Interest grows in Syria oil bid round

13 July 2010

15 September bid round set to increase production

Syria’s Petroleum and Mineral Resources Ministry and the General Petroleum Corporation (GPC) have pushed back the deadline by a month for international oil companies (IOCs) to submit prequalification documents for its planned bid round in September.

IOCs now have until 1 September to hand over financial and technical qualification documents for eight onshore exploration blocks on offer. The eight blocks cover approximately 11,440 square kilometres in the north and east of the country.

Commercial and technical bids, which will include a proposed work programme and budget for exploration periods, new technologies, studies and non-conventional methods which may be applied, will still be submitted by the original 15 September deadline.

According to sources at the GPC, more than 70 companies have so far submitted documents. The prequalification deadline was pushed back to accommodate the number of companies interested in the bid round, according to some Syrian sources.

“It shows there is a measurable interest. How many will actually submit offers is a different question and one that is still to be examined,” says Hisham Yazigi, Syria representative for Sweden’s Svenska Petroleum.

A number of IOCs are already operating in the country’s oil sector in production, development or exploration. Feedback is largely positive, particularly in terms of the financial commitment of the Syrian government.

“Bureaucracy has improved in the oil industry. The government is paying its bill on time without any problems, this is why we have names like [UK-Dutch] Shell and [France’s] Total in Syria for the past 30 years,” says Yazigi.

Syria has signed 28 production sharing contracts with IOCs for exploration and production since 1977. The deals account for 180,000 barrels a day (b/d), approximately 48 per cent of total oil production in the country.

The GPC’s tender book for the bid round contains a draft production sharing contract, which according to Yazigi offers attractive incentives for the IOCs in terms of cost recovery, bonuses, production sharing.

“It will be a challenge to negotiate the terms of the deals though. Once it is signed it is respected”.

According to UK oil major BP, at the end of 2009 Syria had 2.5 billion barrels of crude oil reserves and produced 376,000 b/d. The majority of reserves lie along the Euphrates River in the eastern provinces straddling the border with Iraq.

By tendering the exploration and production blocks, Syria hopes to arrest and reverse its declining oil production. In April, Oil Minister Suffian Alao announced the government expects oil production to see its first increase after more than a decade of decline since peaking at 635,000 barrels a day in 1995. The reason for the decline is largely down to dwindling reserves in the Euphrates fields, which began production in the 1980s, along with technical challenges.

GPC also plans to retender four offshore exploration blocks covering 5,000 square kilometres in the Mediterranean by the end of the year. The blocks were first offered in a disappointing 2008 licensing round, which saw only one bid submitted and no awards.

According to some Syrian sources, the terms on offer were considered unfavourable and the blocks too small to warrant investment. Syrian officials, however said the main factors were the high exploration costs and the sudden fall in oil prices in the second half of the year.

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