Iraq dampens talk of Jordan crude pipeline progress

Market: Crude oil
17/04/22

Iraq's oil ministry has poured cold water on prospects of an imminent start to construction of the 1mn b/d crude export pipeline from Iraq to Aqaba in Jordan, saying that the future of the project will be decided not by the current government, but the next government which the country is struggling to form.

"The project is still under technical study and neither has it been awarded, nor has a contract with any party been concluded", the ministry said late Saturday.

This comes just three months after Jordan's energy ministry expressed hope that work on the pipeline could soon begin after the project had secured the backing of the Iraqi government.

But Iraq's oil ministry now says the cabinet has only approved the "strategy and roadmap" for the project's implementation, rather than any binding agreements, and that the next steps towards its implementation will be left for the new government to take, once it is elected and in office.

How long that could take, however, is unclear as the country remains mired in a bitter political deadlock that has seen the government formation process stretch into its seventh month, a good deal longer than it typically takes, with no clear end in sight.

The crude export pipeline would consist of two sections: a 2mn b/d capacity pipeline extending from Basra to Haditha near Syrian border, which would transport oil to Iraqi refineries and power stations. The second would be a 1mn b/d pipeline extending from Haditha to Aqaba in Jordan's south.

The Iraqis and Jordanians had previously agreed to construct the Haditha-Aqaba section on a build, own, operate and transfer (BOOT) basis. But the ministry announced Saturday that the entire project, from Basra to Aqaba, would be built using an engineering, procurement, construction and financing (EPCF) model.

The Iraqi ministry now says the project cost "will not exceed $8.5bn," down from a previous estimate of "below $9bn." Cost and financing has been a major barrier for the project for many years, with both Iraq and Jordan looking for ways to cut expenses.

The Basra to Aqaba pipeline would give Iraq an alternative export route, allowing it to pump crude to the Red Sea and through Suez to Europe and the Atlantic or to Asia, which accounts for the vast majority of its shipments.

By Ieva Paldaviciute

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