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Economist: Basra-Aqaba Oil Pipeline Will Cost Iraq A Sustainable Loss Of $4.9 Billion Annually

Baghdad The specialist in economic crisis management, Ali Jabbar Al-Fraiji, confirmed that Iraq pays the value of the Iraqi crude oil pipeline project from Basra - Aqaba and loses a third of its ownership to Jordan, adding to it a sustainable loss of $4.9 billion annually.

Al-Fraiji said in a statement to the National Iraqi News Agency / NINA / that "Iraq needs this diversity in oil export channels and outlets by extending oil pipelines with Jordan, Saudi Arabia, Iran, Turkey, Syria...etc, but this economic vision must be governed by a number of factors, including the size of the benefit from each pipeline, will it be useful as revenues for the state treasury in the long run, and is it possible to ensure balanced political and economic relations with these countries, among other important factors.”

He pointed out that "an Iraqi oil pipeline will extend from the Basra fields along the Saudi border to Aqaba, it will be built according to the Build, Operate and Transfer of Ownership (BOT) system for a period of 15-20 years, and then the pipeline will be owned by the two countries," noting that the idea of oil linkage between Basra-Aqaba is not a product of the current circumstances and changes, but rather an old project that Iraq resorted to during the Iraq-Iran war after its oil facilities were bombed and destroyed.”

He added: In 2013, Iraq signed an agreement with the Jordanian side, an agreement for the project of extending the Iraqi crude oil pipeline from Basra to the ports of Aqaba on the outskirts of the Red Sea coast, at a cost of about $18 billion, and a length of 1,700 km with nine giant pumping stations, six of which are inside Iraq and three in Jordan, with an average export capacity of one million barrels per day, approximately 150 thousand barrels, of which will go to equip Zarqa plant in Jordan, and the rest of it will go for export, with the possibility of adding another natural gas conveyor line with a capacity of 100,000 cubic meters as an initial stage.

The specialist indicated that "such strategic projects need international guarantees for their continuity and are not subject to the turbulent political mood in the region, and the rates of transportation fees for this quantity will be subject to a bill that Jordan will receive for its price, which is much more expensive than the bill for transporting Iraqi oil through Basra directly, or even through Ceyhan port, and this is a loss, and the oil transportation tax will not be affected by the rates of oil prices, down or up.”

Al-Fraiji explained: "Iraq will start owning the pipeline after 15 years, and the part that is in Jordan will return to the ownership of Jordan according to the contract, meaning Iraq will pay from the Iraqi oil revenues within the part located in Jordan, and with a simple calculation process, an export rate of 850 thousand barrels per day through the pipeline. The Basra-Aqaba pipeline, by adopting a price of $50 per barrel as a selling rate for long years, the total amount will be $31 million (revenue) per day after deducting production costs of $9 per barrel, with export fees of $4.5 per barrel through Jordan, the net revenue will be $11.3 billion annually, calculating the value of the project at $18 billion, Iraq will lose 30% of the value of the pipeline’s ownership to Jordan added according to the agreement, transferring the ownership of the part of the pipeline to Jordan (approximately $6 billion) after the end of the operating period according to the contract, with another loss (- $16) for each a barrel given to Jordan according to the agreement, 150,000 barrels per day go to Jordan for the same period at an arithmetic rate of 13.6 million dollars per day and an annual revenue rate of approximately 4.9 billion dollars annually. Iraq’s loss from reducing the price of oil to Jordan, and this is considered a continuous (sustainable) loss in addition to the maintenance bill and depreciation that must be accounted for a project of this size (which Iraq will bear)

Source: National Iraqi News Agency