SYRIA - Part 2 - The Oilfields Continue To Decline.

Actual oil production in Syria has fallen to less than 510,000 b/d, having peaked at 615,000 b/d in 1994. The decline, being managed by the foreign operators, is likely to be limited as the state-owned Syrian Petroleum Co. (SPC) plans a redevelopment of its own oilfields in the north-east of the country. Syria could become a net importer of oil, as it was until the mid-1980s, if no major discoveries are made during this decade.

Shell, the main operator in the country, had warned in early 1998 that if no significant oil finds were made in a few years, Syria could return to being a net importer by 2005. All the major producing oilfields in Syria have reached their plateau and most of them have begun a steady but managed decline since early 1996, after a very costly blow-out at a field.

A number of foreign oil companies have left Syria in recent years, due to very tough E&P terms by SPC (see background in Gas Market Trends No. 13). Little exploration was done until mid-1996, when Nader Nabulsi was dismissed as oil minister and was replaced by Mohammed Maher Jamal. But Jamal, a geologist, was in late 2001 replaced by a figure with no experience in the petroleum industry.

Unlike companies elsewhere, the operators in Syria are not allowed to lift or market crude oils they produce. All the output is sold to SPC at prices set by the latter, and the crude oils are marketed by Sytrol which is under the control of the prime minister's office (see Part 3).

The Shell-operated system - consisting of Al Furat Petroleum Co. (AFPC), Al Badiya Oil Co. (BOC) and Al Bishri Petroleum Co. (BPC) - is by far the biggest oil producer in Syria. In Jan. 1996 it began a five-year cutback schedule with its output then set to fall by 10,000 b/d per annum. But the actual rate of decline increased in the subsequent years, despite rapid development of small oilfields discovered by Shell. No major oil discoveries have been made in the past ten years and even fields on stream since the mid-1990s have reached their plateau (see profiles on following pages & in Gas Market Trends).

The decline in oil output has been partly offset by a steady rise in production of natural gas which is used for domestic energy. The shift to gas has limited the growth of domestic oil consumption. The country's gas processing plants are being expanded (see Downstream Trends).

                           SYRIAN CRUDE OIL PRODUCTION
                                  (barrels/day)

                               1994        1995    Mar 2000    Mar 2002
AFPC/BOC/BPC (Shell)        405,000     400,000     340,000     300,000
Syrian Petroleum Co. (SPC)  150,000     150,000     140,000     140,000
DEZPC (TotalFinaElf)         60,000      60,000      60,000      67,000
Al Khabour Oil Co.*              --          --       2,000       2,000
Total                       615,000     610,000     542,000     509,000

*  Al Khabour's Kishma oilfield went on stream in mid-1997.