Sanctions, saboteurs take toll on Syria's oil industry

Syria’s Oil Minister Sufian Allaw acknowledged that sanctions recently imposed by the US and the European Union have reduced his country’s production of oil to 270,000 b/d or less from its normal rate of 380,000 b/d.

Syria’s Oil Minister Sufian Allaw acknowledged that sanctions recently imposed by the US and the European Union have reduced his country’s production of oil to 270,000 b/d or less from its normal rate of 380,000 b/d.

“The imposed sanctions affected the exportation of crude oil and oil derivatives to Europe,” said Allaw. In view of depressed exports to the EU, Allaw expressed hope that Syria’s government will be able to locate alternative markets for the country’s output.

“Syria’s oil productivity might increase according to the size of exports and storage capacity,” Allaw said. Syria earns 28% of its annual revenue from oil sales, with Europe buying about 95% of its output.

The US and EU imposed sanctions on senior Syrian officials and entities, and called on President Bashar al-Assad to step down. In September, the EU banned investment in the country's oil sector, and reinforced its earlier ban on imports of Syria’s oil.

In an effort to bypass the US and EU sanctions, Allaw said that “there are ongoing talks with more than 50 companies and traders to reach appropriate agreements on exporting oil.”

Syria has sent delegations to companies in India, Indonesia, and Malaysia to market its oil, Allaw said. He said Syria has signed three new contracts to export oil as early as next month, but he provided no details of the agreements.

Allaw denied reports that foreign companies stopped their activities in the country's oil sector, a view partially contradicted by Croatia’s INA, which cut its production of oil to 1,500 b/d from the normal 3,000 b/d.

The cut in production came after Syria’s government, eyeing the effect of the sanctions, ordered producers to reduce output as export cargoes were left without buyers and storage areas were full.

INA also said it could face difficulties obtaining payment for its continued production of oil and gas in Syria, especially if existing sanctions are tightened.

“These restrictive measures might have additional adverse effects, which could reflect through difficulties in collection of receivables coming from local production,” INA said.

“INA cannot exclude the possibility of further tightening of the restrictive measures against Syria, which could have further negative effects on Syrian revenues or production levels,” the company said.

Traders also confirmed that Syria's state-owned Sytrol canceled a tender to sell 50,000 tonnes of naphtha, an indication that international firms have become more careful in the wake of the sanctions regimes.

“The Syrian tender has been canceled. They are keeping it in their domestic gasoline pool,” a London-based trader told Reuters, adding, “We were told not to (buy).”

Another oil-products trader active in the Middle East said, “I don't do Syria anymore. Sanctions appeared tougher, so I gave up. The problem is getting a bank to finance it and a ship owner to go there.”

That view was confirmed by Allaw, who said Syria must overcome a number of obstacles in its effort to find other export market, mainly the need to find tankers and open credits at banks.

The lack of export markets does mean that Syria faces little or no domestic shortfall in supplies.

“We do not have any shortage of oil, and we have good reserves of diesel fuel available,” said Allaw, who noted that preparations are in hand for the coming winter and that domestic needs are secured as “there is no modification in the oil prices.”

However, protestors against the Assad regime are hampering the delivery of those oil supplies to the domestic market through attacks on pipelines within the country.

Last month, the Syrian army reportedly dismantled an explosive device placed on a crude pipeline in the Babo Amro area of Homs, the location of numerous clashes with protestors. The device was said to be “carefully camouflaged and positioned” to cause maximum damage to the pipeline.

In July, Syria’s state media reported that saboteurs bombed a crude oil pipeline linking the city of Homs and the Mediterranean port of Tartous.

Explosives were placed along the pipeline at Talkalakh near the border with Lebanon, causing a 10-m crater in the ground. There was no report of the amount of oil spilled or how long repairs would take.

Allawi said the oil ministry has taken “necessary measures to prevent more attacks by armed terrorist groups on fuel pipelines and repair the damaged ones in Idleb and Hama.”

Allaw said the pipelines carry fuel to the governorates of Hama, Aleppo, Idleb and Raqqa. He said the ministry would continue its efforts to meet fuel needs in these governorates through the use of tanker trucks and trains.

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