Source: EIA |
United
States Energy Information Administration
|
Jordan is important to regional energy markets because it is one of Iraq's major
trading partners, especially for oil. Jordan also is a potential alternative transit
center for oil and gas exports from the Persian Gulf region.
GENERAL BACKGROUND
On October 26, 1994, Jordan became the second Arab state (15 years after Egypt in 1979) to
sign a peace treaty with Israel. Since then, the country generally has moved towards a
pro-western regional economic and political policy. On November 6, 1995, Jordan's King
Hussein made his first visit to Jerusalem in nearly 30 years to attend the funeral of
assassinated Israeli Prime Minister Yitzhak Rabin. Since the election of Benjamin
Netanyahu (of the right-wing Likud Party) as Prime Minister of Israel on May 31, 1996,
Jordanian-Israeli relations have been strained by a stagnating Middle East peace process.
On June 21, 1998, Jordan's Foreign Minister described as "provocative" the
decision by Israel's Cabinet to extend Jerusalem's municipal authority over nearby Jewish
settlements on the occupied West Bank. On July 14, 1998, King Hussein urged the Israeli
government to take "courageous and swift" actions towards a Middle East peace
settlement.
Revised gross domestic product (GDP) figures for 1996 and 1997 now indicate that Jordan's economy grew only 1% and 2.5%-3%, respectively, compared to previous estimates of 5%-5.2% during those two years. Growth for 1998 had been forecast at 6%, but this now has been reduced to 3.2%, with some local economists even suggesting a contraction in the economy this year. Positive factors for Jordan's economy in 1998 include a possible increase in trade with Iraq (Jordan's main trading partner) as Iraqi oil export revenues increase. Since 1990, Jordan has been the major entrepot center for Iraqi imports and exports, with about $250 million in annual trade between the two countries. Much of this trade utilizes Jordan's Red Sea port of >Aqaba, as well as roads between the two countries. In 1997, the volume of goods passing through >Aqaba increased 2.5% from 1996, to 12.3 million tons. In mid-July 1998, the U.N. Sanctions Committee granted Jordan five contracts, worth $7 million, to supply Iraq with food, medicine, and medical equipment. On July 22, 1998, Jordan's charge d'affaires in Iraq estimated that Jordan has lost an estimated $3 billion in tariffs and transport fees since 1990 as a result of U.N. sanctions on Iraq.
In mid-July 1998, Jordan's Planning Ministry presented a 5-year (1999-2003) economic and social development plan to the government. The plan is aimed at boosting Jordan's economic growth rate, which has stagnated recently. Other goals of the plan, which must be approved by Jordan's Cabinet before it takes effect, include reducing unemployment from its current 15%, reducing the budget deficit, reforming the banking and finance sectors, and improving living conditions in the Kingdom. Uneven income distribution is a major problem in Jordan, with around 26% of Jordanian families living in poverty. Crime has increased recently, and religious/nationalist extremism appears to be growing. In August 1997, nine opposition parties and 13 professional organizations agreed to a call by the Muslim Brotherhood for a boycott of November elections.
In February 1998, in the midst of the West's showdown with Iraq over U.N. weapons inspections and other issues, riots broke out in the southern Jordanian city of Ma'an. The riots ostensibly were triggered by anger (particularly among Palestinians, who make up as much as two-thirds of the country's population) at Jordan's perceived pro-West, anti-Iraq policy. Many observers believe, however, that the rioters were upset at the poor state of Jordan's economy, and at Jordan's peace treaty with Israel, which had been sold in part as a means to achieve greater economic prosperity for Jordan but which many Jordanians perceive as having failed. One area of disappointment has been the tourism industry, which was expected to grow rapidly given peace in the region, but instead has stalled along with the peace process and following the Luxor, Egypt tourist massacre of November 1997.
Despite having limited natural resources, Jordan has developed a small but solid manufacturing base centered around its phosphates and potash reserves. Jordan has also embarked on a strategy of gaining more added value from these minerals, mainly by setting up joint ventures with foreign firms to manufacture fertilizers. In this area as in many other sectors of its economy, Jordan is attempting to attract foreign (mainly Western) investment. In August 1997, a $170 million, 200,000-tons-per-year phosphoric acid plant came online. The plant, called Shidiyeh, is a joint venture with India's Southern Petrochemicals Industries. Another project underway is a 300,000-tons-per-year fertilizer and ammonium phosphates plant in >Aqaba. This project is a joint venture with the Arab Potash Company and a consortium of Japanese companies led by Mitsubishi. Finally, Norsk Hydro is developing plans for a $400 million fertilizer project in >Aqaba and Shidiyeh.
An important issue for Jordan is adequate water availability. In 1998, around $60 million out of total U.S. aid to Jordan of $150 million will be spent on water projects. Jordan is looking to increase its fresh water supplies, as its underground aquifers are being depleted as the country's water consumption rises along with the rapidly growing population. One proposal is for a $5 billion canal linking the Red Sea with the Dead Sea, where desalination plants would produce water for consumption in Israel and Jordan. Israel favors a plan for a Mediterranean Sea-Dead Sea canal.
On June 1, 1998, Jordan's National Infrastructures Ministry announced a plan to set up an Israeli-Jordanian joint industrial park and free trade zone in the border zone between the two countries. Output from the $200 million project, known as the "Qualified Industrial Zone" (QIZ), would be exempt from taxes in the United States under the U.S.-Israel free trade agreement as long as companies can guarantee a certain percentage of joint Jordanian-Israeli input into their products. The QIZ, which was officially designated by U.S. Trade Representative Charlene Barchefsky on March 6, 1998, has been promoted by the United States as a way to increase economic cooperation between Jordan and Israel, as well as to support Jordanian economic growth.
On the diplomatic front, Jordan has aligned itself closer to the United States, Egypt, and the Gulf states in recent years. On November 11, 1995, Saudi Arabia dispatched a new ambassador to Jordan, the culmination of King Hussein's efforts at mending ties with Gulf Arab states following Jordan's perceived tilt towards Iraq after the 1990 Iraqi invasion of Kuwait. In May 1996, Jordan and Egypt signed bilateral economic cooperation agreements aiming at liberalizing trade by setting up a free trade zone. The agreements are aimed at gradually eliminating customs duties, dual taxation and other trade barriers. On June 29, 1998, Jordan's planning minister visited Kuwait, marking the first visit by a Jordanian cabinet official to Kuwait since the 1990-1991 Gulf crisis. Jordan's government has worked particularly hard to improve relations with Gulf oil producers, which provide an outlet for skilled Jordanian labor.
Jordan also is attempting to improve relations with other Arab countries as well as with Islamic but non-Arab Turkey. In late June 1998, Jordan agreed with Libya to intensify efforts at increasing trade, investment, and economic integration between the two countries. Jordan also agreed to admit Libyan patients formerly sent to Europe for treatment (Libya remains under a U.N. air embargo due to its alleged sponsorship of international terrorism). Meanwhile, Jordan's relations with Syria have been strained by Syria's opposition to Jordan's peace with Israel. In recent months, Jordan also appears to have moved closer diplomatically and even militarily to Turkey, which has been developing closer ties with Israel in recent years.
On July 14, 1998, King Hussein flew to the United States for medical treatment at the Mayo Clinic after suffering from fever and cold sweats for nearly two weeks. King Hussein has had regular medical checkups at the Mayo Clinic since 1992, when he underwent surgery to remove cancerous tissue from his left kidney and ureter. On July 22, King Hussein disclosed that he was suspected of suffering from lymphoma. President Clinton offered the services of his own doctor to King Hussein, in "a sign of the friendship that the president feels personally towards the king, and ...the respect we have for him as a leader."
In February 1998, Jordan signed an agreement with Shell Oil to extract crude oil from the country's abundant (possibly as high as 40 billion tons) oil shale resources. As of July 1998, Shell reportedly was preparing to build a pilot shale oil plant in Jordan, while U.S. companies Westinghouse and Oil Shale Energy were planning to build an extraction unit to produce gas for use in a 150-megawatt (MW) power plant at Lejjun, in southern Jordan. In addition, Jordan has looked into burning oil shale directly to generate electricity. Several tests of the physical and chemical characteristics of Jordan's shale oil resources have shown them to be of high quality. Other features of the shale oil include the likelihood of relatively easy mining due to a small overburden (the amount of dirt and rock), as well as proximity to water sources and other necessary infrastructure.
In early July 1998, Jordan and Iraq agreed on construction of a joint oil pipeline with an initial capacity of 100,000 bbl/d. Currently, Jordan receives nearly all its oil from Iraq, mainly via hundreds of tanker trucks, which cause traffic and environmental damage and harm roads, at an estimated cost to Jordan of around $60 million per year. The proposed 400-mile, $250-$300 million pipeline would carry oil from Iraq to the existing Zarqa refinery northeast of Amman, as well as the new refinery in 'Aqaba. In December 1997, Iraq agreed to increase its annual oil sales to Jordan from 30.66 million barrels in 1997 to 35.04 million barrels in 1998. Iraq has pledged to supply all of Jordan's oil needs during the second half of 1998.
Besides the Zarqa refinery, which produces oil products for domestic consumption, Jordan is looking into the possibility of building an export-oriented oil refinery as well. In 1997, Jordan invited companies to submit bids to build a $2.5 billion, 250,000-bbl/d, export-oriented oil refinery at the Jordanian port of >Aqaba. The refinery's output would target markets in Asia, Israel, and the Palestinian territories. Crude inputs for the refinery most likely would come from Saudi Arabia and other Arab Gulf states.
Jordan's state Natural Resources Authority (NRA) has been promoting exploration within the country, which has been relatively unexplored until now. In October 1995, the NRA signed agreements with Malaysia's Petronas and Houston-based Trans-Global Petroleum for possible exploration of northern and central Jordan. To help attract foreign investment, the Jordanian government has plans to privatize its oil sector. In October 1995, the country set up the state-owned National Petroleum Co. (NPC) to handle upstream oil and gas exploration and development. The intent is for NPC to operate as independently as possible, and eventually to be privatized.
Jordan has one refinery, at Zarqa, with a capacity of 95,000 bbl/d. A study on expanding the refinery, which is operated by Jordan Petroleum Refinery Company (JPRC), is being conducted by MW Kellogg Company of the United States.
A comprehensive settlement of the Arab-Israeli conflict could affect Middle East oil flows significantly. Jordan's geographic location between the Arabian peninsula and the Mediterranean coastal states of Israel and Lebanon offers the potential for alternative oil export routes for Persian Gulf oil to the West. At present, these oil exports must travel either by ship (through the Suez Canal or around the horn of Africa), by pipeline from Iraq to Turkey (capacity 0.8-1.6 million bbl/d), or via the Sumed (Suez-Mediterranean) Pipeline (capacity 2.4 million bbl/d).
Utilization of the Trans-Arabian Pipeline (Tapline) could offer another potentially economic alternative. The Tapline was originally constructed in the 1940s with a capacity of 500,000 bbl/d, and intended as the main means of exporting Saudi oil to the West (via Jordan to the port of Haifa, then part of Palestine, now a major Israeli port city). The establishment of the state of Israel resulted in diversion of the Tapline's terminal from Haifa to Sidon, Lebanon (through Syria and Lebanon).
Partly as a result of turmoil in Lebanon, and partly for economic reasons, oil exports via the Tapline were halted in 1975. In 1983, the Tapline's Lebanese section was closed altogether. Since then, the Tapline has been used exclusively to supply oil to Jordan, although Saudi Arabia terminated this arrangement to display displeasure with perceived Jordanian support for Iraq in the 1990/1 Gulf crisis.
In July 1995, energy ministers and officials from Turkey, Egypt, Jordan, Syria and Iraq discussed a $590 million project to link their electric power grids. According to at least one estimate, such a linkage could save Jordan up to $250 million a year in investments and operating costs to meet seasonal peak electric power demand. Plans for a $370 million system linking the electricity networks of Jordan, Egypt, Israel and Palestine also have been discussed.
As with other areas of its economy, Jordan is moving to privatize its electric power sector. As of early 1998, the state utility (Nepco) had been converted into a corporation, and the Jordanian government was drafting a new law for the electricity sector which could include a break-up of the company. Meanwhile, Jordan is moving ahead with plans for the country's first private power project, although as of February 1998 the location and fuel source of the proposed plant had not been determined.
In October 1995, the Kuwait-based Arab Development Fund agreed to lend Jordan $86 million in financing for expansion at the 'Aqaba Thermal Power Station. In early December 1995, Jordan and Israel discussed the possibility of building a joint $500 million power plant to meet increased demand in the two countries.
In May 1998, Jordan and Syria signed an agreement on a joint hydroelectric dam project. The dam would be built at a cost of $420 million on the upper Yarmuk River. Approximately 70% of electricity generated would go to Syria, and 30% to Jordan.
The U.N. Development Program (UNDP) has allocated $750,000 for a renewable energy project in southern Jordan. The project is to install windmills and solar systems for 200 remote villages.
ECONOMIC OVERVIEW
Currency: Jordanian Dinar (JD)
Market Exchange Rate (7/98E): US$1 = JD 0.71
Gross Domestic/National Product (GDP) (1998E, market exchange rate): $8.6 billion
Real GDP Growth Rate (1997E): 1%-5.3% (1998E): 0%-5.4%
Per Capita GDP (1998E): $1,498
Consumer Price Inflation (1997E): 2.9%-3.5% (1998E): 3%-4.1%
Major Trading Partners: Iraq, USA, Germany, Italy, United Kingdom, India, Saudi
Arabia
Merchandise Exports (1998E): $2.0 billion
Merchandise Imports (1998E): $4.2 billion
Merchandise Trade Balance (1998E): -$2.3 billion
Major Export Products: Chemicals (33%); phosphates (12.6%); potash (11.6%); food
(11.5%); manufactures (10.8%)
Major Import Products: Food (17.3%); machinery (15.3%); chemicals (11.8%);
transport equipment (10.1%); crude oil (9.8%)
Current Account Balance (1998E): -$0.58 billion
Unemployment Rate (1998E): at least 15%
Total External Debt (1998E): $8.4 billion
Debt as a % of GDP (1998E): 97.3%
International Reserves (1998E): $1.7 billion
ENERGY OVERVIEW
Minister of Energy and Mineral Resources: Muhammad Saleh Hourani
Proven Oil Reserves (1/1/98): 300,000 barrels
Oil Production (1998E): 31 barrels per day (bbl/d)
Oil Consumption/Net Imports (1998E): 95,000 bbl/d
Main Oil Import Source: Iraq
Crude Oil Refining Capacity (1/1/98): 95,000 bbl/d
Natural Gas Reserves (1/1/98): 200 billion cubic feet (bcf)
Natural Gas Production/Consumption (1998E): 10 bcf
Electric Generation Capacity (1996E): 1.07 gigawatts (99.4% thermal, 0.6%
hydroelectric)
Electricity Generation (1996E): 5.5 billion kilowatthours
Electricity Consumption (1996E): 5.1 billion kilowatthours
ENVIRONMENT OVERVIEW
Total Energy Consumption (1996E): 0.2 quadrillion Btu
Energy Consumption per Capita (1996E): 35.0 million Btu (vs. 351.9 million Btu in
U.S.)
Energy Consumption per $1987 of GDP (1996E): 23.9 thousand Btu (vs 16.7 thousand
Btu in U.S.)
Energy-related Carbon Emissions (1996E): 3.6 million metric tons (0.06% of world
emissions)
Carbon Emissions per Capita (1996E): 0.6 metric tons (vs. 5.5 million metric tons
in U.S.)
Carbon Emissions per $1987 of GDP (1996E): 0.44 metric tons (vs 0.26 metric tons in
U.S.)
Major Environmental Issues: Limited natural fresh water resources; deforestation;
overgrazing; soil erosion; desertification
ENERGY INDUSTRIES
Organization: Natural Resources Authority (NRA) - state body responsible for
overall direction of Jordan's energy resources; National Petroleum Co. - recently set up
by the government to handle upstream oil and gas exploration and development which had
been off-limits to the NRA; Jordan Petroleum Refinery Co. - operates Jordan's single
refinery at Zarka, near Amman; Jordan Electricity Authority - state body responsible for
the country's electric power supply
Major Port: Al'Aqabah
Major Oil and Gas Fields: N.A.
Major Pipelines: Tapline - closed (Ras Tanura - Haifa)
Major Refineries (crude capacity): Zarqa (95,000 bbl/d)
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