Background

Already one of the region’s smallest producers, Syria saw oil output fall dramatically during 2012 as the country’s ongoing civil war continued to bite. With no end in sight for the devastating conflict, state energy firm Syrian Petroleum Company (SPC) is largely powerless to halt the decline.

Opec, the oil producer’s group, believes Syrian oil output will fall to a new low of 40,000 barrels a day (b/d) in 2013. Production hit a record high of just under 500,000 b/d in 1996, but has been in steady decline ever since.

SPC was set up in 1974 as the state exploration and production firm, taking over a number of assets seized from international oil companies (IOCs) a decade earlier during the brief union of Arab nationalist Egypt and Syria. SPC, however, has largely chosen to work in concert with IOCs to produce oil, setting up joint venture companies to oversee their work, most notably the Al-Furat Petroleum Company, made up of SPC, UK/Dutch Shell, China National Petroleum Corporation and India’s Oil and Natural Gas Corporation.

Since the uprising began in March 2011, a combination of conflict and international sanctions have hit SPC hard, and the status of companies operating in the country remains an open question.

Role in Syria’s economy

SPC is the conduit through which all major oil and gas revenues flow to the government, and as such is hugely important to the Syrian economy. Oil and gas accounted for about 25 per cent of all government revenues in the years before 2011, and for a similar proportion of the country’s economic output.

Role in the global economy

As a small producer and an even smaller exporter, Syria, and hence SPC, has only a modest impact on the global economy, with Opec attributing a loss of about 110,000 b/d of output to the current insecurity in Syria – an amount that Saudi Arabia could replace with relative ease. Rather, Syria’s importance to the region comes from its geopolitical significance (destabilising the Levant area).

Strategy

At present, it is hard to conclude what, if any, strategy SPC is likely to follow in the future, given the degree of political uncertainty in Syria.