Identifier
Created
Classification
Origin
02AMMAN2941
2002-06-05 06:11:00
CONFIDENTIAL
Embassy Amman
Cable title:  

JORDAN-IRAQ OIL PIPELINE UPDATE

Tags:  ETTC ENRG IZ JO 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L AMMAN 002941 

SIPDIS

TREASURY FOR PIPATANAGUL

E.O. 12958: DECL: 06/05/2012
TAGS: ETTC ENRG IZ JO
SUBJECT: JORDAN-IRAQ OIL PIPELINE UPDATE

REF: A. AMMAN 185

B. 01 AMMAN 4049

C. AMMAN 1782

Classified By: AMBASSADOR EDWARD W. GNEHM, REASONS 1.5 (B,D)

C O N F I D E N T I A L AMMAN 002941

SIPDIS

TREASURY FOR PIPATANAGUL

E.O. 12958: DECL: 06/05/2012
TAGS: ETTC ENRG IZ JO
SUBJECT: JORDAN-IRAQ OIL PIPELINE UPDATE

REF: A. AMMAN 185

B. 01 AMMAN 4049

C. AMMAN 1782

Classified By: AMBASSADOR EDWARD W. GNEHM, REASONS 1.5 (B,D)


1. (c) Summary: The GOJ recently extended the deadline for
final bids on a proposed crude oil pipeline connecting oil
fields near Baghdad to the Zarqa refinery. The proposed
100,000 bpd pipeline (which equals Jordan's current oil
consumption) would be expandable to 150,000 bpd once the
Zarqa refinery is upgraded to handle the capacity. While the
GOJ wants the project to move forward for cost-saving
reasons, investors are showing caution in finalizing bids for
the program given the uncertainties arising from Iraq
sanctions issues. End summary.


2. (u) The Jordan Times reported on May 27 that the GOJ had
extended the bid deadline for the 35 bidders on the Jordanian
portion of a proposed crude oil pipeline from Baghdad to the
Zarqa refinery. The new bid deadline for the $365 million
BOOT (Build, Own, Operate, Transfer) project is July 15.
According to the Times, this second deadline extension was
granted at the request of the bidders, who asked for more
time to conduct feasibility studies. The GOJ expects
construction to be completed 15 months after the winning bid
is announced.


3. (c) According to Energy Minister Mohammed Batayneh, the
capacity of the pipeline would be 100,000 bpd, expandable to
150,000 bpd with additional pumping stations (refs a,b).
Current Jordanian demand is 100,000 bpd, with estimated
growth of 7-8% per year (ref c). The Zarqa refinery will
likely hit its refining capacity of approximately 115,000 bpd
by 2005. A February 19 Jordan Times article erroneously
listed capacity at 350,000 bpd. Energy Ministry Secretary
General Azmi Khreisat said the GOJ had discussed the
possibility of one day building an export pipeline with a
350,000 bpd capacity. He confirmed to us, though, that the
only existent concrete plans for the pipeline are for the
100,000 bpd figure, with expansion to 150,000 only following
upgrades of the Zarqa refinery - upgrades that would probably
take a decade to complete.


4. (c) If completed, the pipeline would afford Jordan
significant savings over its current crude transport system.
Batayneh estimated cost savings of $6/ton (equal to $27
million this year),plus recuperation of almost 7% of oil
imports that are currently lost to inefficiencies in the
transport system, including tanker accidents on the highway
(ref b). Environmental savings have not been calculated.
(Note: The claim of 7% loss of oil due to spillage is much
higher than we can verify independently from observing tanker
traffic on the Baghdad-Zarqa highway. End note.)


5. (c) Comment: This pipeline plan has been on the books
for years. The fact that interested bidders have asked for
another extension to continue feasibility studies is an
indicator that bidders are serious, but are being cautious in
light of what may be a raft of technical and legal issues.
Such issues could include limitations on Iraq's ability to
export oil under the oil-for-food program and strict
procedural guidelines from the UNSC for such exports, all of
which could call into question the long-term commercial
viability of the project. Another complicating factor could
be uncretainties concerning the Jordan-Iraq oil protocol
which is subject to renegotiation annually, and which in any
event could be radically affected by any U.S.-Iraq
confrontation. Due to the complexity of such issues, it will
probably be some time before real progress is made on the
project -- responsible companies will be cautious about
building one half of a pipeline to carry oil from a country
under UN sanctions. Nevertheless, the GOJ remains committed
if for no other reason than to save between $30 and $78
million per year compared to the current system.
Gnehm