Oil, oil, go away; come again some other day

Jordan is on its way to becoming the first country in the world where parliament will discuss whether or not there are petroleum deposits in its territory. Typically, this is the job of oil companies or of state geological surveys. But, since such an announcement is not forthcoming, well, then maybe our parliamentarians can do it.

I can see it. They will collect all the aeromagnetic surveys, the geophysical seismic sections, the geological maps, the well data (cuttings and the well log data), and after pouring over all of this data, they will develop depositional and structural models of the geology of Jordan. After that, they will vote on whether there is any oil in Jordan or not.

Obviously, this is the most ridiculous stunt that parliament can pull. But how did we get here?

Exploration for oil in Jordan began in the 1940’s, although none of the efforts was really whole hearted, because oil companies were more interested in the giant oil reservoirs of the Arabian Gulf (the nearest oil giant is about 1000 km away). Some interesting information can be found on page 189 here). Things only became interesting when Trans-Global Petroleum came into the picture in 1997. Their area of interest was in the southern basin of the Dead Sea. Trans-Global has had a rough relationship with the Jordanian government, with a culmination of a lecture at the Jordanian Geologists Association conference last year. During the conference, Trans-Global President, Nick Abraham, announced that his company has discovered massive amounts of oil in the concession area. The Natural Resources Authority was not amused, and tried to take the concession away from them. Later, Trans-Global backed away from the claim of finding oil. Subsequent developments include a newly established Hariri company (Porosity) gaining an 80% share of the Trans-Global concession through NRA coercion and Trans-Global suing the Jordanian government for 700 million dinars. A this stage, observers started to wonder what the intentions of the NRA are.

And to add another nail to the coffin of credibility of the NRA, a previously closed exploration well in the Serhan Basin in eastern Jordan started leaking oil. At the time, MP ‘Awwad Zawaideh (southern Bedouins) said that people are filling their cars directly from the well. Again, the NRA insisted that the well is not productive, and to solve the public relation problem they decided to seal the well with concrete. There. Problem solved.

Rula Hroub at Al Anbat wrote a series of articles about oil exploration in the country. In it, she revealed some very interesting and potentially embarrassing information. To me, the most interesting was how the NRA insisted on having meetings with Trans-Global at their headquarters and how they offhandedly dealt with investors who wanted to join Trans-Global. They only agreed to Hariri joining the concession, although his company has no history in oil exploration. However, why do you need expertise if your name is HARIRI?

Now, all of this does not mean anything about whether or not there are commercial oil deposits in the country or not. It just means that the government is acting suspiciously, which leads people not to trust them. Does that sound familiar?

A new Karamah

During the king’s speech to commemorate the 40^th anniversary of the Karamah battle, he stated obliquely that “We know that every stage has its challenges and dangers, and we should always be ready to face these challenges, and to face any danger that may threaten our security and our stability. This is not solely the responsibility of the armed forces and the security apparatus, but the responsibility of every citizen of this country, each according to their position, role and responsibilities. There are always those, domestic and foreign, who do not wish well for this nation. It is our responsibility to be always at the highest state of vigilance, sense of responsibility and preparedness to confront any danger or attempt to tamper with the security or stability of this country”.

This statement could simply refer to terrorism, or could refer to the deeper challenges related to the economic and social state of the country. Many people feel that the economic situation is being used as a leverage to force Jordan into submission vis a vis solving the issue of Palestine on it’s soil. This is not an unreasonable assumption, as our Arab brethren can easily and painlessly relieve the country of its current predicament. The fact that they are not willing to do so is quite puzzling, and can not be explained except in this context.

Now, if this is the case, I believe that the people need to know. If it is not the case, they need to know as well. There are no convincing answers, and so we are faced with either explaining all of this in terms of political pressure or of embezzlement. If we are being asked to sacrifice for a cause, then we should know what the cause is.

Now, if we are being asked to sacrifice in order to withstand Israeli and American pressure to absorb more Palestinian refugees, with all of the social, political and economic ramifications that this will entail on Palestine and on Jordan, the economic crunch that we are facing will become understandable, bearable and even manageable. The Karamah battle showed that we have the sense of sacrifice and ability to persevere and to prevail. Facing this challenge forthrightly and honestly will bring out our sense of duty and our determination, and, I believe, will be good for the character of our society. Nahid Hattar is even using the anniversary of the Karamah battle to call for preparation for war. I don’t think that this is in the cards, but maybe we need a grand challenge to bring out the best in us.

Good cop, bad cop

Recently, the king announced a massive housing program dubbed "Honorable housing for an honorable life". Over 100,000 housing units will be constructed all over the country over the next five years in order to help low and limited income people find affordable housing. The government will provide the land and the infrastructure, and contractors from the private sector will build the housing at their expense. In exchange for the land and infrastructure, the contractors will give half of the units to the government, and will sell the other half at their own discretion. This novel scheme will allow the government to sell the apartments at low prices (around 15,000 JD), and the banks will provide long term financing. Everybody should be happy, so it is hoped.

And yesterday, the king ordered to the government to delay raising the prices of liquefied petroleum gas and livestock feed until the end to the year. This delay will cost the budget 160 million JD. Everybody is happy here, as well.

Actually, the king is asking the government to spend money that is not in the budget, which is not allowed. Article 49 of the constitution clearly states that "Verbal or written orders of the King shall not release the Ministers from their responsibilities". Of course, the parliament will willingly amend the budget to allow the expenditure, but in a normal system this would not be taken for granted.

The thing is, some columnists erroneously see these initiatives as the king intervening to "correct" the policies of the government, which only take into consideration the financial and not the social ramifications of economic decisions. Of course, while some might want this impression to take hold, it is a quite preposterous thesis. Economic policy since king Abdullah took the throne has not changed significantly, despite the fact that we have had six prime ministers (who were chosen by the king). I am sure that if the king wanted a different economic policy, then he would have found a PM who would be happy to oblige. But he did not. It may be true that uncontrolable factors may be at play that may be limiting the room for maneuvering, but it would be wrong to simply blame the government (any government) for that.

And people are not fooled. Despite the fact that the most draconian economic decisions have been made by PM Dahabi, recent a public opinion poll show that his popularity has not changed since he took office. Clearly, people do not view him as being such a bad cop.

Just saying.

Defending corruption

Fahed Fanek today is criticising the financial and economic committee of the parliament for referring a potential corruption case to the prosecutor general. The committee had studied a report by the audit bureau, which stated that a decision by the Social Security board of directors to buy the failing Zara Hotel in Ma'in was improperly made. According to the bureau report, the shares were bought outside the stock exchange, and the price paid was 80 million dinars over the value of the real assets of the company.

According to Fanek, decision makers in such case should be immune from prosecution, because following up such cases will cause them to shy away from difficult decisions. What he does not say is that the decision to buy the shares was a political and not an investment decision. The government at the time wanted the venture to keep going, and really didn't care what the economic prospects were, because it was not coming out of their own pockets.

I have written before about how the government tries to use the social security fund for political expediency (with a reference to another Fanek article defending the government for doing this). This is a recurring issue, and now that the government is planning issuing a new law to curtail retirement benefits of the social security, it is a good time to put all past decisions into the light.

Political pressure and corruption will always be a threat to social security funds. This is precisely why there should be no immunity for board members of the SSC. Decision makers in the social security investment board should be held accountable so that they resist political pressure from the government. This is the best way to protect them from this pressure and it is a good way to protect our money.

More on the new oil policy

Yesterday, I talked about how the government is insisting on monopolizing oil imports and pricing in the country. Today, Ali Rawashdeh has a report in Al Arab al Yawm concerning the new plans for the oil sector.

The most interesting part of the report is the agreement between the government and the Jordan Petroleum Refinery Company to regulate relationships after the ending of the concession agreement. The company will get one out of four licenses to distribute oil products in the country.

Noteworthy is that the agreement stipulates that distribution companies that will be set up will be obliged to buy 75% of their fuel from the JPRC.

Kind of defeats the purpose, don’t you think?

Slick liberalization

Today, I chuckled as I read Samih Ma’aitah’s piece. In it, he earnestly asks questions about how petroleum products are priced, the cost of the crude oil that we buy and the relationship between the two. I don’t know if he is being naïve or being clever.

I have pointed out previously that the numbers that the government feeds us on this issue don’t make sense. It is almost as if the numbers are put out to confuse rather than to explain.

The government has recently liberated the price of oil products, but it has not liberated the oil market. This means that they retain the monopoly on importing and marketing oil, set the price they feel is appropriate and, thus far, don’t allow the private sector share in the bounty. Nobody is suggesting that government control of prices is meant to protect consumers.

When the issue of the expiration of the 50 year contract with the Jordan Petroleum Refining Company showed up a couple of years ago, the initial statements suggested that the market will be opened and competition between different companies will result. Ziad Manaseer opened a chain of high end modern gas stations in anticipation of this. Since then, the contract has expired and the government has dragged its feet on issuing legislation and regulations to allow for real liberalization to occur. I guess 50 years wasn’t enough time to think about this and decide what to do next.

Today, a report in Al Ghad says that a group of industrialists want to set up a company to import and distribute oil products, because obviously feel that they can get a better deal this way than buying the oil from the government. One investor says that he hopes that the government will encourage this step and take the necessary steps to create the proposed company. His statement suggests that he probably realizes that the government is not interested in any competition in the energy market, all the statements supporting a market economy not withstanding.