The lack of oil and gas has presented major challenges, but the sector remains important

Unlike its neighbours, Jordan has never had a large oil and gas sector. While Iraq and Saudi Arabia have major hydrocarbons industries, the fields on which these are based seem to barely touch the kingdom, with Jordan thus in the unenviable position of having to import almost all of its oil and gas needs. Yet while small, Jordan’s oil and gas sector still makes a vital contribution to the kingdom’s energy mix. Some in the sector remain convinced, too, that Jordan may have much more to offer in hydrocarbons than has been previously thought. The kingdom remains one of the most unexplored countries in the region, while, given the crucial importance of energy to Jordan’s entire development, any find can make an appreciable difference.

State Of Play

Currently, Jordan has just two producing fields. In oil, there is the Hamzah field in Wadi Al Azraq, west of Amman, which began its life yielding around 600 barrels per day (bpd) and is now down to around 20 bpd, according to National Petroleum Company (NPC) officials who spoke to OBG. The NPC is Jordan’s state oil and gas company, in that it is 99% owned by the government, yet it receives no budget from the state, generating revenues purely from sales.

The Oil & Gas Journal estimated in January 2014 that total oil reserves for the country stood at around 1m barrels. In gas, there is the 1500-sq-km Rishah field, discovered in the mid-1980s near the Iraqi border, which produces around 21m standard cubic feet per day ( scfpd) from 20 wells. The journal also estimated that total gas reserves were around 200bn scf, although others put the total as high as 400bn scf. NPC has the concession for the Rishah gas field, an agreement it shared with BP up until the end of 2013. At that point, BP ended the partnership, after spending some $240m drilling two exploration wells at sites within a 7000-sq-km concession area. After examining the results from these, the international oil firm announced there was no technical basis for it to continue operating in the field.

This was a blow to hopes that significant, commercially viable gas deposits remained to be discovered in the area, which shares the same geological history as the Akkas gas field further to the east, in Iraq’s Anbar province. A Palaeozoic section beneath Risha consisting of complex sandstones widens eastwards towards Akkas, leading some to suggest that eastern Jordan has great potential for Palaeozoic tight gas plays in particular. This does not appear to have been BP’s conclusion; yet, NPC officials who spoke to OBG warned that such conclusions might just be the result of different standards being applied by BP and NPC when it comes to what constitutes a “technical basis” for further development. “Here, we have to define what kind of play you will pursue,” Othman Okasheh, director-general of NPC, told OBG. For BP to make a major investment in what might be a minor field in terms of its global assets might not be viable, but for Jordan, which has limited oil and gas, such an investment might still make sense.

Jordan contains a handful of different types of basins within a small area. The Azraq basin and the Northern Highlands region have Cetaceous plays, while there is post-Miocene potential in the Rift Valley area. Regarding the latter, oil seeps and other phenomena have been observed around the Dead Sea for some years, yet so far it is only on the Israeli side that any exploitation – for gas – has occurred. Much of the play is salt-and shale-related, which present particular difficulties.

Continued Exploration

Over the years, various companies have drilled exploratory wells, with Amoco, Hunt Petroleum, Petro-Canada and Petrofina all in Jordan at one time or other. Most drilling has concentrated on the Wadi Al Azraq-Wadi As Sirhan basin area, and around the Rishah gas field. Much of the rest of the country remains unexplored.

At the same time, “old seismic surveys are all we have for much of what has been explored,” Okasheh said. Nowadays, more sophisticated and advanced methods for conducting surveys are available, which can cover larger areas with a higher degree of accuracy and at less expense. What is needed now, the NPC argues, is “smart” exploration, using cutting-edge technologies.

Other Projects

NPC also has three of its own drilling rigs, along with all the data collected by BP and the other companies that have conducted exploration work over the years. It has expertise within its ranks, accumulated over several decades of operations, an established infrastructure in-country and a clear desire to start searching. One challenge, however, is in the company’s finances. With no budget support from the government, NPC currently relies on revenues from sales to finance its operations. Gas from the Rishah field is, however, sold to the Central Electricity Generating Company (CEGCO) at a price fixed by the government, as part of its overall energy pricing and subsidy scheme. This was set at around $2.50 per million British thermal unit (mmbtu) during the period when Jordan was receiving natural gas from Egypt, which is lower than the price paid for gas from other sources.

Egyptian gas supplies have proven unreliable of late, however, and the cost of this disruption has been enormous. According to a Ministry of Planning and International Cooperation report, with the gas turned off, power plants have had to switch to more expensive imported fuel oil and diesel, a move costing the country around JD3.5m ($4.94m) a day.

The gas issue has also had an effect on the overall energy mix as well. Figures from the Ministry of Energy and Mineral Resources show that the percentage that gas held in the energy mix in 2011 was around 11.6%, with this falling to 8.26% in 2012, while crude oil products rose from 82.2% to 87.6% over the same period. “A diverse energy mix provides a stable platform for our economy to grow,” George Hanania, the general manager of Hanania Group, told OBG. “It hedges the risk of an external supply shock.” The shift has likely been even more dramatic in 2013 and 2014.

Funding

With such numbers, obtaining financing for exploration and development work is proving difficult, particularly as NPC is not bankrolled by the government, yet remains owned by it. Such financing would also be useful to extend current programmes to boost recovery at both Hamzah and Rishah. “If we can get a fair gas price and we could guarantee enough investment,” said Okasheh, “we could be getting some 40m scfd in three or four years’ time at Rishah.”

In the meantime, NPC continues to move ahead with exploration work, with hopes high around the Safawi region of eastern Jordan. In February 2014, the Senate endorsed an agreement with NPC to explore this region that will see the firm conduct two phases of research – the first, three-year period involving the digging of two exploration wells and the re-entering of an abandoned third well, while the second, two-year phase will see 3D seismic surveys of a 500-sq-km area.

With oil and gas imports continuing to be both a major financial burden, there is much hope riding on NPC’s exploration efforts. Even a small discovery might ease the burden, while also demonstrating that the local oil and gas sector has the know-how and the resources to find what others may long have overlooked – a potentially impressive achievement at a time when the low hanging fruit of oil and gas has long been picked.