Petroleum Review
As peace talks finally got underway in
Geneva, aimed at
ending Syria’s bloody civil war, one economically
devastating
consequence is all too clear – Syria’s energy sector
has come
to a near standstill. The government has lost control of
key
oil producing areas to the rebels, international oil companies
have left the country, and the regime has had to resort to
roundabout methods to secure energy imports to offset
production
losses. Paul Cochrane reports.
In May 2013, Syrian Oil Minister
Suleiman Abbas told the parliament
that output was down 95% from
the
380,000 b/d produced prior to the start
of the uprising in
March 2011, to 20,000
b/d, and that gas production had halved
to
15mn cm. In November, Abbas gave
the parliament worse figures for
the
sector, with output at 772,540 tonnes
(105,374 barrels) in 1Q2013, down
37.1% from 1,299,100 tonnes
(177,197
barrels) in 4Q2012, according to a report
in Syrian daily
Tishreen. This would be a
steep fall to just over 1,000 b/d for oil
in
government-controlled areas.
Natural gas output – which is still
held
largely in government hands – had
declined from 2,020,800 cm
to 1,558,760
cm during the same period, a drop of
22.9%. OPEC’s
December 2013 monthly
oil report was more upbeat, estimating
Syria’s output to average 90,000 b/d in
2013. This almost
certainly has to include
rebel-controlled
area
production,
although OPEC did not clarify this and
added a health warning: ‘The
lack of
production data from Syria due to the
ongoing political
situation might bring a
large revision once the numbers become
available.’
Indeed, knowledge of what is happening
inside Syria’s oil sector is scant.
One prominent international
energy
consultancy firm turned down an inter-view with Petroleum
Review, stating:
‘The situation is still unclear and it’s very
difficult to assess the impact on oil and
gas infrastructure. We do
not provide
speculative commentary.’
Estimating damages to infrastructure
is clearly difficult to quantify, although
the regime has estimated
it at some
$70mn. Damage to the country’s 6,000
km of pipeline
has been minimal, how-
ever. ‘There are clearly losses in terms
of
production, and determinate costs on
what it will cost to
re-start production, as
to whether damage to facilities is due to
the conflict or because it was not maintained or used. There is no
idea what the
scale is,’ says David Butter, Associate
Fellow at
the Middle East and North
Africa Programme at Chatham House.
Losing oil control
What is clear is that Syria’s energy
sector
is in bad shape. Abbas stated to the
Syrian parliament that
40,000 barrels of
oil were being stolen every day from
across the
country, losing the industry
$1.4bn directly and $17.7bn indirectly
up to the end of 3Q2013. Meanwhile,
$500mn was being spent monthly
on
imports of oil and derivatives to meet
demand.
While the government of President
Bashar al-Assad blames sanctions
imposed on Syria in late 2011 by
the US
and the European Union (EU) for the loss
of oil revenues,
the reality is that the
regime has lost control of the key oil
producing areas. ‘While the regime is
regaining important areas in
the west
and north-west of Syria, it has not
achieved much in the
desert close to the
fields of eastern Syria, which has a large
presence of the [rebel movement] Islamic
State of Iraq and al-Sham
(ISIS), some of
the most capable fighters. I don’t think
the
regime will create a new front with
ISIS to control the fields
because it cannot
concentrate on these areas for logistical
constraints, as focusing on the east would
compromise the western
front, which is
already fragile,’ comments Ayham
Kamel, a senior
Middle East analyst at the
Eurasia Group. ‘So the oil sector will
suffer for a prolonged period of time,
mainly because fields are in
areas under
the control of rebels, and they’re unlikely
to lose
control for the foreseeable
future,’ he adds.
With international oil companies
having left Syria (Chinese companies
pulled out in 2013) and oil
sector
workers having fled production areas,
the rebels have been
forced to extract
oil as best they can, utilising very basic
methods to refine the country’s heavy
crude oil. According to a
report in
the regional Arabic-language daily
Al-Hayat, in the area
around Deir Ez Zour
in the north-east, rebels are operating
some
3,000 small-scale refineries.
‘Anecdotal evidence suggests small
amounts are produced and exported to
Turkey, and refined in a
rudimentary
way, probably tens of thousands of
barrels a day only,’
says Butter.
Kamel, however, thinks production is
just in the thousands of barrels per day,
which has been a stumbling
block to the
April 2013 EU plan of lifting sanctions on
oil exports
from rebel-controlled areas
to help bolster the opposition. ‘It’s
been
a big fiasco. The plan was unrealistic, to
export some of that
oil to outside markets and create a sustainable revenue
stream for,
at that time, the Syrian
National Council. It was mainly a tool to
boost morale among the opposition, as
implementing it was very
difficult – the
regime has an air force and could attack
significant deliveries, and the opposition
was always divided. If
the opposition
had made a coherent front and controlled fields, they
could have had
volumes in the tens of thousands of barrels – but
again, vulnerable to regime
attacks,’ says Kamel. ‘Now, many
opposition groups control the fields, follow no
political authority
and they have little or
zero experience in operating the fields.
It
is hard for the fields to be monetised
in any significant way, as
such small
volumes are for local use,’ he adds.
Offsetting losses
To offset domestic losses and keep its
military machine running, the Syrian
government has had to import
fuel.
According to Butter, prior to the conflict,
Syria was
consuming around 320,000
b/d, half of that figure being gas-oil and
diesel, while half overall was imported.
‘It is obvious that total consumption
is a
lot less than it used to be, but there’s no
real indication
what it may be; perhaps
around 150,000 to 200,000 b/d. There
are a
few indications as to how the
regime is meeting its liquid
requirements, which appears to be a mix of
importing products and
crude,’ he says.
A key refinery at Homs city in western
Syria has
ceased operations, or at best
is operating at 10% of capacity,
notes
Butter, leading to most refining
happening at Baniyas on the
regime-
controlled coast, which has a capacity of
around 130,000
b/d. International media
reported in December 2013 that Syria is
being supplied with crude from Iraq and
Iran via private traders in
Egypt and
Lebanon, with shipments routed to
Beirut and Baniyas. ‘My
reading is
Baniyas has four units – two for heavy
crude from
Iran, and two configured for
lighter crudes for Iraqi crudes; but
there’s no firm information on it,’ comments Butter.
Indicative of neighbouring Lebanon’s
role, mineral (oil, gas and solid minerals)
imports have surged, as
have exports,
going from $3.7bn imports in 2010 and
exports of
$56mn, to $4.6bn in 2013 and
exports reaching $350mn, according to
Lebanese customs data. ‘State-owned oil
companies are not allowed
to sell to
Syrians [due to the sanctions], but private traders can,’
notes Lebanon Energy
Analyst Roudi Baroudi.
A positive note
While the overall picture for Syria’s
energy sector is grim, in December 2013
Damascus inked a 25-year,
$100mn concession with Russian firm Soyuzneftegaz
to explore for
offshore oil and gas.
Although offshore exploration is
likely
to go ahead because there are no maritime security concerns
in Syria, revival
of the sector onshore will have to wait
for the
end of hostilities – assuming the
peace talks have any success.
‘The oil
industry should be the most important
thing to come back
on track, as a
major aspect of GDP, so it should be up
and running
very fast [once peace is
secured]. It all depends on the EU
and US
lifting sanctions,’ concludes
Baroudi.
No comments:
Post a Comment