Jordan launches upstream bid round

14 November 2017, Week 45, Issue 651

While offshore bid rounds by Israel and Lebanon grabbed headlines, additional attention was drawn to the Levantine hydrocarbons sector in early November from an unexpected source – as Jordan quietly launched an onshore auction.

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Despite being surrounded by some of the world’s leading crude producers, the kingdom has minimal reserves of either oil or gas – relying expensively and riskily on better-endowed neighbours and, more recently, on imports of LNG.

After decades of fruitless searching for conventional reserves, upstream hopes in recent years have focussed primarily on oil shale – expensive to extract but in which the country is contrastingly rich.

A notice issued by the Ministry of Energy & Mineral Resources (MEMR) on November 7 invited companies or consortia to submit expressions of interest (EoIs) by December 31 in exploring for conventional or unconventional resources in six large blocks. These cover the bulk of the country’s onshore territory bar two areas in the south-west and two in the east.

Several have been extensively explored – by heavyweights of the calibre of BP and Royal Dutch Shell, both of which withdrew during the first half of the decade – with extensive 2D and limited 3D seismic surveys conducted.

The adjacent Azraq and Sirhan licences – covering respectively 6,311 and 7,970 square km in the central east along the Saudi border – were previously offered in a three-block bid round in 2014. However, with the tender coinciding with a protracted oil price crash, awards were never made. Shell agreed to conduct a nine-month study of the two blocks in 2012 but declined to enter a longer-term deal.

Also offered in the latest invitation is the Jafr block, covering 10,662 square km directly to the south of Sirhan, the Dead Sea block covering 10,841 square km in the central west along the border with Israel, and the North Highlands and West Safawi blocks in the north bordering Syria.

The West Safawi acreage excludes the Hamza development area in the southeast of the block. All the areas have been explored before to varying degrees – with the number of wells drilled ranging from three at Sirhan to 20 in the Dead Sea area, according to material on each block published by MEMR with the EoI notice.

Past information indicates that more than half of the Dead Sea wells have yielded oil and gas shows, as have several of those drilled at most of the blocks.

According to the ministry’s statement, applicants deemed qualified will be invited to receive tender documents and to submit a work plan to the ministry, after which memorandums of understanding (MoUs) or production-sharing agreements (PSA) will be signed.

No further detail was provided on the prospective contracts but the terms would be assumed to be generous to offset the substantial deterrent factors of past failures and current global industry bearishness compounded by enormous regional instability – from which the kingdom has anomalously remained relatively free. 

Excluded from the licensing round is the Risha block in the far west – source of the kingdom’s only current gas production and contracted to a new UK-registered Egyptian-owned company identified as IPG in March 2016 under a four-year PSA.

The novice firm took control with improbable promises to raise output to 50 mmcf (1.4 mcm) per day during the first year – a feat as-yet unattained – from around 12 mmcf (340,000 cubic metres) per day in 2015 and from a peak of 38 mmcf (1.1 mcm) per day in 2003.

BP relinquished control to the government in 2014 after five years of unproductive exploration. IPG’s deal also encompassed the East Safawi block. The Petra and Rum blocks in the far south-west are also left out of the new auction.

Gas demand in the kingdom stands at around 500-600 mmcf (14-17 mcm) per day and Amman has struggled with the financial burden of fuel imports primarily for power generation since the sharp reduction in volumes of low-cost gas sent from Egypt through the Arab Gas Pipeline since 2011.

LNG import facilities were commissioned at Aqaba in mid-2015 – with a floating storage and regasification unit (FSRU) contracted from Bermuda-registered Golar Energy capable of delivering up to 500 mmcf (14 mcm) per day.

Longstanding plans to develop a cross-border crude pipeline for exports from Iraq are expected to be reinvigorated by the expulsion during the summer of Daesh from the western Anbar border province.

An agreement with signed in late 2016 with the operators of Israel’s giant Leviathan field to receive a total of 45 bcm of gas over 15 years from field start-up in 2019.

Meanwhile, Amman’s efforts to tap domestic oil shale reserves – at an estimated 70 billion tonnes, some of the largest in the world – have, while slow-moving, lately proved more fruitful than those targeting conventional resources.

Financial close was reached in March on the US$2.1 billion development of the kingdom’s first shale-fired power plant – with a planned capacity of 470MW. The project is being developed by a consortium of China’s Guangdong Yudean Group, Malaysia’s YTL International and Estonia’s Enefit near the Attarat um Ghudran shale deposit, in the centre of the country.

Edited by

Ian Simm

Editor

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