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Shale oil could save resource-poor Jordan

May 23, 2012 at 1:45 PM   |   Comments

AMMAN, Jordan, May 23 (UPI) -- Jordan, traditionally energy-barren, sits on shale oil deposits that are reported to be the equivalent of 50 billion barrels of oil.

High production costs have made extracting this resource way too expensive for the Hashemite kingdom -- until now.

But extracting the oil will take time, and that means Jordan will have to keep on relying on its oil-rich neighbors such as Saudi Arabia for energy for the time being.

The price tag for that is likely to be Jordan will have to help the Persian Gulf monarchies bring down the embattled Syrian regime, a highly dangerous political move that could easily backfire on Jordan's harried monarchy.

Jordan's energy insecurity only heightens its political vulnerability as the 14-month-old revolution in Syria, the kingdom's often aggressive neighbor to the north, drags on, threatening region-wide instability.

The kingdom has been under pressure from the gulf to back Syrian rebels against the Iranian-backed regime in Damascus

High oil prices, an increasingly shaky economy and mounting protests against the Hashemite throne as the turmoil of the Arab Spring infects the country have thrust Jordan into a dangerous position.

"Due to its small economy, lack of import infrastructure and relative absence of domestic energy reserves, Jordan's heavy reliance on subsidized energy imports from its neighbors has left the kingdom in a precarious position," observed global security consultancy Stratfor.

The reduction of gas supplies from Egypt, via a much-bombed pipeline across the Sinai Peninsula, and Jordan's growing reliance on higher-priced crude oil-based alternatives from Saudi Arabia have added to the woes of King Abdullah II.

His financially strapped government is having to consider imposing a highly unpopular tariff on electricity supplies to cover the increased cost of energy imports.

"This … could further weaken the Jordanian government at a time when the monarchy is already confronting mounting internal criticism over stalled political reforms and economic mismanagement," Stratfor noted.

"As Jordan's dependence on Saudi Arabia grows, Riyadh may use Amman's vulnerability to coax Jordan into taking a more active role against the Syrian regime in exchange for financial support."

Jordan and Syria have a history of enmity that dates back to the end of World War I when the region once ruled by the Ottoman Turks was divided up between Britain and France.

After that conflict, Britain gave the Hashemites, once rivals of the House of Saud, what was then known as Transjordan.

Syria was briefly a Hashemite kingdom, but the French, who were given a League of Nations mandate over Syria, booted out the pro-British King Faisal.

Jordanian animosity toward Damascus heightened in 1958 when the Syrian-backed Baath Party in Iraq, where the British had installed Faisal, overthrew the monarchy, slaughtering the royal family.

The Jordanian monarchy views Iraq as a lost Hashemite kingdom, while Damascus considers Jordan part of historical Greater Syria.

Abdullah has sought to avoid being dragged into the burgeoning bloodbath in Syria in which the Sunni majority seeks to bring down the regime of President Bashar al-Assad, which is dominated by the minority Alawite sect of Islam.

If Damascus retaliated against Jordan's alliance with Saudi Arabia and the gulf monarchies, as it seems to be doing against Lebanon by stirring up sectarian violence, the kingdom would likely be engulfed and the monarchy placed in extreme jeopardy.

If the Hashemites fell, that contagion could spread to the Gulf monarchies, which supply about one-fifth of the world's oil, with potentially disastrous consequences.

It's ironic then that the kingdom has found itself sitting atop the fourth largest oil shale reserves in the world.

It's been unable to exploit such riches because the cost of extraction, $65 a barrel, is prohibitive -- until now. But it's going to be a race against time.

"Rising Saudi oil costs have made it more economically viable," Stratfor said.

The recent boom in shale oil production in the United States and Canada, and the massive boost to their oil output, has been made possible by new drilling technologies.

Amman announced May 10 it expects to produce the first barrels of shale oil on stream by the end of the year. Most of the deposits are in central and southern regions around the Dead Sea.

Jordanian officials say Amman plans to invest $20 billion in shale oil production over the next few years, presumably mainly through hefty investment by international companies like Royal Dutch Shell.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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