oil shale to meet 90 percent of its power needs, while Brazil and China also produce oil shale.
At the signing of the KIO deal, Khaled Toukan, minister of energy and mineral resources, said the venture would “increase energy from indigenous oil shale resources from 0 percent to 14 percent of the country’s energy requirements by 2020; and thereby reduce our reliance on imported oil and gas products from our neighbors.”
Starting with 15,000 bpd by 2014, the area’s production is slated to reach 30,000 bpd by 2020 and 60,000 bpd by 2026. Jordan’s oil demand is 110,000 bpd, according to the energy ministry, with the country importing nearly all of its energy needs. In mid-2010, the government announced plans to increase its natural gas purchases from 240 million cubic meters to 330 million cubic meters in 2011.
Around 80 percent of the kingdom’s gas comes from Egypt. However, political unrest in January caused Egypt to stop gas exports, forcing Jordan to decrease the weight of gas in its energy mix and replace it with more expensive fuel oil. As a result, at $197 milion, Jordan’s oil and electricity import bill for that month was 78.7 percent higher than the same month of the previous year. In March, Egypt announced that it would resume gas exports to Jordan, but at a higher cost. Previously, Egyptian gas had come at a discount of nearly 50 percent off the market price. This, coupled with oil around $100 per barrel, has given further impetus to the kingdom to look to other sources to meet its energy needs.
Until recently, oil shale extraction was prohibitively expensive at up to $95 per barrel. The United States, for example, has the world’s largest oil shale reserves at over 2 trillion barrels, but has declined to begin large-scale production since crude is cheaper to produce. However, new technology has lowered the price of oil shale production to the neighbourhood of $60 to $75 per barrel, with Shell predicting that it can eventually reduce this figure to $25.
In this light, oil shale is looking like an attractive option, and Jordan has sided with that optimism. “The future of Jordan lies in the investment in minerals and oil shale production,” local press reported energy minister Toukan as saying at a parliamentary session in February. Under the deal with KIO, the government will receive 65 percent of net operating profits. If oil prices are $75 per barrel, this means revenues of $2 billion over the next 30 years, according to JEML. And of course, if oil prices continue to stay high, it will be even clearer that Jordan made the right decision.
