Shell, Jordan to Sign Production Sharing Deal

AMMAN (Dow Jones Newswires), July 10, 2008

Royal Dutch Shell PLC (RDSB) is in the final stages of striking a production sharing agreement with the Jordanian government to explore oil from the country's vast oil shale, a senior official at the state-run Natural Resources Authority said Thursday.

"We are about to complete drafting a production sharing agreement with Shell and expected to sign the agreement initially in September this year," NRA's assistant director-general for mining and petroleum, Hisham al-Rabi, told Dow Jones Newswires.

The PSA needs the approval of the Jordanian government and parliament, he said. Shell is expected to invest more than $20 billion in the project over a period of 20 years. The project would cover an area of 22,000 square kilometers, al-Rabi said. The area that Shell would explore stretches from northern Jordan and west Safawi to Azraq in the middle and Sirhan and al-Jafer in the south.

The project could produce thousands of barrels of oil from oil shale, and the kingdom holds some 40 billion metric tons of proven oil shale reserves, a figure which could be doubled, he said. Under Jordanian production sharing terms, the contractor receives 60% of oil production or gas equivalent up to 10,000 barrels a day, with a sliding scale to a 35% share of production over 100,000 barrels a day oil equivalent.

Oil shale refers to sedimentary rocks, mostly carbonates to chalk marl which when heated to above 500 degrees Celsius produces oil and gas. Oil produced from oil shale is mainly used for generating electricity.

Al-Rabi said the Jordanian Natural Resources Authority is also holding talks with an Estonian firm called EESTI Energy, specialized in oil shale, to finalize a production sharing agreement to explore oil shale at Attarat Um El-Ghurdan in southern Jordan. He gave no figure on the cost of the project and how much oil or gas it would produce, but he said oil or gas produced from this southern area would be used for power generation.

Jordan had signed four memorandum of understanding with four companies to carry out technical and feasibility studies on Jordan's oil shale, he said. They are: The International Cooperation for Oil Shale, a Jordanian-Saudi joint venture company with $300 million capital, Oil Shale Energy of Jordan, a Jordanian company which submitted its bid in cooperation with local banks and EESTI. The remaining two are U.K.-registered Jordan Energy and Mining Ltd., or JEML, and Petroleo Brasileiro S/A (PBR).

Jordan, home to around six million people, imports around 95% of its energy needs and is striving to curb its high oil imports bill, which reaches some $1 billion a year. The Jordanian government decided Wednesday to increase fuel prices by 4-9% as part of the government's plan to end fuel subsidies and face up soaring oil prices. Jordan is currently producing only 25 barrels of crude oil a day and some 22 million cubic feet of gas, al-Rabi said.

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