Syria’s war sends oil output crashing to almost nothing

Friday 15/05/2015
A member of the Syrian government forces stands next to a well at Jazel oil field.

Damascus - Syria’s oil production, once the country’s mainstay, has plunged to a record low of 9,500 barrels per day (bpd), strangling an economy bat­tered by more than four years of civil war and sending domestic fuel prices sky high.
The oil sector produced 380,000 bpd before the conflict broke out in March 2011. Of that, Syria exported 130,000 bpd, while the remainder was for domestic use. However, in the past few months, output plunged to a paltry 2.5% of pre-war levels, Syrian Oil Minister Suleiman al-Abbas announced at the begin­ning of May.
“This is highly significant,” said Nader Cyrus Itayim, OPEC editor with the Middle East Economic Survey (MEES), a weekly energy newsletter published in Cyprus.
“Simple back-of-the-envelope calculations would suggest the government’s forgoing around $3.5 billion to $4 billion of what it could be earning through exports and the like, if production was still at nor­mal levels,” he told The Arab Week­ly by email.
Itayim said, even though Syria’s oil industry has been crippled, demand has remained high be­cause of Syrian military opera­tions against rebel forces. “So, the loss of oil production volumes will have hurt on that front as well,” he stressed.
Extremists with the Islamic State (ISIS), which has set up a self-pro­claimed caliphate in north-eastern Syria, have taken over most of the country’s oil fields, which are mainly in that region.
That deprived the Damascus re­gime of one of its main sources of hard currency, badly depleted be­cause of dwindling exports and the fighting across the country.
The regime has accused ISIS and the militant Jabhat al-Nusra, or al- Nusra Front, al-Qaeda’s Syrian affil­iate, of illegal drilling, stealing the crude oil and selling it at cut prices in neighbouring countries, mainly Turkey, to finance their operations.
Oil Ministry figures show that more than 20 oil wells were sub­ject to arson, while 128 others were stolen. The figures also pointed to some 8.5 billion barrels being stolen at a daily average of about 40,000 barrels.
Prior to 2011, oil made up around 45% of Syria’s total exports. A year earlier, oil revenues were estimat­ed at $3 billion.
In 2013, however, Syria had to import oil worth $1.7 billion to make up for lost domestic output and a greatly increased demand for fuel and oil derivatives, largely to keep the military’s tanks and jet fighters operational as the Iranian-backed regime battled for survival.
Direct oil losses amounted to nearly $1 billion in July 2014, ac­cording to Oil Ministry figures. It estimated unspecified “indirect losses” at an additional $6.9 billion.
An Oil Ministry official told The Arab Weekly that several gas fields are constantly being sabotaged by armed groups, mainly ISIS mili­tants.
Production from the Shaer gas field in central Syria, Syria’s larg­est with a pre-war output of 3 mil­lion cubic metres a day, had been repeatedly halted because of the fighting, the official said.
The severe shortage in oil pro­duction has prompted the govern­ment to import oil from its long-time ally Iran, which has repeatedly stepped in to salvage Syria’s limp­ing economy with a seemingly lim­itless credit line facility rumoured to have reached $35 billion.
Itayim said the Iranian link is well documented. He said the Oil Minis­try recently disclosed that Syria’s two refineries in the northern cities of Banias and Homs — each with a capacity of around 100,000 bpd — processed 1.3 million tons of crude, just more than 100,000 bpd, in the first quarter of 2015.
“Presuming the government’s 9,500 bpd figure is correct, that suggests just over 90,000 bpd of crude has been sourced from else­where, either from Syrian fields outside government control or im­ported from abroad,” Itayim said.
“All the indications are that Iran, which according to our estimates supplied the Assad government with around 60,000-70,000 bpd on average in 2014, remains the key supplier,” he added.
The supply has increased in re­cent months, with the Internation­al Energy Agency (IEA) suggesting that Iranian shipments to Syria hit 125,000 bpd in March.
But Itayim emphasised that Iran cannot not plug the gap complete­ly. “It’s gone some way to doing so but there are still shortages and, as a result, there are fuel shortages and regular power cuts,” he said.
With the phasing out of subsi­dies in recent years, the prices of food and fuel skyrocketed, hitting in particular the pockets of Syrians already hard pressed financially.
The price of one litre of kerosene fuel used for heating jumped 700% to 125 Syrian pounds ($0.50). The price of a gas cylinder of 20 litres increased from $1 to $6. One litre of unleaded gasoline also climbed 250% to 56 cents.