ISIS, Kurds deprive Syrian state of revenues

Friday 05/06/2015
Taking what remains. A member of the Syrian government forces at Jazel oil field

Al-Hasakah - With the fall of Pal­myra to the Islamic State (ISIS), known as Tadmur in Ara­bic, Syria’s oil and gas fields are almost totally outside the control of the Syrian govern­ment, depriving it of a major source of income and further shrinking its decimated coffers.
At least 60% of Syria’s oil instal­lations are in the east and north-east, in the areas around Raqqa, the capital of ISIS’s self-proclaimed caliphate, Deir ez-Zor on the Iraqi border and the Kurdish-held area of Al-Hasakah. These have been exploited by Islamist opposition groups and Kurdish militias for two years now.
The remaining fields in and around Palmyra are, since May 20th, under ISIS control, further depriving the government of con­trol of the country’s energy indus­try.
Syria’s oil and gas wealth is being shared by ISIS and Kurdish armed groups, which heavily rely on it to finance war efforts, according to an oil worker in al-Hasakah who spoke to The Arab Weekly on condition of anonymity. “The Kurds control 274 fields, producing some 40,000 bar­rels of oil per day (bpd) in addition to 397,000 cubic metres of gas,” he said.
He said Kurds transferred new oil-refining equipment from Iraqi Kurdistan to beef up production. “They have also been operating the facilities abandoned by the govern­ment and using their equipment, including three big drilling ma­chines, used in repairing fields and exploring new ones,” the oil worker said.
He stressed that “the authorities do not control anymore any single field in the oil-producing province of al-Hasakah.” The little quantity the government has been produc­ing until recently, an estimated 9,500 bpd and 15.6 million cubic metres of gas, came from Tadmur province, which is no longer in their hands.”
Opposite the Kurds, ISIS tight­ened its grip on the fields in the southern part of al-Hasakah after evicting the Free Syrian Army and other Islamic opposition groups. Some of the largest oil and gas fields — Shadadi, Marcada and al- Hol — are in ISIS-controlled terri­tory.
According to an oil employee who asked to be identified as JJ, some 419 oil fields producing more than 35,000 bpd and 67 gas fields with a daily production of 1 million cubic metres are controlled by ISIS.
“In addition to that, more than 50 oil fields that were previously exploited by a Chinese oil company in Shadadi and al-Hol are also op­erated by ISIS,” JJ told The Arab Weekly.
The latest account by Syria’s Oil Ministry estimated overall produc­tion in the first quarter of 2015 at no more than 853,000 barrels and 1 billion cubic meters of gas, most of that from fields in Tadmur. Syr­ian production fell to 9,500 bpd in April, compared to an estimated pre-war production of 380,000 bpd in 2011, depriving the government of some $4 billion annually from oil and gas exports and general sales.
“The impact on the government has been huge,” commented Cy­prus-based energy expert Nader Itayim. “And taking into consid­eration the more recent losses (in Tadmur), the government’s already decimated coffers are only set to shrink further.”
“Beyond oil and gas, the govern­ment lost two phosphate mines in Tadmur that had until recently ac­counted for a big part of the state’s remaining exports,” Itayim added.
Before the war broke out in 2011, Syria was the fifth largest phosphate exporter in the world, mainly selling to Lebanon, Roma­nia and Greece. In the first quarter of 2015, Syria sold 408,000 tons of phosphate on the domestic market and abroad, according to the Oil Ministry. Sales raised $39 million, with exports accounting for all but $4 million.
Most oil fields were exploited by international energy companies which have all left Syria leaving the country with a lack of technical expertise which has also lowered production.
“Production from these fields is only at about 10-15% of what it was pre-conflict, because they are ma­ture fields that need a lot of special technology and care, which they are not really getting,” said Itayim, who works with the Middle East Economic Survey (MEES).
In Kurdish-dominated territory, thousands of technicians and gov­ernment employees working in the oil sector remained at their jobs operating oil installations and even get their salaries from the ministry in Damascus.
In return, the government pro­vides the Kurds with gas from the Homs refinery to operate power plants in al-Hasakah and Qamishli, JJ said.
Moreover, the Kurds imported small refineries from Iraq’s Kurdis­tan, which enabled them to process half of the oil produced in their re­gion. Part of the product is sold locally and the rest is expedited to northern Iraq where it is sold at cheap prices to fuel smugglers and oil traders, JJ added.
One litre of gasoline from locally refined crude sells at an average of 50 Syrian pounds (17 US cents) and one litre of diesel at some 33 pounds, less than one-third of the price of better-quality gasoline and diesel in government-held areas.
In ISIS-controlled areas, the US-led coalition’s air strikes have sig­nificantly weakened the group’s ability to produce and smuggle oil to Iraq and Turkey where it is sold at discounted prices.
“At one point, ISIS was transport­ing 100 tanks of crude oil daily to the Iraqi city of Mosul but the coali­tion air strikes led to a reduction in oil extraction and almost total pa­ralysis of cross-border oil transpor­tation,” a Syrian oil expert in ISIS-held territory told The Arab Weekly on condition of anonymity.
“Alternatively, the group ‘leased’ the exploitation of the fields to lo­cal investors, who at the end of the day pay the group their share of the day’s labour,” he said.
Crude is also sold locally to the owners of “burners” who boil it in big tanks at extremely high tem­peratures to separate the main components, such as fuel and kerosene.“Such a primitive refining technique is causing environmen­tal hazards and endangering public health in the region, especially in Shadadi and al-Hol, where black smoke from burners is blocking the sun,” the expert said.