Iraq-Jordan Oil Pipeline

From Global Energy Monitor
This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.
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Iraq-Jordan Oil Pipeline is a proposed oil pipeline in the Middle East.[1]

Location

The pipeline is planned to run from Basra, Iraq to Najaf, South of Baghdad, and then runs along the Saudi-Iraq border into Jordan onward to its terminus at Aqaba Port, Jordan.[2]

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Project Details

  • Operator: State Company for Oil Projects (SCOP)[1]
  • Proposed capacity: Basra, Iraq to Najaf, Iraq: 2.5 million bpd. Najaf, Iraq to Aqaba, Jordan: 1 million bpd[3]
  • Length: Between 1,680 km and 1,980 km
  • Oil source: Basra oil fields, Iraq
  • Status: Proposed
  • Start Year:

Background

In December 2016, Iraq initiated the first stage of the pipeline process by inviting bids from energy companies and investors. According to the State Company for Oil Projects (SCOP), the oil ministry of Iraq, the first stage of the process will include the engineering, procurement, construction, and financing of the pipeline linking the Basra fields to the Iraqi city of Najaf.[4] For the second portion of the pipeline from Najaf to Aqaba, Jordan's Mass Holding Group and a consortium of Chinese companies submitted a bid to undertake the project. Iraq's South Oil Company would supply the oil while the other companies would receive a service fee.[5]

A recent study by the Iraqi government reported that the pipeline project will cost between 5 and 7 billion dollars. The pipeline is meant to satisfy Jordan's crude oil demand by supplying it with about 150,000 bpd, while the rest of the oil will be exported to Egypt and the global market.[6] As of August 2017, the Jordanian-Iraqi border has reopened, potentially spurring the pipeline project which has been stalled due to the Islamic State's control of a large proportion of Anbar province in Western Iraq where the pipeline is routed.[7]

In July of 2019, the Iraqi Cabinet met in Baghdad under the chairmanship of Prime Minister, Adil Abd Al-Mahdi. The Cabinet discussed a series of strategic projects aimed at increasing Iraq's oil production and exporting capacities, using recommendations from the Ministerial Committee for Energy. The Cabinet approved the proposed Iraq Jordan Oil Pipeline and the construction of offshore oil exporting facilities in Iraq's territorial waters in the Gulf.[8]

Pipeline Proposal's History

Original Pipeline Plan

In 2013, Iraq and Jordan announced its plans to build a dual pipeline consisting of gas and crude oil which would stretch from the Basra oil fields in Iraq to Jordan's Red Sea port at the Northern point of the gulf of Aqaba. The original pipeline plan was estimated to cost $18 billion and would measure 1,680 kilometers, providing Iraq with an alternative export route to its Persian Gulf outlet.[9][10] The $18 billion price tag would have made it the most expensive project of its kind in the world.[11] The first segment of the crude oil pipeline from Basra to the K-3 station in Haditha would carry 2.5 million bpd, and the second segment from Haditha to Aqaba in Jordan would carry 1 million bpd.[3] The original plan also contained a gas pipeline which would run parallel to the crude oil line and would maintain a capacity of 350 million cubic feet per day within Iraq and 258 million cubic feet per day within Jordan.[9]

Route change and Security Concerns

The pipeline project was delayed in 2014 due to the loss of the Anbar Province to the ISIS militant group in the Western portion of Iraq, physically cutting off any direct route to Jordan.[10] Several companies who were bidding for the project dropped out due to the deep security concerns hovering over the region, while a great deal of the Iraqi government's resources were going towards the military campaign against the militant group. Even though the Iraqi government had taken back large swaths of territory from ISIS over time, the Oil Ministry altered the pipeline's route to try and avoid potential security issues.[12] The segment from Basra would now travel further South to Najaf instead of Haditha, adding around 200 to 300 kilometers to the pipeline.[2]

Gas Pipeline Cancellation

In 2017, the plan to build a gas pipeline along with the crude oil line was cancelled due to the high costs and the desire to expedite the construction process.[13] The crude oil pipeline is planned to move ahead at a cost of anywhere between $5 to $7 billion dollars.[14]

COVID-19 Delays

In December 2019 a deadline of May 2020 was set for qualified companies to submit their bids for the project. But according to an Iraqi oil ministry spokesperson, that deadline was postponed because of COVID-19. Jordan’s Minister of Energy and Natural Resources said that the status of the project would resume once Iraq and Jordan overcome the pandemic and a senior fellow at the Iraq Energy Institute stated that the project will be most likely placed "on the back burner." [15]

Pipeline's Political and Economic Context

Iraq

Both governments have conveyed the strategic importance of the pipeline.[16] For Iraq, the project will offer a key alternative port to its currently existing export terminals on its sliver of coastline along the Persian Gulf, while also opening up access to new markets for its oil exports.[17] The Iraqi government also views the pipeline in geopolitical terms by bypassing any vulnerability its Southern Gulf terminals might suffer from any potential closure of the Straight of Hormuz due to the geopolitics of the region.[17][18][19] However, although the pipeline would offer one solution to Iraq's dependence on the Persian Gulf, it would open itself to vulnerability and dependence on the Red Sea, Suez Canal, Jordan, and Egypt.[18]

Additionally, the pipeline comes at a time of very low oil prices and low economic growth for the oil-dependent Iraqi state, further pressuring the need to produce more oil output despite a global market saturated by an oil and gas glut. The situation has been significantly worsened due to the internal struggle with ISIS in Anbar, which has required an immense amount of resources and revenue form the state. Although Iraq is part of an OPEC agreement which seeks to drive down production in order to bring prices up, Iraq's desperation may make it neglect its requiered decreased production quotas.[20]

Jordan

Jordan, which lacks any significant energy resources domestically, imports nearly 97% of its energy needs. The Kingdom has experienced high energy costs since 2011 due to problems with its supply from both Egypt and Iraq. The 1 million bpd portion of the pipeline linking Najaf to Aqaba will provide between 150,000 to 200,000 bpd to Jordan, while the rest will be transported to Egypt and the International market. Because the pipeline ends at Jordan's port in Aqaba, it has been reported that the state will receive up to $3 billion annually.[12]

Articles and resources

References

  1. 1.0 1.1 Iraq-Jordan Oil Pipeline, Egypt Oil & Gas, accessed September 2017
  2. 2.0 2.1 Consortium bids for re-routed Iraq-Jordan oil export pipeline, S&P Global Platts, March 23, 2016
  3. 3.0 3.1 The Iraq Strategic Basra – Aqaba Crude Oil Pipeline Project [1] Iraq Business Council, accessed September 2017
  4. Aref Mohammad, Iraq invites bids to build first phase of oil export pipeline to Jordan, Reuters, December 11, 2016
  5. John Lee, China-Jordan JV Bids for Iraq-Jordan Oil Pipeline, Iraq-Business News, March 28, 2016
  6. Jordan-Iraq Oil Pipeline to Cost $5-7bn, Iraq-Business News, March 24, 2017
  7. Suleiman Al-Khalidi, "Jordan border crossing with Iraq to reopen in major boost to ties", Reuters, August 29, 2017
  8. Cabinet Approves Iraq-Jordan Pipeline, Offshore Oil Exporting Facilities menafn.com, 7/11/2019
  9. 9.0 9.1 Hassan Hafidh, Iraq Begins Design of $18B Oil Pipeline to Jordan, Rigzone, February 28, 2013
  10. 10.0 10.1 Jordan pipeline route back on the table, but issues remain, Your Pipeline News, accessed September 2017
  11. John C.K. Daly, Iraq-Jordanian $18 billion pipeline – Reality or Fantasy?, Oilprice.com, Aril 15, 2013
  12. 12.0 12.1 Raied T. Shuqum, "Iraq, Jordan pipelines in the works", The Arab Weekly, September 4, 2016
  13. Iraq cancels Basra-Aqaba oil pipeline, Roya News, August 7, 2017
  14. Jordan-Iraq Oil Pipeline to Cost $5-7bn, Iraq-Business News, March 24, 2017
  15. Noam Raydan. "Long-Sought Iraq-Jordan Pipeline Hits New Roadblock Amid Pandemic". Forbes. Retrieved 2020-08-01.
  16. "Iraq, Jordan affirm importance of oil and gas pipeline", Middle East Monitor, November 15, 2017
  17. 17.0 17.1 Oil Project: The intermixture of the Economics and Politics between Iraq and Jordan, Rawabet Center, April 9, 2017
  18. 18.0 18.1 David Mills, Risky Routes:Energy Transit in the Middle East, The Brookings Institute, April 2016
  19. "Can Iran close down the Straight of Hormuz?", The Telegraph, January 5, 2012
  20. Irina Slav, Iraqi Economy Hit Hard By ISIS And Low Oil Prices, Oilprice.com, August 10, 2017

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