Arab News:
Taylor Luck
AMMAN - The existence of commercially viable oil in Jordan has long been a dream for many.
In an area surrounded by oil-producing countries, international companies and the government alike have searched for oil over several decades.
After years of disappointment, many came to accept that the Kingdom is home to little or no oil reserves.
But with recent claims of the possibility of Jordanian oil, and a parliamentary committee examining the issue, the subject has been elevated to a national discourse steeped in controversy and unanswered questions.
The issue dates back to 1996, when the Natural Resources Authority (NRA) signed a Production Sharing Agreement (PSA) with US company Trans-Global to explore for oil in the Dead Sea area.
The agreement, which was ratified by Parliament in 1997, gave the company the concession to explore the area in three phases over several years.
Expectations were not high due to the geographic nature of the rift valley, as well as the rough terrain, which are unfavourable for oil exploration, according to experts.
Over the next few years, the firm dug four wells at Isaal and Wadi Mujib, some thousands of metres deep, in hope that the rift valley would yield any positive results.
According to the company, logging data and technical studies of the wells revealed huge oil traps of hydrocarbons with significant commercial potential and large oil pays, the solid technical indicators of a major oil discovery.
On August 15, 2005, as per the PSA, the company said it officially informed the NRA of its discovery, but the authority declined to review the studies, according to Trans-Global, which felt there was little interest on the part of the NRA administration to follow through.
“This is the exact opposite of how any petroleum ministry in the world would respond to the discovery of oil,” Trans-Global General Manager Nazeeh Abraham told The Jordan Times.
“We claimed a significant oil discovery, and instead of developing it they denied it. We then faced obstructions every step on the way, preventing us from starting a large accelerated drilling development programme,” he added.
Frustrated with the lack of interest from the authority, Trans-Global announced the discovery during the 9th International Geological Conference of the Jordanian Geologists Association in Amman in April last year.
The announcement created an uproar and came as a shock to the NRA.
“They went public without ever informing us, which is a breach of the PSA. We were only told of a technical discovery, which doesn’t mean much in the oil business,” NRA Director Maher Hijazin told The Jordan Times.
“We have all the documents to prove that there is no discovery,” he stressed.
Industry experts
Although the announcement was shocking to many, it came as no surprise to Jordanian Geologists Association (JGA) President Khaled Shawabkeh.
He claimed that the NRA drilled at least five wells in the area in the 1990s, and found oil in different quantities, although their commercial viability was not verified.
Lack of support and technical difficulties brought on by the area’s topography prevented the authority from any further exploration, and the subject was shelved, he said.
“In my view, Trans-Global has made an oil discovery. The quantity and commercial quality of this discovery should now be explored,” the JGA president stressed.
Weatherford, Reeves Logging Ltd., one of 14 third-party companies that performed assessment studies for Trans-Global on the Isaal and Wadi Mujib wells, said it could not confirm or deny the existence of oil in the area, as their only purpose was to log data, not analyse it.
Another industry source, however, told The Jordan Times that the independent third-party studies pointed to “a strong possibility” of commercially viable oil in the Dead Sea area.
Concession changes hands
In order to expand its activities to further exploration and large-scale drilling, Trans-Global sought to bring an investor on board.
The company brought in three technically competent and established investors from the region who were rejected by the NRA, according to Shawabkeh, who was working for the authority at the time.
The investor that the authority eventually accepted was Porosity Ltd., a company formed and backed by Lebanese billionaire Ayman Hariri.
The company was created shortly before signing an agreement late 2006 with the NRA and Trans-Global, giving it 80 per cent of the oil concession, according to Porosity.
Porosity was tasked with expanding on exploration wells in the area and building on Trans-Global’s previous work under a farm-out agreement, but the two firms soon had a falling out over the management of the site and the existence of oil in the vicinity.
Since the announcement last spring, Porosity CEO Moiffak Hassan consistently challenged the validity of Trans-Global’s discovery claims.
“In the PSA, discovery is well-defined as a well that is capable of producing oil at the surface for a certain period of time. No such discovery has been made in the area so far,” he stressed.
Hassan, however, had performed a feasibility study on the wells himself, when he served as a consultant to Trans-Global in 2005 prior to being appointed Porosity CEO.
Industry experts indicated that his study supported Trans-Global’s technical discovery.
Unwilling to comment on the study, Hassan remained sceptical of the claims.
“If Trans-Global did find oil in commercial amounts, why would they sell 80 per cent of the concession away?” he added.
According to Nazeeh Abraham, the oil firm had few options in choosing its partner or the terms of the farm-out agreement.
“NRA administration gave information to other investors that were designed to discourage them from working with us and to undermine our credibility as a company,” Abraham charged.
Hijazin dismissed the claims, pointing out that Porosity was the only company to come forward and apply for the concession.
“All paper submitted for investors were responded favourably according to the PSA, we have no records of any others,” Hijazin told The Jordan Times.
Future of the concession
Under the farm-out agreement, Trans-Global requested Porosity to commence drilling by April 2007, according to both firms.
A year later, the company has yet to start drilling, possibly placing both oil firms’ claim to the area at jeopardy.
As per the PSA, if an actual oil discovery is made, the concession holder has the right to develop the area for 25 years, according to the NRA.
If no further exploration commences by the end of the year, however, the oil concession is considered null and void and is then opened to new investors, according to the agreement as explained to The Jordan Times by the authority.
Hassan said the delay was due to the lack of a certified oil rig, pointing out that Porosity’s new rig recently arrived in Aqaba, and will be moved to the Dead Sea this week.
Some in the Arabic press have questioned whether the delay has been intentional, in order to open the concession to other companies, a claim Hijazin called “unfounded”.
“They have the entire year to dig, you can’t declare someone guilty of something that hasn’t even occurred,” he said.
Investigations and lawsuits
Trans-Global has taken the case to the International Centre for Settlement of Investment Disputes, claiming that its contractual rights and investments were undermined.
World Bank arbitrators will consider whether NRA and Porosity’s actions violated the US-Jordan bilateral investment treaty and Trans-Global’s claims.
Pointing out that it spent $29 million and several years investing in the high-risk area, Trans-Global, has placed its damages at $700 million.
The question of whether Trans-Global’s investment was undermined was deemed serious enough that late last year several US congressmen and women, from Texas to Michigan, expressed their concern, requesting further information from the Jordanian ambassador to the US.
The possibility of oil in the Dead Sea area also dominated Parliament deliberations before it went into recess on April 1, with many MPs demanding answers.
Deputy Yousef Qarneh (Amman, 2nd District) stressed that under the law, the PSA has to be renegotiated between NRA and its new partner Porosity and sent to Parliament for approval, adding that many details still need clarification.
“The first thing we need to determine is do we have oil? And if so, is it feasible? If the NRA knew of the existence of oil, then why weren’t we told? These are some major questions that have to be answered,” Qarneh told The Jordan Times.
The NRA stressed that it has done no wrong.
“What we have done is in the interest of the country, what we have done is the legal and constitutional thing,” Hijazin said, stressing that the controversy has been generated by the press.
Porosity CEO Hassan agreed.
“It is unfortunate that some parties are taking advantage of street sentiment at a time when fuel costs are skyrocketing,” he said.
A special parliamentary committee formed to investigate energy transactions in the Kingdom met for the first time last week and will spend the next several months examining whether the NRA was prudent in its treatment of Trans-Global, and the validity of the US company’s claim.
Until then, the search for oil, and answers, continues.
No comments:
Post a Comment