It has been a long time in coming but by the end of 2008, Amman hopes to award its first concession to develop Jordan’s oil shale resources. By 2020, it plans to bring on stream the first commercial oil shale operation in the world.
Lacking conventional hydrocarbon resources, Jordan’s economy is struggling to cope with the burden of importing oil and gas. But the flip side of the oil price boom is that the high cost of oil is finally making the development of oil shale technology – which still requires massive investment – a more realistic proposition.
“We have been trying unsuccessfully to develop our oil shale for two-three decades,” says Maher Hijazin, director general of the Natural Resources Authority (NRA). “It did
not fail because of any lack of commitment but because of the technology, the interest of [foreign] companies and the price of oil. The increase in the price of oil has created renewed interest in oil shale and other alternatives.”
If the technological and financial barriers to oil shale extraction can be overcome, Jordan could quickly move from being a resource-poor country to a resource-rich one. “There is probably two-thirds to three-quarters of the country that is covered by oil shale at different depths,” says Hijazin. “The exploration we have done has shown that the amount we have is huge. It puts Jordan in the top five countries in the world in terms of oil shale.”
Some of the reserves are more difficult to access than others. “In the middle and the south of Jordan, the oil shale begins near the surface, about 40-60 metres deep,” say Hijazin. “In the north and east, it is a deeper play.”
The NRA estimates that the kingdom has about 40 billion tonnes of shallow oil shale, which would yield about 4 billion tonnes of oil, equivalent to almost 30 billion barrels or three-quarters of Libya’s reserves. The deeper reserves could yield even greater amounts.
Most of the progress to date has been in assessing the feasibility of developing the
shallower resources. Four international companies – from Brazil, Estonia, Canada and Russia – have signed headline agreements to carry out feasibility studies. If approved, the next step will be to take the studies to the bankable feasibility stage. This would enable them to secure financing to carry out the work, after which they would be granted an exploration-and-development concession by the NRA.
“We hope to conclude the first concession agreement by the end of this year or early next,” says Hijazin. “The Estonians submitted feasibility studies around the end of April, and we are in the process of evaluating them. We are waiting for the other companies to submit their studies, which should happen towards the end of the year. We have also put forward a request for proposals for four other blocks.”
Work is also under way to evaluate the prospects for the extraction of the deeper-lying oil shale. Having signed a headline agreement in 2006, the UK/Dutch Shell Group is now in the process of negotiating a multi-billion-dollar concession agreement with the NRA.
Although pilot projects are under way in Brazil and Estonia, oil shale has not been tapped commercially anywhere in the world. “We think we will be the first in the world to do it,” says Hijazin. “The Estonians have estimated that it would take 10 or 11 years to complete the project, but we are still waiting for the others to respond. Maybe they will say they can do it in seven or eight years.”
Getting the oil shale out of the ground is just the first part in a long process to turn it into a useful product. “What you produce from shale oil is not consumable,” says Hijazin. “You can’t just send it [all] to a refinery. You need a tailor-made upgrading facility that suits the oil shale you are extracting from a particular area.”
A limited amount can be refinery processed, but not more than 2 per cent of the refinery’s capacity. With the 36,000-barrel-a-day (b/d) facility at Zarqa being Jordan’s only refinery, the impact would be negligible.
The other key problem is financing. Given the current problems with scaling up oil shale facilities, the capital cost per barrel is huge. The NRA estimates that a 36,000-b/d oil shale project would cost $6bn, including $2bn for an upgrading facility to convert the resource into one that can be processed in a refinery. Add to that the unproven nature of the technology and banks might be wary of funding such an investment.
Despite these substantial barriers, the NRA is still confident its plans will reach fruition. “According to our hopes, there is an 11 out of 10 chance that it will work,” says Hijazin. “But even if we are being realistic, I would still say there is a seven out of 10 chance of a scaled up oil shale project in Jordan in the next 10 to 15 years.”
Oil shale production to start – 2020
Cost of oil shale deposit – $6bn
Oil to be derived from shale – 30 billion barrels