18 March 2009
While Syria will face the twin challenges of falling domestic oil production and lower crude prices this year, the government has moved to reinforce the competitiveness of the national energy sector by improving efficiencies within the country's oil industry and encouraging domestic conservation.
In a bid to improve Syria's rate of upstream production and exports, the government has moved to restructure the country's sizeable hydrocarbons industry, streamlining the sector's bureaucracy and limiting local consumption through new conservation measures.
On February 24, President Bashar Al Assad ratified a series of laws establishing two new state bodies to oversee operations in the energy sector, with a clear separation of upstream and downstream activities.
Under the legislation, the array of state-owned companies will be grouped under one of two new entities. The General Organisation for Refining and Distribution of Petroleum Products (GORDPP) will be responsible for the refining and distribution of oil products, while the General Organisation for Petroleum (GOP) will be charged with exploration, production, transportation of petroleum and gas processing. Though autonomous, the two companies will report to the minister of petroleum and mineral resources.
The Syrian Petroleum Company (SPC), Syrian Gas Company and the Syrian Company for Oil Transport will all be affiliated with the GOP. GORDPP, meanwhile, will take the Homs Refinery Company, Banias Refinery Company, Syrian Company for Distribution of Gas and the Syrian Company for Storage and Distribution of Petroleum Products under its wing.
Speaking to local media the day the laws were enacted, Syria's oil minister, Sufian Al Alao, said the government hopes that by streamlining many of the operations of the energy sector it will reduce costs and improve efficiency, ending the duplication of activities by various state energy firms and allowing them to focus on core activities. According to the government, this improved productivity should further encourage overseas investors to enter into joint ventures with the state's energy firms.
According to figures released by the Ministry of Petroleum and Mineral Resources in early February, oil production fell by 2.8% last year, with output averaging 369,288 barrels per day (bpd) compared to 380,000 bpd in 2007.
Of total production, the state-owned SPC averaged 195,475 bpd while output from joint ventures between international companies and SPC produced 173,813 bpd, the ministry report stated.
Similarly, Syria's budget deficit, estimated at $5.3bn for 2009, or around 9.24% of GDP, could increase, while GDP could fall should oil prices fail to rise from their current levels. The budget's revenue figures were based on an estimated price of $51 per barrel for light crude and $42 per barel for local heavy crude. With light crude trading at around $47 a barrel in early March, and the price of heavy crude drifting between $40 and $45, there is no guarantee that income projections will be met.
Nor does Syria have the option of boosting output to increase income. At best, wellhead production is expected to remain at 2008 levels, though that is likely to prove somewhat challenging due to reserves drying up, with some wells stopping production altogether and operating fields having less oil to pump.
Rising domestic demand coupled with the fall in production has put Syria in the position of being a net importer of certain grades of oil, especially light crude. A recent study conducted by Syrian economist Ziad Arbash showed domestic oil consumption had risen to 349,000 bpd by the end of 2007, more than double the 153,000 bpd of the early 1990s.
With demand predicted to grow by 5% annually until 2010 and 4% for each of the five subsequent years, according to a report by the Syrian news agency SANA in late February, the country will be increasingly reliant on imports to make up the production shortfall.
Syria is also trying to make the most of existing reserves by promoting improved energy usage at home, with the parliament passing legislation in mid-February that revised the drafting of new building codes, mandating higher levels of energy efficiency and the rationalisation of consumption.
Careful husbanding of oil reserves may extend the life of the sector somewhat, but comprehensive structural reforms like these will not only help boost production but improve the attractiveness of the country's upstream sector. While Syria does face some significant challenges maintaining current rates of domestic upstream production, it is evident that the government does have a clear vision of how to ensure the sector's sustainability.
While Syria will face the twin challenges of falling domestic oil production and lower crude prices this year, the government has moved to reinforce the competitiveness of the national energy sector by improving efficiencies within the country's oil industry and encouraging domestic conservation.
In a bid to improve Syria's rate of upstream production and exports, the government has moved to restructure the country's sizeable hydrocarbons industry, streamlining the sector's bureaucracy and limiting local consumption through new conservation measures.
On February 24, President Bashar Al Assad ratified a series of laws establishing two new state bodies to oversee operations in the energy sector, with a clear separation of upstream and downstream activities.
Under the legislation, the array of state-owned companies will be grouped under one of two new entities. The General Organisation for Refining and Distribution of Petroleum Products (GORDPP) will be responsible for the refining and distribution of oil products, while the General Organisation for Petroleum (GOP) will be charged with exploration, production, transportation of petroleum and gas processing. Though autonomous, the two companies will report to the minister of petroleum and mineral resources.
The Syrian Petroleum Company (SPC), Syrian Gas Company and the Syrian Company for Oil Transport will all be affiliated with the GOP. GORDPP, meanwhile, will take the Homs Refinery Company, Banias Refinery Company, Syrian Company for Distribution of Gas and the Syrian Company for Storage and Distribution of Petroleum Products under its wing.
Speaking to local media the day the laws were enacted, Syria's oil minister, Sufian Al Alao, said the government hopes that by streamlining many of the operations of the energy sector it will reduce costs and improve efficiency, ending the duplication of activities by various state energy firms and allowing them to focus on core activities. According to the government, this improved productivity should further encourage overseas investors to enter into joint ventures with the state's energy firms.
According to figures released by the Ministry of Petroleum and Mineral Resources in early February, oil production fell by 2.8% last year, with output averaging 369,288 barrels per day (bpd) compared to 380,000 bpd in 2007.
Of total production, the state-owned SPC averaged 195,475 bpd while output from joint ventures between international companies and SPC produced 173,813 bpd, the ministry report stated.
Similarly, Syria's budget deficit, estimated at $5.3bn for 2009, or around 9.24% of GDP, could increase, while GDP could fall should oil prices fail to rise from their current levels. The budget's revenue figures were based on an estimated price of $51 per barrel for light crude and $42 per barel for local heavy crude. With light crude trading at around $47 a barrel in early March, and the price of heavy crude drifting between $40 and $45, there is no guarantee that income projections will be met.
Nor does Syria have the option of boosting output to increase income. At best, wellhead production is expected to remain at 2008 levels, though that is likely to prove somewhat challenging due to reserves drying up, with some wells stopping production altogether and operating fields having less oil to pump.
Rising domestic demand coupled with the fall in production has put Syria in the position of being a net importer of certain grades of oil, especially light crude. A recent study conducted by Syrian economist Ziad Arbash showed domestic oil consumption had risen to 349,000 bpd by the end of 2007, more than double the 153,000 bpd of the early 1990s.
With demand predicted to grow by 5% annually until 2010 and 4% for each of the five subsequent years, according to a report by the Syrian news agency SANA in late February, the country will be increasingly reliant on imports to make up the production shortfall.
Syria is also trying to make the most of existing reserves by promoting improved energy usage at home, with the parliament passing legislation in mid-February that revised the drafting of new building codes, mandating higher levels of energy efficiency and the rationalisation of consumption.
Careful husbanding of oil reserves may extend the life of the sector somewhat, but comprehensive structural reforms like these will not only help boost production but improve the attractiveness of the country's upstream sector. While Syria does face some significant challenges maintaining current rates of domestic upstream production, it is evident that the government does have a clear vision of how to ensure the sector's sustainability.
© Oxford Business Group 2009
