VZCZCXYZ0000
RR RUEHWEB

DE RUEHAM #1161/01 1081529
ZNR UUUUU ZZH
R 171529Z APR 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 2284
INFO RUEHEG/AMEMBASSY CAIRO 3619
RUEHTV/AMEMBASSY TEL AVIV 1146
RUEHDM/AMEMBASSY DAMASCUS 3869
RUEHJM/AMCONSUL JERUSALEM 4984
RUEHRH/AMEMBASSY RIYADH 1937
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS AMMAN 001161 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR NEA/ELA 
STATE PLEASE PASS TO USAID 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ECON EINV JO
SUBJECT:  Restructuring of Jordan's Oil Sector Lagging 
 
Sensitive but unclassified; please protect accordingly. Contains 
proprietary information - not for distribution outside the USG. 
 
Refs: A) Amman 628 
      B) Amman 233 
      C) 07 Amman 2442 
      D) 07 Amman 1452 
 
¶1. (SBU) SUMMARY: Jordan's plans to open up the oil sector to 
competition are running behind schedule.  The draft Minerals and 
Petroleum Law -- the main legislation that will set up a regulatory 
framework for opening up the sector -- is still pending Cabinet and 
parliamentary approval.  Before complete liberalization of the 
market, the law would allow for a five-year transitional market 
structure, including a logistics company and four marketing 
companies to import and distribute fuel products to retailers.  The 
GOJ plans to move ahead with this new structure before approval of 
the law by announcing tenders within the month.  End Summary. 
 
Draft Minerals and Petroleum Law Pending 
---------------------------------------- 
 
¶2.  (SBU) Kholoud Ahmad Mahasneh, Director of the Industrial Energy 
Department at the Ministry of Energy and Mineral Resources (MEMR), 
discussed ongoing plans to restructure and liberalize the 
hydrocarbon sector in Jordan during an April 16 meeting with 
Econoffs.  Although Jordan aimed to have a regulatory framework in 
place and to open up the upstream and downstream markets by March 
2008 - when the 50-year concession of the Jordan Petroleum Refinery 
Company (JPRC) for importing, transporting, marketing, and 
distributing fuel products ended - Mahasneh admitted that these 
original plans are now behind schedule by about a year (ref B). 
 
¶3.  (SBU) Mahasneh confirmed that the draft Minerals and Petroleum 
Law was still under review in the Prime Ministry's Legislation and 
Opinion Bureau.  Assuming that the law receives Cabinet approval 
within the next month, MEMR hopes that it will be included on the 
agenda for the next potential special parliamentary session in June, 
although a number of competing high-priority laws could result in 
its being deferred until the normal parliamentary session in 
October.  This law would effectively establish a new regulatory 
commission, similar in mission to the U.S. Federal Energy Regulatory 
Commission, to guide activities within the sector in a regulated 
manner.  The Commission would also take over some of the Natural 
Resource Authority's current responsibilities to grant production 
sharing agreements, concessions, and other mining licenses. 
Mahasneh said that MEMR also drafted regulations for the law, which 
provide more detail on its implementation, but the GOJ would most 
likely need technical assistance in reviewing and refining the 
regulations, as well as drafting additional directives. 
 
Jordan's Refinery Remains 
Sole Provider of Fuel Products 
------------------------------ 
 
¶4.  (SBU) Given the lag in opening up the market, JPRC signed a 
service agreement with the GOJ in March 2008, valid until December 
31, 2008 (ref A).  Mahasneh noted that in the past, the GOJ was 
responsible for paying for and transporting crude oil to JPRC's 
refinery in Zarka, but under the new agreement, JPRC has taken over 
those responsibilities.  In addition to the service agreement, JPRC 
reportedly signed a settlement agreement with the GOJ to sell its 
assets in Aqaba and at Jordan's three civilian airports to the 
Jordanian government.  According to Mahasneh, these assets will be 
used by a future logistics company, of which the government will 
have a 20% share. 
 
Planning to Move Forward with New Market Structure 
--------------------------------------------- ----- 
 
¶5.  (SBU) The logistics company is one of the new entities to be 
established in Jordan as part of a transitional market structure 
before completely opening up the sector.  The logistics company will 
provide transportation and storage facilities, but will not own or 
trade products.  Mahasneh said the GOJ will also give two- to 
three-year licenses to four other marketing companies, one of which 
will be owned by JPRC.  NOTE: Three distribution companies will also 
be established specifically for liquefied petroleum gas (LPG).  END 
NOTE.  The four marketing companies will be responsible for 
importing products or buying products from JPRC or future refineries 
in Jordan.  Mahasneh clarified that JPRC will be required to sell to 
the other three marketing companies -- and the marketing companies 
will be required to buy -- 75% of the refinery's production. 
Meanwhile, JPRC continues to advertise for and accept bids for a 
strategic partner to upgrade and expand its capacity, as well as 
build a crude oil transportation pipeline from Aqaba to Zarka (refs 
B, C, and D). 
 
¶6.  (SBU) The future marketing companies will supply products to 
wholesale and large industrial customers.  They will also be able to 
own retail stations.  Mahasneh said that the existing gas stations 
will be divided into four tranches, according to volume and 
location, and each marketing company will be allocated one tranche, 
effectively requiring the gas stations to buy from that designated 
company. 
 
¶7.  (SBU) Mahasneh said that although the draft law provides for 
this transitional market structure and regulatory framework, the 
government cannot wait for parliamentary approval of the law, which 
might still take some time.  Therefore, she said that plans were 
moving forward to establish this new structure, and tenders should 
go out in the next month.  The government plans to include in each 
contract provisions similar to those in the draft law to protect 
investors and provide regulatory guidelines that will hold even if 
the final law changes. 
 
Visit Amman's Classified Website at: 
http://www.state.gov.sgov.gov/p/nea/amman/ 
 
HALE