by Taylor Luck | Feb 21,2012 | 23:38

AMMAN — Jordan has reached an understanding with a South Korean firm to resume oil exploration in a Dead Sea region some claim to be home to the country’s only commercially viable oil deposits.

The Natural Resources Authority (NRA) and Korean firm, Korea Global Petroleum Corporation, signed a memorandum of understanding (MoU) on Tuesday to resume exploration activities in the eastern Dead Sea/Wadi Araba region, which was vacated following a fallout between the government and its previous holder over oil discovery claims.

The deal involves a 6,189-square-kilometre concession area previously held by US firm Trans Global, whose public claims of an oil discovery in 2007 led to a breach of its product sharing agreement (PSA), a dispute that sent both sides to an international arbitration court.

Under the MoU, the Korean company and the Jordanian government will have three months to finalise a multi-phase PSA that will grant the firm a four-year window to drill three exploration wells in order to determine the viability of its oil exploration bid.

Pending the results of the initial phase, the firm will move on to second and third exploration stages, providing the Kingdom with some $14 million in guarantees.

The NRA’s insistence that the American firm’s oil discovery claims were unsubstantiated have failed to lower expectations surrounding the concession. Days ahead of the signing of MoU, the South Korean firm issued a press statement projecting to produce 1.1 billion barrels of oil daily, a claim it later retracted.

NRA Director Mousa Zyoud acknowledged that speculation over the potential presence of oil reserves has made the Dead Sea concession block a “sensitive” file.

“Obviously there is a long history behind this concession and we at the NRA have a lot of data regarding the Dead Sea block,” the official told The Jordan Times.

“We will give Korea Global Petroleum Corporation plenty of time and space to carry out its own exploration activities as this is a very large concession area.”

The controversy over the exploration block dates back to 2005, when Trans Global, a US firm that won the concession in 1997, informed the Jordanian government of technical indicators showing the existence of oil reserves in the Dead Sea area, data the NRA deemed not commercially feasible.

After making its claims public in 2008, the US firm alleged that it came under pressure by the Jordanian government to sell majority of its concession to Porosity Ltd., taking a $700 million claim against Amman to the International Centre for Settlement of Investment Disputes.

Trans Global later dropped its claims and the NRA reopened the concession to bidding late last year after Porosity Ltd. failed to confirm the presence of commercially viable oil deposits.