Syria’s war sends oil output crashing to almost nothing
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.