Syria oil and gas in numbers

18.2 years: The life of Syria oil wells at current production levels

48.9 years: The life of Syria’s gas reserves at current production levels

Source: Petroleum & Mineral Resources Ministry

Syria’s oil and gas sector is enjoying a renaissance. After years of decline, it has seen an upturn in oil production in recent months, while gas production is set to almost double in 2010.

Having peaked in the 1990s, oil production has fallen in each of the past eight years, from 580,000 barrels a day (b/d) in 2001 to 376,000 b/d in 2009.

According to the latest official figures, output has risen slightly so far this year to about 386,000 b/d. With deals currently on offer for enhanced oil production projects at seven further oil fields, the government is confident that production can be maintained at this level for some time to come.

Syria’s oil decline arrested

The country’s success in arresting the decline of its oil production has taken many by surprise. “We projected a much steeper drop in production,” says Nabil Sukkar, head of the Syria Consulting Bureau for Development and Investment in Damascus. “But the fall in production by the [UK/Dutch] Shell and its partners has been balanced by new production from smaller players and the intensification of development on the fields run by Syrian Oil Company using new technology.”

Gas reserves (trillion cubic metres)  
1989 0.16
1999 0.24
2009 0.28
Source: BP 

Prospects for gas are even brighter. Gas production dropped from 6.4 billion cubic metres in 2004 to 5.5 billion cubic metres in 2008, when Syria became an importer of natural gas from Egypt via the Arab Gas Pipeline. Production increased slightly to 5.8 billion cubic metres in 2009, according to BP’s latest review of world energy, published in June. This year, it has seen a sharp change. Current output is more than 10 billion cubic metres a year (cm/y) and is set to rise to more than 13 billion cm/y by 2011, according to the Energy Ministry.

Syria oil reserves (billion barrels)
1989 2
1999 2.3
2009 2.5
Source: BP

The rapid increase in gas production has been facilitated by a programme to build three new major gas facilities. The South Central Area Gas Project, built by Russia’s Stroytransgaz, began production in November 2009. The plant has capacity of 7.2 million cubic metres a day (cm/d) of gas, 50 tonnes a day (t/d) of liquefied petroleum gas (LPG) and 4,500 b/d of condensate. In April, PetroCanada completed the construction of the Ebla gas plant, which has capacity for 2.5m cm/d of gas, 120 t/d of LPG and 2,500 b/d of condensate. An early production unit came onstream in November at a third facility, the Hayan gas treatment plant. Full startup is scheduled for early 2011. The plant, which is being built by the UK’s Petrofac, will have capacity of 3.5 million cm/d of gas, 180 t/d of LPG and 6,000 b/d of condensate.

The government plans to use increased gas production to meet the country’s rapidly rising demand for power. Domestic electricity consumption is set to double by 2025 and triple by 2030, from 44.5 million kilowatt-hours in 2009, according to Petroleum & Mineral Resources Minister Sufian al-Allaw. By 2014, the government hopes to be using gas-powered generation to meet all of its domestic and industrial demand.

Unfortunately, the country’s oil and gas reserves are unlikely to last very long. According to BP, Syria could maintain current oil production for another 18.2 years, assuming no new discoveries are made. Known gas reserves would last 48.9 years at current output, but any ramping up of production will see a commensurate fall in the lifespan of the country’s reserves. “Syria knows it has the potential to produce more oil and gas, but it probably won’t last more than a couple of decades,” says a Beirut-based energy analyst.

No new prospects for oil and gas in Syria

The prospects for new significant finds are not good. Bids are due by 15 September for licences on eight onshore blocks, but previous work on the fields offers little hope that there are any major discoveries to be made.

Although drilling is ongoing on the four blocks awarded in the latest onshore licensing round, held in 2005, no significant discoveries have yet been made.

“Exploration work has been going on for some time, but there have been very few discoveries,” says Sukkar. “There is little optimism about the new round. The big companies just aren’t responding to invitations to bid. There could be a surprise discovery, but it’s hard to see where it would come from.”

One area of potential is offshore. Egypt, Gaza and Cyprus have all had success in the eastern Mediterranean, and a recent gas find in Israeli waters by Noble Energy of the US was the second-largest discovery worldwide in the past two years. Lebanon too is hopeful of its offshore potential. Previous attempts to licence exploration acreage offshore Syria have been hampered by deep waters and by the lack of a suitable pricing framework to attract international companies. An attempt to licence offshore acreage in 2007 failed to attract any bids. The government plans to offer four offshore blocks later this year under new commercial terms.

Ultimately, Syria’s hydrocarbons future lies as a regional hub. The country’s location makes it an ideal conduit for the supply of gas to Europe from Egypt, Iraq, Iran and central Asia, and it also offers an alternative to the Gulf for the export of oil from Iraq.

Syria already imports about 1.5 million cm/d of gas from Egypt, and agreements have been signed with Iran and Azerbaijan to import a similar amount from each market. Headline deals are also in place with Turkey to import between 0.5-1 billion cm/y of gas from 2011 and with Iraq for the treatment of gas from the Akkaz field near the Syrian border.

Challenges ahead for Syrian oil and gas sector

At the moment, there are major obstacles to all of these possibilities. Imports of gas from Turkey and oil from Iraq are dependent on the development of pipeline networks, while plans to refine Iraqi oil in Syria rely on significant investment being made in refining infrastructure.

The country’s existing refineries, at Homs and Banias, are in desperate need of rehabilitation, and plans for new infrastructure have made little progress. “There are three new refinery projects, but none of them are moving forward,” says Sukkar. A proposal from Kuwait’s Noor Petroleum for a 140,000 b/d refinery in Deir al-Zor has been dropped due to an escalation in construction costs, according to Al-Allaw.

The extension of the Arab Gas Pipeline to Turkey is on target for completion next year, and Al-Allaw claims that Syria is ready to deliver 300,000 b/d of oil from Kirkuk in Iraq to Syria’s Banias refinery, but pipeline rehabilitation work on the Iraqi side of the border is still incomplete. China’s Sinopec has, meanwhile, completed studies on the construction of a new pipeline to bring oil to Syria from the Rumaila field in southern Iraq, but this is dependent on the completion of a joint project between Sinopec and BP to increase production on the field.

Syria’s role as a hub for Iraqi hydrocarbons is also hampered by political considerations. A deterioration in relations between the two countries over the past year and the impasse at the heart of Iraq’s own government mean that any formal deal is likely to be a long way off.

“There’s been a lot of talk of co-operation with Iraq, but at the moment progress is being held up for political reasons,” says the energy analyst. “If co-operation remains on hold for a long time, this could have serious implications for Syria. Iraq could start looking into a direct agreement with Turkey, bypassing Syria altogether.”

There are also serious obstacles to Syria’s potential role as a conduit for the supply of Iranian gas to Europe. The complexity of Iran’s own relationship with Europe is a barrier to progress in the medium term. “Iran is a no-go for Europe at the moment, and the US is not even talking about it,” says the energy analyst. “European firms are usually more free in their choices, but with the most recent round of sanctions it’s difficult to see anything happening. Everyone keeps Iran in their plans, but the time horizon is becoming increasingly long term.”

Whether Iran and Iraq can free up serious quantities of gas for export is also in question, as domestic gas requirements are rising in line with strong growth in local electricity demand.

Framework agreements

Assuming that sufficient gas is available to make Syria a hub for European gas imports, an appropriate framework would still need to be agreed to regulate transit fees and the price of onward gas sales. The scares that European consumers suffered over the reliability of gas supply from Russia via Ukraine and Belarus in recent years will make them all the more cautious about the potential for supply interruptions elsewhere.

Local deficiencies in human resources will also need to be tackled if Syria is to become a major regional player. Petrofac is helping to build a new national oil and gas training centre in Furqlus, but it will be a long time before the scheme bears fruit.

“The local staff are not well-trained, and it’s very difficult to find workers who speak English,” says the energy analyst. “Companies are obliged to employ local staff, but they have to be trained from scratch. If several projects go ahead as planned this could be a problem for the companies involved.”

Syria’s ambition to become a regional oil and gas hub are not unachievable. But the sheer number of hurdles that must be overcome mean that they are unlikely to be realised in the near future. For the medium term at least, it will have to be content that its own production capacity has turned a corner.