Chronicle of the Middle East and North Africa

Oil and Gas

Oil and Gas

Syria’s conventional crude oil reserves have been estimated at 2.5 billion barrels by Oil & Gas Journal and BP. Syria also has shale oil resources, with estimates of reserves as high as 50 billion tons as of late 2010, according to Syrian government sources. The Syrian government has indefinitely delayed a bidding round for the country’s shale resources, which was scheduled for November 2011, leaving any discussion of shale reserve production outside the scope of the present discussion. At the 2009 conventional reserves-to-production ratio of 18.2 years, Syria maintains the second-smallest reserves-to-production ratio among the major oil producers in the region. Nevertheless, Syria’s oil production, which averaged over 400,000 barrels per day (bbl/d) between 2008 and 2010, is relatively high for the entire MENA region taken together. Historical production has been declining since its peak in 1996, and with the onset of the civil war has declined dramatically, dipping significantly below consumption. According to the Energy Information Administration (EIA), production hit its lowest level in more than 30 years reaching 25,000bbl/d in January 2014 – predominantly outside areas controlled by the Syrian government (more on this in Civil War: Dispersed Control of Oil Resources).

Much of Syria’s crude oil is heavy (low gravity) and sour (high sulphur content), making processing and refining difficult and expensive. The pre-war years saw an increased emphasis on the use of enhanced oil recovery (EOR) techniques to produce Syrian oil, with several companies planning additional investment in the country’s mature oilfields. This was viewed as a critical component of new production given the low likelihood of new finds.

Also prior to the war, oil exports had been a vital component of Syria’s export economy, accounting for roughly 35% of the country’s total export revenues in 2010, according to IHS reports. In the 12 months prior to the protests in March 2011, approximately 99% of Syria’s crude exports went to Europe (including Turkey), according to the EIA. With the introduction of sanctions by the United States, European Union and others, many of the international oil companies (privately held) and national oil companies (predominantly government held) doing business in Syria ceased operations, significantly limiting Syria’s exploration and production capabilities. The only oil companies still operating in Syria as of September 2013 were Hayan Petroleum and Elba Petroleum Company. In December 2013, however, the Syrian government and Russian petroleum company SoyuzNefteGaz signed a 25-year offshore exploration agreement. The contract stipulates that the company will conduct surveying and exploration for oil and gas in the region extending from the southern shores of Tartous to the city of Banias. This area is estimated at 70 kilometres in length with an average width of 30 kilometres, and comprises a total area of 2,190 square kilometres. The contract is for exploration, which is more viable in the present environment than production. If oil or gas is found, however, a complicated road would lie ahead for the regime and SoyuzNefteGaz.

With production at a virtual standstill, the lack of crude oil has led the country’s two major state-owned refineries in Homs and Banias to operate at roughly half their pre-conflict capacities. This has resulted in supply shortages of refined products including heating and fuel oil. The combined nameplate capacity of the two refineries at the end of 2013 was just below 240,000bbl/d, according to Oil & Gas Journal. All refinery expansion or new construction plans are on hold due to the fighting. In 2012, Syria’s consumption of refined products fell below 260,000bbl/d, and EIA estimates that 2013 consumption will be even lower once the data become available. The Syrian government continues to subsidize domestic consumption of refined petroleum products in territories it still controls. In the first half of 2013, the government spent more than $1 billion on petroleum subsidies, according to the Minister of Petroleum and Mineral Resources.

Syria’s 2010 proven natural gas reserves have been estimated by Oil and Gas Journal at 8.5 trillion cubic feet. Prior to the conflict, more than half of Syria’s natural gas production came from non-associated fields, with those volumes being redirected to oilfields for reinjection and to domestic demand centres throughout the country’s now damaged domestic pipeline network. Production and consumption in 2012 were equal at 228 billion cubic feet, reflecting the collapse in import capacity.

In 2008, Syria became a net importer of natural gas. The only previous source of natural gas imports, the Arab Gas Pipeline, became the target of attacks as the conflict intensified, forcing the shut-down of the pipeline (see map 2). Production declines from available data suggest production losses upwards of 20%. Estimates from mid-2013 indicate that the losses from the hydrocarbons sector have topped $12 billion, from both direct causes (damage to infrastructure, spillage and theft) and indirect causes (lost exports). According to the Syrian government, damage to the country’s energy infrastructure and spilled or stolen oil and natural gas cost the country approximately $1 billion through the end of July 2013.