Government Says Still Paying Part of Fuel Bill – Jordan Times

Text of report in English by privately-owned Jordan Times website on 18 August

["Gov't Says Still Paying Part of Fuel Bill" - Jordan Times Headline] [ Computer selected and disseminated without OSC editorial intervention ] By Hani Hazaimeh

AMMAN -The government says it has incurred around JD121 million to cover the difference between actual prices of fuel and the ones decided by a pricing panel since fuel prices were floated in February.

The announcement was made amid criticism that the latest update of fuel prices at 5 per cent was “disappointing” due to the relatively huge drop in the prices of crude oil on the international market.

Minister of Energy and Mineral Resources Khaldoun Qteishat [Khaldun Qutayshat] said yesterday that in August, “the cost price of gasoline (octane 95) stood at JD0.878 per litre, JD0.38 higher than the price announced by the pricing committee for the same month”.

Cooking gas is still partially subsidized by at least JD3.5 for each cylinder, in implementation of a directive by His Majesty King Abdullah.

The minister was speaking during a meeting with local media representatives and columnists following a wave of protests against the new update.

Qteishat stressed that the cost of prices for the same month in question were higher than the announced list, yet the government decided to lower prices to “preserve its credibility in the eyes of the public”.

Prime Minister Nader Dahabi, speaking to lawmakers days before the August 8 update, said critics should “wait and see” if the government would keep its promise to lower prices according to the decline in international prices.

The minister insisted the government is not making profits from fuel derivative sales other than the usual revenues from fees and taxes, which have amounted to JD71.842 million since February.

He added that the government will issue new updates on fuel derivative prices at the beginning of each month starting September 1.

A special committee comprising representatives from the ministries of energy and mineral resources and industry and trade and the Jordan Petroleum Refinery Company (JPRC) is tasked with examining and defining prices of fuel derivatives on a monthly basis.

The amendments on prices were supposed to be issued on the first of each month, but since the government decided to lift fuel subsidies on February 8, the announcement of fuel prices for the following month was delayed till March 11. During the meeting yesterday, Qteishat reiterated that the decline in international crude prices does not necessarily reflect by the same ratio on end- user cost of fuel derivatives on the local market.

Prices are more affected by demand and supply of fuel derivatives rather than the prices of crude oil.

The JPRC is the only party entitled to contract with the Saudi oil company, ARAMCO, since the latter does not deal with governments, said the minister, adding that ARAMCO provides the Kingdom with around three million barrels of crude oil delivered to Aqaba on an average of three shipments a month.

Since JPRC production of fuel products does not meet the Kingdom’s needs, said the minister, the company floats tenders on international markets to offset the shortage.

He noted that imports of fuel derivatives in the first half of 2008 stood at 436,000 tonnes at a total cost of JD1,393.62 million compared with 928,000 tonnes in the entire 2007 worth JD2,012.18 million.

The fuel bill is expected to amount JD2.8 billion by the end of 2008, the minister added.

Qteishat pointed out that the government adopts the average of prices of two international markets: the Singapore and the Mediterranean, adding that price updates take into consideration transportation costs from the Saudi port of Nweibeh to Aqaba, from Aqaba to the JPRC and then to end-users.

Added to the above, new updates on prices also take into account the cost of handling, insurance and storage.

He added that the energy sector in the King dom will be liberated totally within three years as four specialised companies will be established this year which will be entitled to import the Kingdom’s needs of crude oil and fuel derivatives.

Qteishat said the government is negotiating with a local transportation company that has won a tender to carry Iraqi oil from the loading point of Haditha to the JPRC as soon as possible.

During the Joint Jordan-Iraq Higher Committee meetings held in Amman recently, the two sides agreed to extend the memorandum of understanding (MoU) in this regard for a term of three years.

Under the MoU, Iraq was to provide Jordan with 10,000 barrels per day, which is 10 per cent of the Kingdom’s needs, to be increased gradually to 30,000 barrels. Based on the agreement, Iraq has agreed to bring up the discount offered to Jordan on the Kirkuk crude oil to $22 per barrel in an amendment to a previous three-year deal under which the Kingdom was offered Brent crude oil at $18 lower than the international price for a barrel.

Qteishat expects the first shipment of Iraqi oil to arrive in the Kingdom by mid-September.

Originally published by Jordan Times website, Amman, in English 18 Aug 08.

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