Page 6 - DMEA Week 05 2021

DMEA COMMENTARY DMEA

Iraq and Jordan renew

oil supply deal

Ties between Amman and Baghdad have strengthened in recent years

MIDDLE EAST THE governments of Iraq and Jordan last week
renewed an oil supply contract following a meet-
ing between Prime Ministers Mustafa al-Ka-
dhimi and Bisher al-Khasawneh.
The two parties said that “issues of common
concern” had been discussed during the meet-
ing, noting that they had sought “to achieve
integration of interests and strategy and in all
economic, investment and trade fields.”
Ties between Amman and Baghdad have
strengthened in recent years and their mutual to halt the spread of coronavirus (COVID-19).
interest in the success of this deal was revealed Shipments were severely affected by the pan-
by way of an addition to the 2019 agreement demic and the resultant drop in oil price with
which covered 10,000 barrels per day (bpd) of several pauses in supplies and no crude at all
crude oil supplies. Last week’s ‘reactivation’ of the sent to Jordan in August. Cargoes resumed in
deal also included continued implementation of September following a July agreement between
a 300-km dual-circuit electric antenna transmis- Amman and Baghdad on the resumption of oil
sion line that connects Jordan’s Risha conversion exports, with Iraq completing all of the required
station and Iraq’s al-Qaim substation. This will logistical preparations. Jordanian Energy Min-
provide around 1,000 GWh per year of electric- ister Hala Zawati said that crude flows had
ity to Iraq. The two governments signed a deal stopped after prices fell below $20 per barrel.
last year that sought to interconnect the coun- Local media noted that the latest talks had
tries’ electricity grid as part of a wider ‘Gulf Grid’ also covered the long-delayed 1mn bpd Bas-
as Iraq attempts to wean itself off its reliance on ra-Aqaba crude oil pipeline.
Iranian electricity. While no agreement was made, both sides
The pre-existing bilateral deal was signed in agreed to continue talks until a “a framework
February 2019 for Iraq to cover around 7% of agreement between the two countries” is in
Jordan’s oil demand. After lengthy delays, the place.
first batch of Iraqi crude was trucked from Baiji Preliminary work to develop the $5bn con-
to Jordan via Kirkuk in September that year. duit is thought to be nearing, with the Iraqi
At the time, it was reported that Jordan would Ministry of Oil (MoO) expected to announce
purchase the oil at a $16 per barrel discount to contract winners by the end of the year. In May,
Brent in order to cover the transport and devia- the ministry clarified that the pipeline inside Iraq
tion in specifications with Iraqi goods exported would be installed according to the engineering,
through the port of Aqaba, receiving preferential procurement, construction and financing con-
rates in return. tract (EPCF) model, while in Jordan it would be
However, in early January, in an interview executed under the build-own-operate-transfer
with the Iraq News Agency (INA), Alaa al-Ya- (BOOT) system.
siri, general manager of Iraq’s state oil marketer The Jordanian government has also approved
SOMO, said: “The Oil Marketing Company a deal with the Iraqi federal government to build
does not have differential prices, but rather fixed two oil and gas pipelines connecting the neigh-
prices according to the market … Jordan stip- bouring countries, Jordanian state-run news
ulated that, according to the Cabinet’s decision, agency Petra reported.
the transportation cost was calculated at $11 The project is divided into two phases: the
from Baiji to Jordan, and this is among the items first phase includes installing a 700-km pipeline
of bilateral agreements between the two coun- with a capacity of 2.25mn barrels from Rumaila
tries, and the supreme interest is valued by the to Haditha; the second phase includes construct-
country and the government.” ing a 900-km pipeline in Jordan between Hadi-
Flows were steady from September 2019 until tha and Aqaba with a capacity of 1mn barrels.
April 2020, giving a cumulative total of 2.44mn Total cross-border capacity is expected to be
barrels before cargoes began being unloaded 1mn bpd of oil and 258mn cubic feet (7.31mn
into Jordanian trucks at the border in an effort cubic metres) per day of gas. ™

P6 www. NEWSBASE .com Week 05 04•February•2021