Iraqi Oil Exports to Jordan Resume: A Closer Look at Trade, Value and Future Prospects, 2 OCT
The Iraqi Oil Marketing Company (SOMO) has recently revealed that the average price of crude oil exported to Jordan was $78 per barrel in September. This figure is $14.05 less than the official selling price, indicating a significant discount in favor of Jordan. The total oil exports to Jordan for the month reached 449,423 barrels, averaging 15,000 barrels per day, and amounted to approximately $35 million in value. The resumption of oil exports follows a memorandum of understanding for crude oil supply between the Iraqi Ministry of Oil and the Jordanian Ministry of Energy and Mineral Resources, which was approved by the Iraqi Cabinet in March 2023.
A History of Oil Trade between Iraq and Jordan
Historically, Jordan has depended on oil supplies from Iraq to meet a portion of its domestic demand. In September 2021, Jordan began receiving oil shipments from the Kirkuk fields under an agreement to purchase 10,000 barrels of crude oil daily. However, this supply was halted in February 2022 due to the expiration of the contract, only to resume in April, pause again in August, and then resume once more in September 2022.
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The Iraqi Cabinet’s approval of the memorandum of understanding signifies an extension of this agreement set for one year, effective from its implementation date. The two countries have since reached an agreement to increase monthly oil imports to 450,000 barrels from the previous 300,000 barrels. Iraq facilitates these exports through tanker trucks, delivering approximately 15,000 barrels daily.
The Impact of Oil Trade on Jordan’s Economy
The resumption of oil imports from Iraq has significant implications for Jordan’s economy. The quantity of oil imported from Iraq constitutes about 7% of Jordan’s needs for crude oil. The discounted rate at which Iraq sells its crude oil to Jordan ($78 per barrel, as opposed to the official selling price of $92.05) represents a substantial economic benefit for Jordan. It is estimated that Jordan makes about $25 million in revenues each year due to this discount.
Future Prospects
Looking forward, the continuation and potential expansion of this oil trade agreement between Iraq and Jordan could have considerable economic and political implications. It not only strengthens the bilateral ties between the two countries but also aids in increasing the value of trade between them. This agreement also represents a strategic move for Iraq, which needs to diversify its export outlets. Jordan offers a reliable and stable partner in this regard.
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Furthermore, the potential implementation of the Iraq-Jordan Export Pipeline, a project that has been proposed since 1980, could further increase the capacity for oil trade between the two countries. This pipeline, stretching from Basra in Iraq’s southernmost tip to Jordan’s Red Sea Port of Aqaba, can transfer around 1 million barrels a day, significantly boosting the volume of oil trade.
As the dynamics of global oil trade continue to evolve, the relationship between Iraq and Jordan in this sector will undoubtedly remain a key focus for policymakers, analysts, and industry stakeholders.
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