Jordan has rich shale deposits waiting to be tapped

Jordan is reported to have huge shale reserves beneath its territory but lacks funds to fully explore this wealth. Given this scenario, it will have to go on depending on Saudi Arabia for its oil requirements while it is building up funds through investments from foreign firms.

The rise in current crude oil prices coupled with a lack of its own oil reserves could threaten the country’s stability. Experts also note that Jordan’s over-reliance on Saudi oil could put itself on the spot as it may be pressured into helping its oil-rich neighbor in toppling Syria’s government. It’s certainly a risky situation that may do more harm than good to the country, especially as the Syrian crisis has been going on for more than a year now.

Stratfor, a global security consultant, said that Jordan is too dependent on oil subsidies from its rich neighbors. This overdependence can further weaken its position and expose it to unwanted risks.

With higher crude oil prices, King Abdullah II is pressured to impose high tariff rates on electricity – a decision that would cover costs of imported oil but would also certainly infuriate his constituents.

“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.”

Hostilities between Syria and Jordan started since the close of the First World War. Both were governed by the Turks but were later split between France and Great Britain. The gap between the two countries widened in the late 50s when Iraq’s Baath political party, which is still well favored by Syria, ousted King Faisal who is, in turn, strongly supported by the king of Jordan.

King Abdullah II knows full-well the dire consequences of immersing itself in Syria’s battles with the Sunni group if Saudi applies pressure on Jordan.

One way out is tapping Jordan’s shale – reportedly the fourth biggest shale reserve in the world. This has been in Abdullah’s agenda, for it will surely boost its oil reserves. However, the cost of releasing shale is $65 per barrel. With the present crude oil price per barrel, resulting marginal profits may be too narrow to make such development economically feasible.

Still, Amman declared early in May that it may release the first batch of shale oil by the close of 2012. Jordan’s government officials disclosed that Amman is investing about $20 billion for the production of shale, but it may rely heavily on Royal Dutch Shell for funding.