SYRIA - Exploration Background.

There has been little exploration in recent years, with no significant oil discoveries. The latest major oil find was made in July 1999. The discovery well, Kishma-101, tested 5,000 b/d of light oil and 7.1 MCF/day of gas. Spudded on May 19, 1999, the well was targeting a Paleozoic objective at a depth of 3,000 metres. The well is about 100 km south-east of Deir ez-Zor and just 2 km south-east of the Kishma-1 discovery which was made in 1995 by Dublin-based Tullow Oil. But Tullow Oil later abandoned the field and left Syria. The only other big find was made in September 1997 by SPC which announced a "major gas field" in the Palmyra area. The national company, exploring a block abandoned by Marathon, found the field at a depth of 2,400 metres about 80 km south-east of Palmyra. SPC said this was the largest gas field in Syria.

Later SPC said the field, Abu Rabah, had the potential to produce 1-2 MCM/day (about 35-70 MCF/d). It said this was to help Syria shift to gas for the operation of its power plants and oil refineries. The field's reserves were not disclosed. A second well, Abu Rabah-2, in 1999 struck gas and condensate. SPC has announced several gas discoveries made since January 2000. Gas and condensate were found in a Kurrachine Dolomite Fm in Abu Rabah-3 well. It said that, following an April 1999 spud, the well was drilled towards a projected depth of 3,500 metres to appraise the Abu Rabah-2 find. Another appraisal, North al-Faid-2, found gas and condensate in the Kurachine Dolomite. This was pursuing a gas/condensate trend of the Palmyrides Fold Belt, which also extends into central Syria. SPC said oil was found in the al-Bishri block, where exploration well Wadi Obeid-24 was drilled to the Judea Fm. A find was made in the Kishma field, where the Kishma-103 appraisal struck gas in a Paleozoic Fm. SPC in 2003 announced another gas discovery north-west of Deir ez-Zor. Shell and other firms have made a number of finds and have put them quickly into production (see background in Vol. 62, gmt9b).

Exploration and drilling cover less than half of Syria's 800 potential structures. A few E&P deals have been signed since mid-1998 (see E&P regime in Part 2 next week).

The Ministry of Petroleum and Mineral Resources (MOPMR) in May 2005 opened its fifth licencing round in four years, and invited IOCs to bid for nine EPSA covering an area of around 65,000 sq km. The blocks, which included those issued in previous bid rounds, were as follows: V (6,994 sq km), VII (3,390 sq km), IX 10,000 sq km), XI 10,000 sq km), XIII (6,000 sq km), XV (8,267 sq km), XVI (6,880 sq km), XIX and XXI (3,925 sq km). The deadline for companies to submit their proposals was Oct. 3, 2005. The following was ready for review at the SPC Exploration Department: - Technical summary for each block of the open blocks (promotional brochures). - Main contractual terms and conditions (draft contract project). - Data room for G&G studies for evaluation to be made by the interested companies. - More information can be found at the MOPMR official website - http:/twww.mopmr-sy.org or www.spc-sy.com.

IOCs continue to invest in Syria's petroleum industry and explore its potential reserves despite a looming threat of UN sanctions, and a US campaign to isolate President Bashar al-Assad's Ba'thist dictatorship. In 2003 Houston-based Gulfsands Petroleum, which has 50% in Block 26 bordering Iraq in the north-east, ratified an agreement with the Syrian parliament to initiate an exploratory study into the block's reserve potential. Ryder Scott, an independent petroleum consulting firm which did the feasibility project, announced the discovery of significant oil and gas reserves in Block 26 on Jan. 30, 2006. Based on the results Gulfsands plans to drill two oil wells in 2006 whose reserve potential could reach 1 bn barrels.

Gulfsands gets most of its crude oil from New Mexico, but like other firms which fear a dwindling global energy supply they are focusing on expansion. Gulfsands said Syria was an obvious choice due to its proximity to refining facilities which also process crude oil from the Persian Gulf. The Daily Star in January quoted a top Gulfsands executive as saying: "I know American friends who have pulled out of Syria, like Devon Energy that had to evacuate due to US sanctions so they sold their stake in fields back to Gulfsands, but we are a UK firm, listed at the London Stock Exchange. Only our corporate offices are based in Houston".

In keeping with the 2003 Syrian Accountability Act, US imports of "dual-use" and military items have been banned except in cases of medical or humanitarian emergencies. The legislation allows the president to choose two or more of six possible sanctions, including one which forbids US firms from investing and operating any business ventures with Assad's regime. Though the Bush administration has stopped short of forbidding firms to invest in Syria, JVs like the one conducted by Gulfsands would be jeopardised if the US stance changed.

The current US sanctions programme is not immediately impacting the Syrian economy since even before the 2003 legislation, the volume of bilateral trade between the two countries was low, reaching only $300m in 2002. Some oil consultants argue the consequences have been more harmful to US firms than to Syria. By comparison the EU is Syria's main trading partner, with bilateral trade reaching $7.2 bn in 2003 - over 87% of which was Syrian fuel exports to the EU. But bilateral economic relations are declining in proportion to Syria's falling oil output (see omt10SyriaOil&PoliticalProspectsMar6-06).

Gulfsands in January signed two LIs with MB Drilling Overseas, a unit of Oman's MB Holding, for two rigs. MB rig-21, for shallow drilling, will be used for one well with options for a second. MB rig-3, for deep drilling to be shared with another firm, is contracted for one year with options for two one-year extensions. Two Block 26 prospects have been selected for drill-ing. The first to be drilled is an area known as Suwaidiyah North where a vertical well will be drilled to a depth of 2,134 metres with an expected spud date in early May. The second is an area known as Tigris where a vertical well will be drilled to a depth of 4,267 metres, with an expected spud date of mid-August. These follow completion of 2D seismic over a 1,155-km area in 2006. Ownership of Block 26 has changed hands. The UK's Emerald Energy got 50% in the block previously held by Soyuzneftegas of Russia after a placing of more than 5m shares in mid-November at the London Stock Exchange. The total cost of the acquisition was $16.9m.