Jordan: Searching for shale

Jordan’s massive stores of oil shale have been the topic of much discussion lately, with investors keen to help the kingdom harvest the energy locked in the layers of rock underfoot.

The country’s oil imports, on which it depends for energy, are equivalent to up to 20% of GDP, making the practice both expensive and unsustainable. The kingdom’s national energy strategy therefore plans for electricity produced by oil shale to account for 14% of its energy mix by 2020. In addition, oil shale production is expected to lower local energy costs and significantly boost exports in the sector. Shale was thus a key topic at the October 10-12 Jordan Energy Investment Summit, with a statement issued by the summit organisers stating that Jordan’s oil shale reserves could meet the kingdom’s energy needs for more than 900 years. Furthermore, local production of oil shale is expected to replace a large share of the kingdom’s oil imports by 2020, with production set to be around 100,000 barrels per day (bpd). Three companies – Eesti Energia, Karak International Oil (KIO) and Royal Dutch Shell – are currently in the process of extracting Jordan’s estimated 40bn tonnes of oil shale reserves, which are estimated to lie under more than 60% of the country. In 2010 Jordan signed a 44-year production sharing agreement with Estonian firm Eesti Energia to produce up to 35,000 bpd in Jordan’s central provinces. According to Maher Hijazin, the director-general of the Natural Resources Authority, spending by Eesti Energia will reach around $2.5bn by 2017 to produce 19,000 bpd, rising to around 40,000 bpd by 2019, 5000 bpd more than the agreement’s stated target. In Jordan’s eastern and northern regions – where the oil shale reserves are deep, rendering conventional oil mining methods unsuitable – Royal Dutch Shell is in the exploratory phase of a multibillion-dollar operation to apply its patented In-situ Conversion Process, a technology that converts the kerogen in oil shale to shale oil. Meanwhile, south of Amman in Al Lejjun, KIO is also set to begin extracting oil shale. The company, a subsidiary of Jordan Energy and Mining (JEML), is projected to produce 15,000 bpd by 2015, amounting to 15% of the oil needed in the kingdom. The project is also expected to create more than 3000 jobs, reduce Jordan’s reliance on foreign oil imports and increase national wealth by an estimated $60m per year through taxes and royalties. KIO, which has said it is investing $1.8bn in the project, will use thermal cracking and retorting technology to extract and process the oil shale. “This major new oil shale venture will make a significant contribution to the government’s declared Energy Strategy to increase energy from indigenous oil shale resources from zero to 14% of the country’s energy requirements by 2020, thereby reducing our reliance on imported oil and gas products from our neighbours,” Khaled Toukan, the minister of energy and mineral resources, said of the KIO project in March. The Energy Strategy also includes promoting the kingdom’s oil shale reserves to attract more private-sector investment in the industry. Indeed, current foreign and local investment in the sector is estimated to be worth billions of dollars, much of which benefit from the Investment Promotion Law in sectors such as oil and gas. These investments are expected to hit JD2bn ($2.84bn) by the end of 2011, exceeding the JD1.66bn ($2.35bn) seen in 2010, the CEO of the Jordan Investment Board, Samer Asfour, told local media in mid-September. Under the Investment Promotion Law, the government grants financial incentives to a host of projects, including oil and gas. In the first two months of 2011, when public unrest erupted in Tunisia and Egypt, investment dried up. However, between early March and the end of July, the volume of investments registered a “tremendous” increase, Asfour said, adding that during the first seven months of 2011, total investments that benefitted from incentives went up to around JD1.24bn ($1.76bn), or 19% more than the same period in 2010. More than just benefitting the economy as a whole, these investments have created around 11,000 jobs in the first seven months of this year – 3000 more jobs than were created during the same period in 2010. “These figures are very positive in light of the difficult circumstances the kingdom has gone through, due to regional events,” Asfour said. Under such circumstances, the investments being made in shale extraction are likely to benefit not only oil companies, but also the government and Jordanians seeking employment, inarguably providing a boost to the economy at many levels.