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Abu Dhabi, UAEMonday 18 June 2018

Jordan approves Iraq pipeline, as Baghdad looks for alternative export routes

The link will transport crude from Basra to export markets from Jordan's Red Sea port of Aqaba

The Rumaila field in southern Iraq. Sources tell Bloomberg the new bid deadline is April 25. Essam Al Sudani / Reuters
The Rumaila field in southern Iraq. Sources tell Bloomberg the new bid deadline is April 25. Essam Al Sudani / Reuters

Jordan's cabinet has approved a much-delayed pipeline to supply oil and gas from Basra in southern Iraq to the kingdom's Aqaba port, as Baghdad seeks alternative routes to bring its crude to market.

The project aims to construct a pipeline to export Iraqi oil through Jordan and to provide oil to meet some of the kingdom's needs, state news agency Petra reported, citing a Cabinet statement.

The statement offered no further details on the project or the timeline.

Iraq, the Arab region's second-largest crude producer after Saudi Arabia, had considered building a pipeline to bring oil from its southern Rumaila field for export from Jordan's Red Sea Port of Aqaba, located 330km south of its capital Amman. Iraq's instability and battles with ISIL had put the project on the back-burner.

In December 2016, Iraq's State Company for Oil Projects, which oversees the proposed Basra-Aqaba project, invited energy companies and investors to bid to build and finance the first phase of the pipeline from Basra to an energy station at Najaf central-south Iraq.

Ruba Husari, managing director at consultancy Iraq Insight, said the project had begun before Iraq's conflict with the oil-rich Kurdish Regional Government intensified following last year's independence referendum as the federal government had long-sought Red Sea access in addition to the Gulf (via Basra) and the Mediterranean (via Turkey's Ceyhan).

"Kirkuk-Ceyhan has been problematic since 2003 with various groups bombing it at different periods, hence the need for another option," said Ms Husari.

The pipeline linking crude from Kirkuk, one of the Middle East's oldest fields, to the Turkish port of Ceyhan is Iraq's biggest and main export link with capacity to transport 150,000 barrels per day (bpd). Parts of the supply line had been severely damaged during fighting between various factions and the Iraqi government. Following the reclamation of territory from ISIL last year , Baghdad has pushed for reconstruction of energy infrastructure across the country, including repair of damaged sections of the Kirkuk pipeline.

The ministry announced last October that it had boosted export capacity from Basra by 900,000 bpd to 4.6 million bpd after building a new floating terminal.

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The Basra-Aqaba pipeline would take "at least a couple of years" to develop, said Ms Husari.

"They have to complete the agreements with the developers (private companies) and agree the financing of the pipeline for both sections in Jordan and Iraq. There is still more work to do before they get to the construction phase," she added.

Alan Mohtadi, an Iraq-focused energy analyst based in Sweden, said that it was unlikely that the Basra-Aqaba pipeline could move soon given concerns over security that remain in the country, even after the fall of ISIL

"The security is a major concern, I can't see a pipeline to Jordan anytime soon," he said.

The route of the pipeline, which had earlier included the restive Anbar province, has been modified to skirt further south of the governorate and is now "more secure," saidMs Husari.

Jordan, which shares a border with Iraq, Syria, Israel and Saudi Arabia meets 88 per cent of its requirements through the Arab Gas pipeline, which supplies gas from Arish in Egypt. However, repeated attacks on the pipeline in the Sinai peninsula has forced the Levantine kingdom to look for alternative sources, including renewables to meet its power requirements. The energy-deficit country depends on oil and crude products to meet 98 per cent of its power requirements.

The proposed Basra-Aqaba pipeline "would spur supply" to Jordan's sole refinery at Zarqa, added Ms Husari, with Amman set to benefit from cashing on transit fees to export Iraqi crude.

State refiner Jordan Petroleum Refinery Company is currently undertaking a $1.6 billion expansion of the facility to boost capacity to 120,000 bpd.

Jordan has also looked at developing nuclear power plants with Russia to meet its energy requirements. The kingdom last year floated tenders to develop its first nuclear power plant, which is estimated to cost $10bn and will be financed equally by Jordan and Russia.