MEOG: Cost-cutting and reshuffling

In this week’s MEOG, we look at the ongoing talks between Iraq and Jordan to cut costs on their planned cross-border pipeline and new appointments at the top of Yemeni oil firms.

The governments of Iraq and Jordan remain in discussions over the development of a long-planned cross-border oil pipeline but only if costs are reduced significantly, according to an update this week from Baghdad’s Ministry of Oil (MoO).

An agreement for the conduit, known as the Basra-Aqaba pipeline, was originally signed in 2013 on a line that would transport 1mn barrels per day (bpd) of crude from Iraq’s oil-rich Basra Governorate to the Jordanian port of Aqaba via Haditha.

Plans for the project date back to 1983, at which point Jordan asked the US for guarantees that the pipeline would not be targeted by Israel.

The MoO said that the “project is still under technical and commercial discussion, despite the negotiations reaching advanced stages, with the aim of adding the project economic value to Iraq and Jordan, provided that implementation costs are reduced to less than $9bn”.

However, this will require major cost-cutting, with cost estimates for the pipeline’s construction having been as high as $26bn based on a $4bn fee to develop the Iraqi portion of the line, with the section in Jordanian territory costing up to $22bn. A price of $12bn has also been quoted for implementing the project, while in 2019, $18bn was talked of as the sum for constructing an extended version of the line running to Egypt.

Meanwhile, Yemeni President Abd Rabbuh Mansur Hadi this week appointed new executives at two state-owned oil companies as fighting intensified between government and Iranian-backed militants in the oil-rich Ma’rib Governorate.

Ammar Nasser Al-Awlaki was appointed as general manager of the Yemen General Corporation for Oil, Gas and Mineral Resources (YOGC), while Mohammed Yaslam was made an executive director of Aden Refinery Co.

The moves followed the appointment by Oil Minister Abdulsalam Baaboud of Saleh Al-Jariri as head of the Aden Oil Co., taking over from Aden Governor Ahmed Lamlas.