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Syria: Oil and gas sector gearing up for a rejuvenation

Wednesday, 14 April 2010 12:31

Syria's oil and gas sector is gearing up for a rejuvenation of sorts, with the minister of oil, Sufian Alao, announcing recently that the government expects oil production in the country to rise this year following 13 years of steady decline. The announcement came as the Syrian hydrocarbons sector prepared to welcome 265 companies from 41 countries to the Seventh Syrian International Oil and Gas Exhibition (SYROIL 2010), held in Damascus April 5-8.

Oil production in Syria currently stands at around 383,000 barrels per day (bpd), a decline of around 7000 bpd from last year's average figure, and around 200,000 bpd below the all-time high of 583,000 bpd reached in 1993. While Syria's 13-year decline would appear to place it firmly in the rank of nations experiencing the phenomenon of "peak oil", the country nonetheless still has estimated reserved of some 2.5bn barrels and expects to produce 2bn barrels of oil by 2025. Alongside oil, Syria also currently produces 28m cu metres of gas a day, using around 20m cu metres for domestic electricity generation. Alao announced that he also expects gas production to rise this year.

While turning around a long-term decline in oil production remains a significant challenge, it is not without precedent. Fellow Arab League member Oman managed to turn around its own steady decline in 2008 through the development of smaller fields and the use of enhanced oil recovery (EOR) techniques on existing fields. The Syrian government appears committed to a similar strategy, announcing at the start of SYROIL 2010 that eight new blocks are to be opened for exploration, development and production, with international companies invited to bid for production-sharing agreements before a September 15 deadline.

The blocks - 3, 4, 5, 7, 12, 14, 16 and 18 - are located mostly in the north and east of Syria and join seven further blocks that have recently had their deadlines extended for the submission of bids. These latter seven have been divided into two groups, both in the Raqqa province: in the first group are West Tureb, Halima and Dohal; in the second group are Jaadeen, Tal Asfar, Zenati and Al Haloul. According to press agency reports, these two groups are all believed to contain mature heavy oil fields, which the General Petroleum Corporation (GPC), Syria's national oil company, believes can be rehabilitated through the use of EOR techniques such as steam injection. The deadline for these areas has been extended from May 19 to June 20.

Inviting foreign investment into the Syrian oil sector will be vital in securing a sustained renaissance in production levels: EOR techniques are not only capital-intensive, they also require specialised technology that relatively few companies can implement.

Already, several major international oil companies have begun operations in Syria, including Royal Dutch Shell, Total, Gulfsands Petroleum, Tatneft and ONGC Videsh. GPC has also been working with the China National Petroleum Corporation since 2003, pioneering the use of EOR techniques such as acid fracturing to raise production levels. Indeed, with oil approaching an 18-month high, SYROIL 2010 has been well-timed to attract further big names to the sector.

Investment in the energy sector currently accounts for around a quarter of total government investment - around $5.5bn. Meanwhile, a further $3bn of foreign investment has also been attracted. One area where the government is likely to prioritise new foreign investment is in expanding Syrian refinery capacity.

Alao announced on April 5 that a long-planned 140,000-bpd refinery deal with Kuwait's Noor Financial, anticipated to involve investment of some $1.7bn, had been cancelled. A memorandum of understanding for the project was originally signed in 2007, with UK-based consultant Wood McKenzie hired in 2009 to conduct a feasibility study. Now that the Kuwait option is no longer on the table, efforts are likely to focus instead on talks with foreign investors for two further refineries with a combined capacity of 240,000 bpd. Enhanced domestic refinery capacity may enable the government to reduce imports of refined products such as diesel, and thus improve balance of trade figures.

Global Arab Network

This article is published in partnership with Oxford Business Group

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