Iraq Begins Design of Pipeline to Jordan

Source: The Wall Street Journal 3/1/2013, Location: Middle East

Oil-rich Iraq has started technical work on a planned $18 billion oil-export pipeline from Basra in southern Iraq to the Jordanian port of Aqaba on the Red Sea, bypassing the Strait of Hormuz, senior Iraqi oil officials said.

If realized, the pipeline would deliver a significant export outlet for Iraq's crude-oil production, which rose by 15% in 2012 as the country focused on rejuvenating its energy sector. It could also provide an alternative to seaborne transport of oil through the Strait of Hormuz after Iranian officials threatened in 2012 to block it if the West didn't ease pressure on the country over its nuclear program.

Iraq has signed some 11 postwar oil deals; three gas agreements, and four oil and gas exploration contracts with international energy companies. The first phase of the 1,680-km (1,044-mile) oil pipeline would export roughly 1 million barrels a day from Basra, which pumps around 2.3 million barrels a day, or about 70% of Iraq's total oil production, Basra Governor Khalid Abdul Samad Khalaf said at an Iraqi conference in Amman.

The second phase would export a further 1.25 million barrels a day to the Syrian Banias port in the Mediterranean, said Jamal Faleh Hassan, head of designs section at the State Company for Oil Projects, an affiliate of the Iraqi oil ministry. 'Our priority now is to set up the part of the pipeline which goes to Aqaba in Jordan, while the part to Syria has been delayed because of the [security] situation there,' he said.

Pipeline developers from the U.S., Canada, Germany, Japan and China attended the Amman conference, organizers said. The Iraqi oil ministry has already awarded Canadian consultant SNC-Lavalin Group a contract worth between $13 million and $14 million to carry out front-end engineering designs, Mr. Hassan said. The company is expected to finish the design work in the next three months, he said.

The 680-km section of the pipeline located inside Iraq—which would extend from Basra to Haditha, northwest of Baghdad in the western Anbar province near the Jordan border—will be financed by the Iraqi government, said Sabah Abdul Kadhim al-Saedi, deputy head of the contracts office at the Iraqi oil ministry. The Iraqi and Jordanian governments will choose investors to fund, build and operate the remaining 1,000 kms inside Jordan.

A gas pipeline would be built parallel to the oil pipeline to supply gas to power stations that will be constructed along the route. Three pumping stations and three power stations would be built in Iraq to operate the pipeline. In the Jordan section, there would also be three pumping stations, Mr. Hassan said. The project would also build storage facilities near Basra and Haditha with a total capacity of 28 million barrels, he said.

The section of gas pipeline inside Iraq would have a transport capacity of 350 million cubic feet a day to feed power stations operating the pipeline in Iraq. The Jordan section would handle around 258 million cubic feet a day. About 100 million cubic feet a day of that gas would go to Jordan for domestic use while the remainder would be used to operate the pipeline inside Jordan. Out of the 1 million barrels a day of oil exports, about 150,000 barrels a day would go to Jordan for domestic use as the Jordanian government has requested, Mr. Hassan said. Jordan is dependent on imported oil and gas, with 96% of its needs coming from other markets. The pipeline, if built, could easily meet all of Jordan's needs.

In 2012, the Paris-based International Energy Agency estimated that Iraq would be able to pump as much as 6.1 million barrels a day in 2020 and 8.3 million barrels a day in 2035. Iraq said it would be able to reach 8 million to 9 million barrels a day in 2020. The bulk of Iraqi crude oil exports are handled by the southern oil terminals in the Gulf, where Iraq is pumping between 2.1 million and 2.2 million barrels a day while 350,000 to 400,000 barrels a day are handled by the Iraq-Turkey pipeline to the Mediterranean port of Ceyhan.

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