Jordan - Natural Resources

Oil and Gas

By the late 1980s, a twenty-year-long period of exploration had resulted in the discovery and exploitation of three oil wells in the Hamzah field in the Wadi al Azraq region west of Amman that yielded only a small fraction of domestic energy requirements. Jordan also had just discovered oil from what appeared to be a field in the eastern panhandle near the Iraqi-Saudi Arabian border. Jordan remained almost entirely dependent on oil imported from Saudi Arabia and Iraq to meet its energy needs. Jordan refined the imported crude petroleum at its Az Zarqa refinery. In 1985 the Az Zarqa refinery processed about 2.6 million tons of petroleum. Of this total, about 1.8 million tons came from Saudi Arabia, 700,000 tons from Iraq, and 2,800 tons from Jordan's Hamzah field. An additional 400,000 tons of fuel were imported from Iraq. The Saudi Arabian oil was transported to Jordan via the Trans-Arabian Pipeline (Tapline). Oil from Iraq was transported by tanker truck. About 40 percent of oil imports were used by the transport sector, 25 percent to generate electricity, 16 percent by industry, and the remainder for domestic use.

Jordan's oil bill was difficult to calculate and was subject to fluctuation as the Organization of Petroleum Exporting Countries (OPEC) changed its posted price for crude. Since 1985, barter agreements with Iraq to trade goods for crude oil have removed some of Jordan's oil bill from the balance sheet. Jordan also varied its imports of crude oil and other, more expensive fuels, depending on its immediate fuel demand and its refinery capacity, and cut consumption through conservation measures and price increases.

The oil bill remained very large, however. A major irony of Jordan's energy dependence was that despite--or because of--its proximity to its main oil suppliers, it was sometimes obliged to pay extremely inflated prices for its oil. In mid-1986, for example, Saudi Arabia charged Jordan the official OPEC price of US$28 per barrel at a time when oil was selling on the international spot market for US$10 per barrel. Saudi Arabia's motives were perhaps as much political as economic, in that it wanted to maintain the integrity of the OPEC floor price for oil. Dependent on Saudi financial aid, Jordan could not alienate its patron by shopping on the world market. In 1985 estimates of Jordan's oil import bill ranged between US$500 million and US$650 million. At that time, imported oil constituted approximately 20 percent of total imports and offset 80 percent of the value of commodity exports. In 1986 and 1987, Jordan's estimated fuel bill declined considerably, to less than US$300 million. The drop resulted from barter with Iraq, decreased fuel imports, and OPEC's reduction of its official price of crude oil to bring it into line with world market prices. As prices dropped, the Jordanian government--which had subsidized domestic fuel prices--was able to cut the subsidy from US$70 million to US$14 million instead of passing on savings to consumers.

Since 1984 Saudi Arabia has forced Jordan to underwrite the entire cost of operating the Tapline. This has added more than US$25 million per year to Jordan's oil bill. During the Iran-Iraq War, therefore, Jordan tried to persuade Iraq to obtain an alternative oil outlet by building a pipeline across Jordan to Al Aqabah. The project foundered because of Iraqi concern that the line was vulnerable to Israeli attack and embarrassment over disclosure of Jordanian attempts to obtain a secret Israeli pledge not to attack the line.

The 1980 discovery of from 10 billion to 40 billion tons of shale oil deposits in the Wadi as Sultani area raised Jordanian hopes of greater self-sufficiency, but there were doubts that large-scale exploitation of the deposits would be commercially viable in the near future. Since 1985 Jordan has attempted to interest Western oil companies in exploring for oil. Amoco, Hunt Petroleum, Petro-Canada, Petrofina of Belgium, and the Japanese National Oil Company were conducting survey work in Jordan in the late 1980s. Jordanian planners hoped that potentially extensive natural gas reserves discovered at Rishah in eastern Jordan could eventually replace oil for electricity generation, cutting imports by one-quarter.

Natural resources

Jordan's mineral wealth and extractive industries constituted a major source of its gross output manufacturing as well as of its total value added in manufacturing. Such natural resources also represented a significant element in Jordan's exports.

Phosphates

Phosphate deposits were Jordan's primary natural resource and a major source of export income. Estimates of Jordan's proven, indicated, and probable reserves ranged from 1.5 billion to 2.5 billion tons. Even if the more conservative figure were the most accurate, Jordan could produce at its present rate for hundreds of years. Total 1987 production was 6.7 million tons, of which 5.7 million tons were exported as raw rock. The remainder was upgraded into fertilizer at several facilities and either retained for domestic use or exported. Jordan was the third ranked phosphate exporter in the world, after Morocco and the United States, and it had the capacity to produce well over 8 million tons annually. In 1986 phosphate sales generated US$185 million in income, which made up 25 percent of export earnings and gave Jordan a 10 percent share of the world market. Sales by volume in 1986 increased approximately 14 percent over the previous year, but profits rose only 4 percent, an indication of the depressed price for phosphates on the world market. In 1986 long-term agreements were concluded with Thailand and Yugoslavia that assured the added export of almost 1 million tons per year.

In 1985 the Jordan Phosphate Mines Company closed the country's original phosphate mine at Ar Rusayfah near Amman because it produced low-grade rock; this left major phosphate mines in operation at Al Hasa and Wadi Abu Ubaydah near Al Qatranah in central Jordan, and a new high-grade mine at Ash Shidiyah, forty kilometers south of Maan, where according to one estimate, reserves were more than 1 billion tons.

Among Jordan's major development projects was the construction of a US$450 million processing facility near Al Aqabah, completed in 1982, to produce monoammonium phosphate and diammonium phosphate fertilizer, and other chemicals such as phosphoric acid from raw phosphate rock. The project was envisioned as a boon to the extractive industry because it would increase value added in its major export commodity. Instead, it became an encumbrance as the prices of sulfur and ammonia (which Jordan had to import to produce the diammonium phosphate) rose while the price of diammonium phosphate on the world market slumped. Production costs of diammonium phosphate at various times between 1985 and 1987 ranged from 110 percent to 160 percent of world market price for the product. Nevertheless, Jordan remained cautiously optimistic about the long-term prospects for the fertilizer industry because of its geographic proximity to the large Asian markets. In 1985 Jordan exported more than 500,000 tons of fertilizer, primarily to India and China.

Water

The government was concerned that scarcity of water could ultimately place a cap on both agricultural and industrial development. Although no comprehensive hydrological survey had been conducted by the late 1980s, some experts believed that demand for water could outstrip supply by the early 1990s. Average annual rainfall was about 8 billion cubic meters, most of which evaporated; the remainder flowed into rivers and other catchments or seeped into the ground to replenish large underground aquifers of fossil water that could be tapped by wells. Annual renewable surface and subterranean water supply was placed at 1.2 billion cubic meters. Total demand was more difficult to project. In 1985 Jordan consumed about 520 million cubic meters of water, of which 111 million cubic meters went for industrial and domestic use, and 409 million cubic meters went for agricultural use. By 1995 it was estimated that domestic and industrial consumption would almost double and agricultural demand would increase by 50 percent, so that total demand would be about 820 million cubic meters. By the year 2000, projected demand was estimated at 934 million cubic meters. Jordan, therefore, would need to harness almost all of its annual renewable water resources of 1.2 billion cubic meters to meet future demand, a process that would inevitably be marked by diminishing marginal returns as ever more expensive and remotely situated projects yielded less and less added water. The process also could spark regional disputes--especially with Israel--over riparian rights.

The government had completed several major infrastructure projects in an effort to make maximum use of limited water supplies, and was considering numerous other projects in the late 1980s. The King Talal Dam, built in 1978 on the Az Zarqa River, formed Jordan's major reservoir. In the late 1980s, a project to raise the height of the dam by ten meters so as to increase the reservoir's capacity from 56 million cubic meters to 90 million cubic meters was almost complete. A second major construction project underway in 1989 was the Wadi al Arabah Dam to capture flood waters of the Yarmuk River and the Wadi al Jayb (also known as Wadi al Arabah) in a 17 million cubic meter reservoir. These two dams and innumerable other catchments and tunnels collected water from tributaries that flowed toward the Jordan River and fed the 50-kilometer-long East Ghor Canal. Plans called for the eventual extension of the East Ghor Canal to the Dead Sea region, which would almost double its length. In 1989 about fifteen dams were in various stages of design or construction, at a total projected cost of JD64 million.

By far the largest of these projects was a joint JordanianSyrian endeavor to build a 100-meter-high dam on the Yarmuk River. The project, which had been contemplated since the 1950s but had foundered repeatedly because of political disputes, was revived in 1988 after the thaw in Jordanian-Syrian relations and appeared to be progressing in early 1989. Called the Maqarin Dam in previous development plans, it was renamed the Al Wahdah Dam to reflect the political rapprochement that made construction feasible (Al Wahdah mean unity). The dam was to create a reservoir of 250 million cubic meters. The Jordanian estimate of the cost, which Jordan was to bear alone, was US$397 million. Independent estimates placed the figure at more than US$500 million. Building time was estimated at two years after the planned 1989 starting date, but new political problems threatened to stall construction. In 1988 the United States attempted to mediate between Jordan and Israel, which feared the dam would limit its own potential water supply; Syria, however, refused to join any tripartite negotiations.

In 1989 serious consideration was being given to two proposals to construct major pipelines to import water. Completion of either project could be a partial solution to Jordan's water scarcity. Because of cost, however, neither project was likely to be constructed in the near future. One project was to construct a multibillion dollar 650-kilometer-long pipeline from the Euphrates River in Iraq. The pipeline would supply Jordan with about 160 million cubic meters of water per year. The other project, on which feasibility studies had been conducted, was to construct a 2,700- kilometer-long pipeline from rivers in Turkey, through Syria and Jordan, to Saudi Arabia. Jordan could draw an allotment of about 220 million cubic meters per year from this second pipeline. The estimated US$20 billion cost of the latter project was thought to be prohibitive.

Potash

Potash was the other major component of Jordan's mining sector. A US$480 million potash extraction facility at Al Aghwar al Janubiyah (also known as Ghor as Safi) on the Dead Sea, which was operated by the Arab Potash Company, produced 1.2 million tons of potash in 1987 and yielded earnings of almost US$100 million. The facility processed the potash into potassium chloride. Future plans included the production of other industrial chemicals such as potassium sulphate, bromine, magnesium oxide, and soda ash. As in the case of phosphates, India was a major customer, buying almost 33 percent of output. Jordan was the world's lowest cost producer, in part because it used solar evaporation. There was lingering concern that possible Israeli construction of a Mediterranean-Dead Sea canal would dilute the Dead Sea, making extraction far more expensive.

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