Jordan's petroleum sector liberalization presents opportunities for new entrants as the Jordan Petroleum Refinery Corporation loses its monopoly

Under the close supervision of the government and the terms of the concession agreement, JPRC has so long been Jordan's sole refiner, importer, marketer and wholesaler of petroleum products. This is expected to change drastically come March 2008 as the concession agreement terminates and new entrants are allowed into the market.

With the market currently being hugely underserved (at the Jordan Petroleum Refinery's current refining capacity) and growing at an average of 3% annually, the Jordan Petroleum Refinery has initiated its fourth expansion phase. This would entail attracting a technically and financially accomplished strategic investor with direct access to crude oil supplies, increasing refining capacity by 40%, establishing a new Aqaba-Zarqa crude oil pipeline and rehabilitating existing facilities to accommodate higher quality production.

Based on JPRC 2006 sales figures, which include both locally refined products and imported ones; the Jordanian downstream petroleum market totaled 4.64 million metric tons. The Arab Advisors Group expect demand to surpass the 5.50 million MT mark by 2011 and reach 6.82 million MT by 2015. If the Jordan Petroleum Refinery Company goes ahead with its fourth expansion phase slated to begin in 2007, it will be able to cover the Kingdom's demand for most of its refined petroleum products during the next 5-7 years, and indeed accrue a surplus in certain products. The proposed expansion could threaten the government's market liberalization plans as it severely trims down the underserved portion of the market and increases Jordan Petroleum Refinery Company's advantage over potential newcomers. However, this excess capacity will shrink as the market outgrows the refinery's production capacity, with Arab Advisors Group's estimates indicating that there will be at least a 15% gap between market demand and locally refined products.

Of course, if the Jordan Petroleum Refinery Company production capacity stagnates at current levels, and the strategic partner plans falter, the market becomes very appealing for new entrants immediately.

A new sector report, "Jordan Downstream Petroleum" was released by the Arab Advisors Group's Financial Markets Strategic Research Service on March 1, 2007. The 56-page report provides a comprehensive background on the Jordanian downstream petroleum sector, its current landscape and key stakeholders. In addition to providing detailed information on the government's proposed plans for liberalizing the sector, the report also takes a brief look at the privatization process currently taking place in the electricity sector. The Jordan Petroleum Refinery Corporation is thoroughly profiled including company history and time line, the planned fourth expansion phase, its proposed post-concession structure and detailed analysis of its financial and operational performance during 2005 and 2006. The report concludes by drawing a post-concession scenario of JPRC's operational and financial results, assessing the value of the market for new entrants and offering our opinion on the Jordanian Downstream Petroleum Market liberalization as put forward by the government. All opinions are based on both historical information and a set of justified assumptions.