US embassy cable - 03AMMAN6621

UNCLAS SECTION 01 OF 02 AMMAN 006621 
 
SIPDIS 
 
SENSITIVE 
 
PASS TO TDA FOR FOR CYBIL SIGLER/HENRY STEINGASS 
 
E.O. 12958: N/A 
TAGS: ENRG, ETRD, EINV, JO 
SUBJECT: OIL, GAS, AND ELECTRICITY FOR IRAQ: ENERGY 
MINISTER DISCUSSES GOJ OPTIONS AND PLANS 
 
REF: AMMAN 2367 
 
1. (SBU) SUMMARY: Jordanian Minister of Energy Mohammed 
Bataineh told DCM on October 14 that little progress beyond 
statements of principle has been made in talks on the 
provision of Iraqi oil to Jordan.  He expressed pride at the 
completion of the first phase of the Egypt-Jordan gas 
pipeline and conversion of the Aqaba power station to gas, 
and was optimistic about the extension of the pipeline and 
gas supplies to northern Jordan.  He discussed outstanding 
and upcoming tenders for the refurbishment of Jordan's Zarqa 
oil refinery and the creation of new power generating 
facilities.  Finally, he alerted Emboffs to the possibility 
that the Syrian  Minister of Electricity and Turkish Minister 
of Energy would be in Jordan next month to discuss the 
activation of a six-nation power grid including Iraq - which 
would allow Iraq to take excess power from surrounding 
Levantine states in larger quantities - and asked for U.S. 
assistance in convincing the Turkish Minister of Energy to 
support such a reactivation.  END SUMMARY. 
 
OIL SUPPLIES 
 
2. (SBU) Bataineh expressed his desire - so far frustrated - 
to begin receiving shipments fo Iraqi oil.  The post-war 
arrangement, in which Jordan is receiving its entire 
allotment of crude oil by way of the port of Aqaba, has been 
afflicted with constant problems, from bottlenecking at Aqaba 
(where there is only one jetty used for offloading crude, 
vegetable oil, and sulpho-chemicals) to environmental damage 
and road degradation caused by trucks carting fuel north to 
Jordan's refinery at Zarqa. (Reftel)  The only long-term 
solution to this problem would be a switch back to Iraq as 
primary supplier or the creation of an Aqaba-Zarqa pipeline, 
which would cost a substantial amount and take 2-3 years to 
complete.  Periodic talks with the Iraqi Oil Ministry - most 
recently a meeting yesterday in Amman with Iraqi Minister Dr. 
Ibrahim Bahr Al-Uloum - have yielded little beyond a 
statement that in principle, Iraq will provide Jordan with 
oil by way of a pipeline out of Iraq as soon as it is 
practicable to do so. 
 
3. (SBU) Practically speaking, the only current way for Iraq 
to export to Jordan would be by way of trucks sent from the 
southern fields by way of the highly dangerous Iraqi Highway 
1, and Bahr Al-Uloum refused to approve this option based on 
the length and danger of the route.  Jordan is still 
receiving subsidized oil both from Saudi Arabia and Kuwait 
(Reftel), and while Kuwait's provision is scheduled to end at 
the end of October, the GOJ is negotiating to extend the 
provision.  Bataineh admitted that he was not sure whether 
UAE cash payments that Jordan had been receiving in lieu of 
oil during the war were still coming in, though he had heard 
Finance Minister Marto complain in a meeting that he had not 
received the UAE's payment for September. 
 
 
NATURAL GAS PIPELINE 
 
4. (SBU) Bataineh called the recently completed gas pipeline 
between Egypt's Mediterranean coast and Aqaba "one of the 
most successful projects in the region" and proudly projected 
that all five turbines of the Aqaba power station would be 
using gas by next month (three are already using gas).  He 
said that the second phase of the project, running from Aqaba 
to the Syrian border, would run along the line of the eastern 
"Desert Highway," although the Ministry is holding 
information on the route closely until all right-of-way had 
been purchased from private landholders, to avoid paying 
inflated prices.  It will be built by the same Egyptian 
consortium, EPEG, that built the initial line. 
 
5. (U) EPEG will also receive an 18-year concession to supply 
gas to large industries and other major users, but this has 
not dampened the enthusiasm of other companies to use the gas 
that will be provided. A Kuwaiti company has expressed 
interest in using the pipeline to supply a local gas network 
for residences in Amman.  U.S. contractor Washington Group 
International is exploring the construction, with USTDA 
support, of a power plant that would supply the 220 MW used 
by the Dead Sea-area operations of mining companies. 
Bataineh said that both companies will need to negotiate with 
the Egyptian consortium supplying the gas to determine the 
price that they will pay for it - once the right-of-way is 
obtained, GOJ plans to step out of the picture. 
 
UPCOMING ENERGY PROJECTS 
 
6. (SBU) Bataineh bemoaned the poor state of the Jordan 
Petroleum Refinery Company's refinery in Zarqa, and said that 
the GOJ is looking at two ways of addressing it.  He is 
currently considering a proposal for a new refinery to be 
built near Aqaba, which he says he will only approve if the 
final plans place it at least 40 km from the coast and up to 
standards of export-quality oil production.  More 
immediately, the GOJ has consultants conducting a feasibility 
study of a USD 500-600 million upgrade of the Zarqa refinery 
and the simultaneous divestiture of assets in the Zarqa 
refinery complex, such as a shipping service, that are not 
directly related to the refining of crude oil.  GOJ has 
released a tender for the building of a new power station 
south of Amman, and is studying the feasibility of a new 
independent power project to be begun in 2007. 
 
ELECTRICITY PRIVATIZATION 
 
7. (SBU) Jordan is moving ahead with plans to privatize 
portions of its electricity sector, Bataineh said; the 
state-owned enterprise that generates power and two power 
distribution SOEs will hopefully be ready to be sold off by 
April 2004, leaving the GOJ with only the state-owned power 
transmission utility.  Bataineh regretted that the 
post-September 11 investment climate had delayed the 
privatization process by scaring off potential buyers of the 
companies, but said that consultant Rothschild Associates is 
moving ahead with its study of the feasibility of 
privatization and should have its findings in soon.  He also 
noted that the former SOE handling power distribution to the 
central portion of Jordan has already been 100 percent 
privatized. 
 
POWER FOR IRAQ 
 
8. (SBU) Bataineh raised the subject of power supply to Iraq, 
mentioning his regret that Jordan had no direct grid 
connections with Iraq and could therefore not supply Iraq 
with excess power to make up for its substantial power 
shortfall.  He said, however, that Iraq does have connections 
with Turkey and Syria, and that it had at one point been part 
of a six-nation power grid (also including Egypt and 
Lebanon).  If the grid were to be reactivated, he said, Iraq 
would be able to obtain considerable excess capacity from the 
five other countries on the grid.  At the end of the meeting, 
Bataineh received a telephone call, then informed us brightly 
that the Syrian Minister of Electricity had agreed to meet 
with him and the Iraqis in Amman in November to discuss 
reactivating the six-nation grid.  In this context, he asked 
that we help in getting the Turkish Minister of Energy on 
board for the meeting, noting past political obstacles to 
"turning on the switch" of the electricity grid between 
Turkey and Syria and saying that his participation would be 
crucial if the meeting was to achieve anything. 
 
COMMENT AND ACTION REQUEST 
 
9. (SBU) Jordan is proceeding with plans to modernize and 
diversify its energy sector, despite the difficulties of 
problematic fuel supplies and skittish foreign investors. 
Post requests CPA and Department guidance on how to proceed 
on the proposed November meeting to reintegrate Iraq into the 
six-nation power grid. 
GNEHM