Syria’s oil and natural gas fields offer opportunities for investors

Old fields could produce 400,000 barrels of oil per day within a year and there are some large natural gas reserves to exploit, but investment is needed to make the most of the opportunity.

Syria's oil and gas reserves could fire an economic recovery but investment is needed.
Al Majalla
Syria's oil and gas reserves could fire an economic recovery but investment is needed.

Syria’s oil and natural gas fields offer opportunities for investors

Syria has a wealth of resources and related industries, such as agriculture. In the 1950s, the country produced vast quantities of wheat—both hard and soft varieties—and exported fruit, olives, olive oil, leather, furniture, and fabrics made by skilled artisans, as a flourishing private sector boosted trade.

The 1960s ushered in a change in political regime, however. Its state-capitalist model placed the means of production under state control. The government assumed ownership of everything, installing managers who lacked the expertise or qualifications. This bred partisanship, political affiliation, and cronyism. All this may seem irrelevant to those now interested in Syria’s oil reserves, but it is not. The issues are connected.

Oil’s early years

Syria’s oil story is a complex one that began in the late 1950s, when two small, little-known companies—Concordia and Manhal—were allowed to operate near Iraq, in the north-east of Syria, in the Sweidiyeh, Rumailan, and Karachok regions.

This was when global oil production was dominated by five major companies (three American, one British-Norwegian, and one French), whose prospectors found oil in Iraq, Iran, Saudi Arabia, Kuwait, Libya, Algeria, Venezuela, the United Arab Emirates, Bahrain, and Qatar.

Syria was largely overlooked by these giants, partly because the Iraq Petroleum Company (IPC) had previously explored Syria’s Euphrates region and deemed it unworthy of further investment. Still, after geological studies, oil was discovered in the north-east, with recoverable reserves estimated at 2.5 million barrels.

By the late 1950s, with only a few rigs and a small team of Syrian and foreign engineers, extraction began. The primary challenge was transport: building pipelines and finding an export port (a costly endeavour). The oil found was of heavy consistency (API124), a thick bituminous type—less desirable than the light crude of the Gulf.

Still, during the brief Syria-Egypt union, a refinery was built in Homs with a capacity of 1 million barrels per year (bpd), close to the pipeline transporting Iraqi oil from Kirkuk to Baniyas (on the Syrian coast, between Latakia and Tartous) and Tripoli in Lebanon.

Syria had signed a 1949 agreement for two pipelines: one to the Baniyas refinery owned by a British-Norwegian company operating in Iraq, and another running to the Tripoli refinery and port. Syria got transit fees from both pipelines.

Private to public

When the Homs refinery was built, it began drawing its needs from Iraqi crude, with financial settlements calculated against Syria’s pipeline transit share, but in 1963 the Baath Party took power. The following year, under the slogan “Arab oil for the Arabs,” all foreign oil licences were revoked.

Delil Souleiman/AFP
An oil production facility near al-Malikiyah (Derik) in Syria's north-easternHasakah province on October 27, 2020.

Manhal and Concordia were nationalised, and a new Ministry of Oil and General Petroleum Corporation (later renamed the General Company for Oil) were established. The ownership of the oil, together with the exploration and production of it, now came firmly under the Syrian state.

The Syrians worked with Soviet experts to find reserves. In 1965, the General Company for Oil contracted the construction of pipelines from Sweidiyeh, Rumailan, and Karachok to a new terminal north of Tartous. This terminal, near the expanded Homs refinery (now 1.5 million barrels per year), would serve oil exports.

In 1964, under the slogan "Arab oil for the Arabs," all foreign oil licences were revoked

Initially, only modest amounts of Syrian oil were exported from the Hasakah fields to the Soviet Union in exchange for goods. After 1970, exploration expanded, with drilling in Hasakah, Tanf, and Habari (south of Raqqa), but little was found of commercial value, in part because of poor drilling technology (with a limited depth of 3,000-4,000 metres) and inadequate geological studies.

In 1974, the Soviets began cooperating with American companies like Occidental, Mobil Oil, Bechtel, and New Jersey Standard. This was seized upon by Syria's President Hafez al-Assad, who contracted companies including Mobil Oil, often through well-connected intermediaries such as Mohamed Makhlouf (Assad's brother-in-law).

Pumping money

These service contracts were similar to those Iraq signed with new firms like Hispanoil of Spain, Total of France, and ENI of Italy, after enacting its Abdel-Karim Qassem Law No. 80 (devised by Oil Minister Abdel-Rasoul Salman), which revoked 99-year concession agreements.

Under similar terms, Syria's agreements allowed companies to spend $50mn on exploration. If they discovered commercial volumes, they could claim 12.5% of extracted crude and recoup costs over 20-30 years. This led to discoveries in the Omar and Taym fields in Deir Al-Zor, as well as Tanf and smaller fields, all yielding a light crude superior in density to North Sea Brent.

Between 1989 and 1995, Syrian oil production surged, topping 700,000 bpd from Hasakah fields and service contract areas. This coincided with global price hikes. After 1974, light crude reached $29-35 per barrel, with spot markets hitting $45. This oil revenue was vital for Syria's economy, but it was captured by Assad and his sons.

Rami al Sayad/AFP
Syrian technicians at a makeshift oil refining installation near the city of al-Bab, north of Aleppo, on March 28, 2022.

The money never entered the Central Bank or public treasury. Instead, it was parked on paper in the Real Estate Bank (Branch No. 3), controlled unofficially by the regime. Oil contracts, imports of diesel, jet fuel, and lubricants were all managed by an office in Al-Maliki, run by two men close to Makhlouf.

The Oil Marketing Office—under the Prime Minister, but with no legal status—handled all crude sales and imports, with its head appointed by the Presidential Palace. Staff were assigned via the Economic Committee and the Prime Minister's office. Those questioning these revenues were dismissed or threatened. I know—it happened to me.

Regime apologists claimed that the money from oil was used to fund arms purchases, but after the death of Hafez's son and heir-apparent Bassel Al-Assad in 1994, it was revealed that he had $13bn in foreign bank accounts.

Bust then boom?

After 2000, sanctions against the Oil Marketing Office and wider energy sector forced US firms out. By 2011, when civil war broke out, production had fallen to 380,000 bpd. Wells, rigs, and pumps were destroyed or looted. Oilfields in the north-east eventually came under the control of the US-backed Syrian Democratic Forces (SDF).

Today, Syria produces 80,000 bpd, but Assad is gone, and thanks to mediation by Arab states, a Syrian government-SDF agreement was signed to return the oil fields back to state control. Restoration studies are underway, aiming to rebuild capacity to 200,000 bpd and sign deals both to develop old fields and to explore new ones.

From 1989 to 1995, Syrian oil production topped 700,000 bpd, but the money never entered the Central Bank or public treasury

There are several promising areas, both for oil and gas. The plan is to raise production from Hasakah, Deir Al-Zor, Shaddadi, and other old fields to 400,000 bpd within a year, with more possible from offshore Mediterranean fields. Qalamoun is also promising, particularly Nabek, Deir Atiyah, and Qara, where Occidental discovered huge natural gas reserves.

Syria could yet become one of the world's biggest gas producers, while the return of Chinese, European, and American companies to their former blocks—combined with modern horizontal drilling in Habari, Tanf, and the Mediterranean—could elevate Syria to the ranks of oil-exporting nations.

This would mean rebuilding and expanding pipelines (either those of the Syrian Oil Transport Company or the Iraqi pipeline to Baniyas and Tartous), deepening ports to handle tankers carrying up to one million barrels, and probably building a third refinery in Raqqa with a 300,000 bpd capacity. The area has strong agricultural potential and could support petrochemical and fertiliser industries.

Diana Estefanía Rubio
Syria's oil and gas comes with strategic potential

The Homs refinery has been expanded six times and could churn out 6.2 million tonnes annually. The Baniyas refinery—built later, mainly for exporting oil—had a similar capacity, having once exported around three million tonnes annually. Both facilities now require costly maintenance and upgrades.

These costs, combined with the cost of developing the fields in Hasakah, Deir Al-Zor, Shaddadi, and the Conoco field, equate to several billion dollars, yet foreign investor companies could be interested, with the Ministry of Energy and Oil issuing international tenders that protect both state and company interests.

Syrians facing an expensive rebuild after 14 years of civil war continue to live in hope that companies with the means and willingness to invest will show serious intent to survey all Syrian territory. What lies below the ground will help rebuild what lies above it.

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