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Jordanian and Chinese Consortium to Build Oil Pipeline: Ministry of Iraq



A Jordanian-Chinese consortium was been awarded the contract to build and operate a crude oil export pipe that will pump 1 million barrels per day to the Aqaba, a port in the Red Sea according to a source who is well-informed about the progress of the project. 


The Chinese companies and Mass Group Holding, the Jordanian Industrial company--all submitted a proposal to the Iraq Ministry of Oil on "a build, own, operate and transfer contract basis." Crude will be supplied to the government-owned South Oil Company from the fields awards in the Iraq's first and second licensing rounds. 


However, either the State Oil Marketing Organization or Somo, all subsidiaries of the Iraq Ministry of Oil will sell crude from Aqaba. The consortium will then receive a service fee for the initial construction and operation costs, which have been previously agreed to at a fixed price. The next step for the consortium is for Baghdad to begin negotiations and to financially close the project during the beginning of 2017, meaning procurement, mobilization, procurement of long lead time items and engineering could mean the project begins in July of 2016


The success of this project is important for Baghdad as it will provide an additional export pipeline to the Persian Gulf. However, Jordan will also benefit as very little oil reserves and neighbouring Egypt is currently attempting to access new energy sources and could eventually access Iraqi oil and gas re-exported from Aqaba.

The previously planned route for the pipeline as also changed as plans have had to consider territory controlled by the IS as the original plans had the pipeline running through Basra to the north of Iraq, the city of Haditha then to Aqaba. 

 The pipeline has now been extended another 200-300 km in order for it to stop at Najaf, south of Baghdad and running parallel to the Iraq-Saudi border then making its way to Jordan. The BOOT contract will cover the Najaf to Jordan segment and will be project managed by SNC Lavalin, a Canadian engineering company. Jordan however, will include a tie-in for a potential 150,000 barrel per day pipeline to Zarqa refinery. The Iraq Ministry of Oil will also build a 2.25 million barrel per day segment from Basra to Najaf. 

While the entire project for the pipeline must be completed before BOOT segment reaches its final close, it is not entirely clear how the Iraqi government will fund the project due to the financial pressures experienc
ing from IS and the low global oil pricesThe entire tender process for this pipeline has to be completed before the BOOT segment reaches financial close.


But it is not clear how the government will finance the project with the continuance of low global oil prices and a war against IS consuming most of their revenue. 



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