US embassy cable - 02AMMAN2941

JORDAN-IRAQ OIL PIPELINE UPDATE

Identifier: 02AMMAN2941
Wikileaks: View 02AMMAN2941 at Wikileaks.org
Origin: Embassy Amman
Created: 2002-06-05 06:11:00
Classification: CONFIDENTIAL
Tags: ETTC ENRG IZ JO
Redacted: This cable was not redacted by Wikileaks.
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) 
 
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 

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