Petroleum industry in Syria

The petroleum industry in Syria forms a major part of the economy of Syria. According to the International Monetary Fund, oil sales for 2010 were projected to generate $3.2 billion for the Syrian government and account for 25.1% of the state's revenue.[1]

Syria is a relatively small oil producer, accounting for just 0.5 percent of the global production in 2010.[2][3] Although Syria is not a major oil exporter by Middle Eastern standards, oil is a major pillar of the economy.

Geography

Map of Syrian oil fields and pipelines

Syria is the only significant crude oil producing country in the Eastern Mediterranean region, which includes Jordan, Lebanon, Israel and the Palestinian territories. According to the Oil and Gas Journal, Syria had 2,500,000,000 barrels (400,000,000 m3) of petroleum reserves as of 1 January 2010.[4] Syria's known oil reserves are mainly in the eastern part of the country in the Deir ez-Zor Governorate near its border with Iraq and along the Euphrates River; a number of smaller fields are located in the center of the country.[5] In 2010, Syria produced around 385,000 barrels (61,200 m3) per day of crude oil.[1][3] Oil production has stabilized after falling for a number of years, and is poised to turn around as new fields come on line. In 2008, Syria produced 5.3 billion cubic metres (1.9×1011 cu ft) of natural gas, and two years later in 2010, it increased production to 5.3 m3 (190 cu ft).[6] While much of its oil is exported to Europe, Syria's natural gas is used in reinjection for enhanced oil recovery and for domestic electricity generation.[4]

Although Syria produces relatively modest quantities of oil and gas, its location is strategic in terms of regional security and prospective energy transit routes.[4] The first section of the Arab Gas Pipeline to enter Syria, totalling 600 kilometres (370 mi) through Syria, starts at the Jordan–Syria border in the south, connecting to Tishreen and Deir Ali power stations.[7] This was subsequently extended to connect to Deir Ammar power station in Lebanon and Baniyas in Syria.[8] A further section was planned to continue up to the Turkish border,[7] but the ongoing civil war is expected to further delay this connection.[9]

History

A pumpjack in Syria's Rumeilan oil fields

Syrian oil exploration first began in 1933 during the French Mandate, by the Iraq Petroleum Company (a consortium made up of Shell, BP, Exxon-Mobil, Total, and Gulbekian). In 1949 James W. Menhall, an independent oil producer from Illinois, was approached by Syrian President Shukri al-Quwatli to come to Syria to prospect for oil, after the IPC had drilled eleven wells and given up hope of finding any oil in Syria. He was awarded a concession on 17 May 1955 by unanimous vote of the Syrian parliament and started drilling in April 1956. In September 1956, Menhall discovered the Karatchok oil field with over 1 billion barrels of reserves. Six consecutive wells were drilled, each producing in excess of 4,000 barrels (640 m3). Menhall was just commencing preparations to drill the adjoining Rumeilan oil field (with over 500 million barrels of reserves) when, on 5 October 1958, President Nasser of Egypt, as President of the United Arab Republic, expropriated Menhall's concession and confiscated his equipment and three drilling rigs without compensation. The Syrian government, under the Baath Party leadership, has since refused to consider any compensation. The Syrian oil industry took off in 1968, when the Karatchok oil field began production after a pipeline connecting it to the Homs refinery was completed, although Syria did not begin exporting oil until the mid-1980s.[10]

In 2009, Syria's net petroleum exports were estimated to be 148,000 bbl/d (23,500 m3/d).[11] All oil exports are marketed by Sytrol, Syria's state oil marketing firm, which sells most of its volumes under 12-month contracts. Syrian crude oil exports go mostly to the European Union, in particular Germany, Italy, and France, totaling an estimated 137,400 bbl/d (21,840 m3/d) in 2009, according to Eurostat.[12] In 2010, the European Union as a whole spent $4.1 billion on Syrian oil imports.[13] Local exporters of oil in Syria include the Altoun Group in Maraba Damascus Syria.[14]

Challenges

Alongside the civil war, the oil sector of the economy faces a number of challenges, including a decline in output and production resulting from technological problems and a depletion of oil reserves. Syria's rate of oil production has decreased steadily from a peak close to 610,000 bbl/d (97,000 m3/d) in 1995 down to approximately 385,000 bbl/d (61,200 m3/d) in 2010. Meanwhile, consumption is rising, which means that Syria could become a net oil importer within a decade.[3][10] To counteract this problem, Syria intensified oil exploration efforts.

Syria's upstream oil production and development has traditionally been the mandate of the Syrian Petroleum Company (SPC), an arm of the Syrian Ministry of Petroleum and Mineral Resources. The SPC has undertaken efforts to reverse the trend toward declining oil production and exports by increasing oil exploration and production in partnership with foreign oil companies. The SPC directly controls about half of the country's oil production and takes a 50 percent stake in development work with foreign partners.[4]

Syria oil exports by destination country in 2010 (note that as of 2012, all countries on this chart no longer trade oil with Syria due to sanctions against the country)

Foreign investment is vital for improving production levels, and following the outbreak of the Syrian civil war Western companies are legally prohibited from working in the country. The main foreign producing consortium is the Al-Furat Petroleum Company, a joint venture established in 1985, which currently includes the SPC at 50 percent ownership, Anglo-Dutch Shell at 32 percent, and the remainder held by Himalaya Energy Syria, a consortium of China National Petroleum Company and India's Oil and Natural Gas Corporation.[4] Shell has one of the oldest relationships with Syria dating back to 1949.[5] It produced with its joint venture partners an average 100,000 bbl/d (16,000 m3/d). As of December 2011 Shell has suspended operations in Syria due to EU sanctions.[15]

Another important consortium is Deir Ez Zor Petroleum Company, owned by SPC and France's Total. Total formed its Syrian operation in 1988 and in 2008 renewed its partnership sharing agreement with Syria during French President Nicholas Sarkozy's visit to Syria, confirming France's continued interest in the company's activities in the country. Prior to the Syrian civil war, Total produced an average 27,000 bbl/d (4,300 m3/d) from its fields around Deir ez Zour.[16] Since the start of the civil war and the international sanctions applied to Syria, Total suspended operations in the country from December 2011.[17]

A more recent entrant into the Syrian oil sector was the United Kingdom's Gulfsands Petroleum. At the beginning of 2011, its oil fields produced 20,700 bbl/d (3,290 m3/d).[18] As of February 2012, Gulfsands has suspended its Syria operations and entered into a force majeure due to EU sanctions on the Syrian government prohibiting the trade of oil.[19] Gulfsands dealings in Syria were also hit by EU sanctions due to Syrian tycoon Rami Makhlouf, a cousin of the Syrian president formally owning a 5.7 percent stake in the company,[20] with this stake being suspended in August 2011 due to specific sanctions relating to Makhlouf.[21] Other international players include or included: Canada's Suncor, Poland's Kulczyk, US-Eygptian firm IPR, Croatia's INA, Russia's Stroytransgas and Soyuzneftegaz, and Triton Singapore.[5][22]

Another option to handle the increase in domestic oil consumption besides increasing oil production is to switch power stations from oil-fired to natural gas-fired. Proven natural gas reserves, approximately three-quarters of which are owned by the Syrian Petroleum Company, were estimated at 2.6 trillion cubic meters (9.1 trillion cubic feet) in 2010.[6] A major challenge for the natural gas industry is logistics: reserves are located mainly in northeastern Syria, whereas the population is concentrated in the west and south.[23]

References

  1. 1 2 IMF Country Report No. 10/86 (PDF). March 2010. p. 17. Retrieved 18 August 2011.
  2. ↑ Fineren, Daniel (14 August 2011). "Factbox: Syria's energy sector". Reuters. Retrieved 18 August 2011.
  3. 1 2 3 "BP Statistical Review of World Energy June 2011" (PDF). British Petroleum. pp. 6-8. Retrieved 18 August 2011.
  4. 1 2 3 4 5 "Country Analysis Brief: Syria". US Energy Information Agency. Retrieved 18 August 2011.
  5. 1 2 3 The Report: Syria 2011. Oxford Business Group. 2011. p. 96. ISBN 1-907065-34-2.
  6. 1 2 "BP Statistical Review of World Energy June 2011" (PDF). British Petroleum. pp. 22. Retrieved 18 August 2011.
  7. 1 2 Xinhua News Agency (18 February 2008). "Syria Completes First Stage of Arab Gas Pipeline". Downstream Today. Retrieved 15 December 2015.
  8. ↑ "Lebanon Receives Egypt Gas To Run Power Plant". Downstream Today. McClatchy-Tribune Information Services. 20 October 2009. Retrieved 15 December 2015.
  9. ↑ Rzaveya, Gulmira (February 2014). Natural Gas in the Turkish Domestic Energy Market: Policies and Challenges (PDF). pp. 38–39.
  10. 1 2 "Background Note: Syria". US State Department. Archived from the original on 17 August 2011. Retrieved 18 August 2011.
  11. ↑ Taib, Mowafa. "2009 Minerals Yearbook: Syria" (PDF). US Geological Survey. Retrieved 23 August 2011.
  12. ↑ "Imports (by country of origin) - oil - annual data". Eurostat. Retrieved 23 August 2011.
  13. ↑ "Registration of Crude Oil Imports and Deliveries in the European Union 2010" (PDF). European Commission Directorate-General for Energy. Retrieved 21 August 2011.
  14. ↑ Canada Tightens Sanctions Against Assad Regime. International.gc.ca.
  15. ↑ "Shell to quit Syria after EU extends sanctions". Financial Times. 2 December 2011. Retrieved 29 August 2012.
  16. ↑ Syria, 2010. London: Oxford Business Group. 2010. p. 103. ISBN 978-1-907065-16-3.
  17. ↑ "Total: To Stop Operations With General Petroleum Corp Of Syria". Wall Street Journal. 5 December 2011. Retrieved 29 August 2012.
  18. ↑ Gulfsands Petroleum Annual Report 2010 (PDF). p. 18. Retrieved 21 August 2011.
  19. ↑ "Block 26, Syria". Gulfsands Petroleum. Retrieved 28 August 2012.
  20. ↑ Young, Sarah (19 August 2011). "Gulfsands faces risk of extra EU sanctions on Syria". Reuters. Retrieved 21 August 2011.
  21. ↑ Mason, Rowena (24 August 2011). "Syria: Gulfsands Petroleum suspends shares belonging to president Bashar al-Assad's cousin". The Daily Telegraph. Retrieved 28 August 2012.
  22. ↑ "Russia launches into oil exploration in Syria (in French)". Le Monde. 2013-12-25. Retrieved 2013-12-27.
  23. ↑ Syria country profile, pp. 10-11.

Works cited

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