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SYRIA - The Refining Sector.

The Syrian oil refining sector is getting older and less efficient, while domestic demand for high quality fuels is rising rapidly. With the Syrian population growing at a high rate, the country's imports of gasoil/diesel in 2000 are to reach 1 million tons and will exceed 2.6 million t/y by 2010. Private refining projects have been stalled for years.

The sector has not seen significant upgrading or expansion in the past two decades. Many proposals made through the 1980s and 1990s were frozen for reasons ranging from government indecision to financial difficulties.

There are two oil refineries in Syria, at Banias and Homs, with a combined capacity of 245,000 b/d. Both are owned by the state, which regards all the productive sectors as being of "strategic importance". Much of their output is for domestic consumption. Some surplus gasoline and fuel oil is available for export. Export markets have included Lebanon and Cyprus.

Both the Homs and Banias refineries are badly in need of revamping. A proposal to build Syria's first private refinery has been made by the Sarakbi Group of US-based Syrian businessman Bourhan Shafik Al Sarakbi. This group is also to build the first IPP in Syria, which has won government approval, as a BOOT venture. But talks with the state's power company over its planned purchase from the IPP have been dragging on since mid-1999 (see DT No. 9).

The only new facility built in Syria recently is a lube oil plant in Adra village, 20 km north-east of Damascus. A private venture between Mobil and a Syrian company, this was inaugurated on July 21, 1997, by Syrian Minister of Petroleum and Mineral Resources Mohammed Maher Jamal. It has a capacity of 10,000 t/y and employs 90 workers. Mobil (now part of ExxonMobil) owns 49% in the venture. The Syrian firm holds 51%. The first phase of investment was 150 million Syrian pounds ($3m).

Private investment has been sought for the fertiliser industry since 1998. But there has been little progress since then, because the state's incentives are judged not good enough by potential investors (see following).

Proposed Expansions: There are four possibilities for expanding this sector. The first is through the addition of new units at the existing refineries, the second is a proposed refinery at Deir Ez Zor, the third is the private venture proposed by the Sarakbi group, and the fourth is a proposed Iraq- Syria refinery at Banias.

The Sarakbi Group's venture was first proposed in September 1994. The businessman then said he had government approval to build a 120,000 b/d refinery. Since then, the planned capacity has been raised to 140,000 b/d and it is promoted as an export venture to target Turkey, Lebanon, Cyprus and other Mediterranean markets. Preliminary studies on the project were completed in October 1996 - with ABB Lummus Crest of the US involved - focusing on the location for the refinery, the crude feedstock mix, the product mix and the marketing strategy. The favoured site is Banias, near the existing refinery. It would process a blend of Syrian light and heavy crudes with the option of including Saudi light. Its output would include high quality gasoil/diesel, gasoline, kerosine, jet fuel, naphtha, LPG and fuel oil. The government would take a 25-50% stake in the refinery.

Sarakbi Group executives say the project has generated interest among investors in Europe, the US and the Gulf Co-operation Council (GCC) states. The viability of exporting to Lebanon seems assured as the two refineries in the neighbouring country, at Tripoli and Zahrani, are virtually inoperable. The Beirut government has indicated that it does not have the money to revive them. Many Lebanese businessmen are said to consider the prospect of importing products from Syria as more cost effective compared to an expensive effort to revamp these plants. But there have been no major developments on the Sarakbi venture.

The proposed 140,000 b/d Iraq-Syria refinery in Banias would obviate the need for Sarakbi's project. But this needs approval by the UN Security Council as it is part of a major crude oil pipeline to be built from Kirkuk. APS sources indicate that this is one of the carrots which the US may offer to Damascus as incentive for a positive conclusion of the peace negotiations between Syria and Israel. Other incentives expected are major financial aid to Syria from the US/OECD, funding for several projects including this refinery, and a big geo-political role for Damascus in the Middle East (see News Service in this week's APS Diplomat).

The 60,000 b/d refinery project at Deir Ez Zor has been raised several times since 1995. By May 1996, the government had received bids for the plant, to be located near Syria's main oilfields in the Euphrates valley. But out of 30 companies prequalified for the contract, only four presented full bids. There was speculation about possible financial aid from Saudi Arabia or Kuwait, but this did not materialise. The economic viability of the project came in for criticism because it was too far from the major consumption centres.

Plans to upgrade the Banias and Homs refineries have existed since the 1980s. Related proposals have faced revisions and delays. French companies have shown interest since 1992. Cost estimates have risen to $1 bn. Beicip of Institute Francais du Petrole was assured in September 1995, as the company completed a set of tender documents, that the oil ministry would continue with the upgrading of the Banias plant.

In June 1997 the oil ministry rejected a set of tender documents because they failed to cut the output of fuel oil to a satisfactory level. In 1998 new upgrading plans were submitted to the ministry by Beicip and Franlab, another French entity. These envisaged new facilities for hydrocracking and vacuum distillation at Homs refinery. Modernisation of the existing crude distillation and coking units were included in the plan. At Banias refinery, upgrading could include a 28,000 b/d catalytic cracker.

In October 1990 the oil ministry commissioned United Oil Products (UOP) of the US to do a comprehensive study of the country's downstream sector. The UK units of Bechtel and Chem Systems were also involved in the study. The study, worth $1m, covered the refining industry and prospects for the development of a petrochemical sector. The study was submitted to the oil ministry in September 1992. Its recommendation was that the refineries should be upgraded, with catalytic crackers and lube oil plants to be installed at Banias and Homs, in addition to which a hydrocracker was to be added to the latter. The recommendations were accepted by the oil ministry in August 1993. In August 1994 more than 20 international firms bid for the project's technical assistance contract. Beicip was one of them. Others included Chem Systems, Arthur D. Little and Foster Wheeler of the US, Comprimo of the Netherlands and Monenco Agra of Canada.

Most of UOP's recommendations were not implemented, except for a catalytic cracker and hydrotreater at Banias which began operating in early 1994. UOP was then commissioned to do a revised study, which was to be delivered by end-April 1995. The completion of this report was delayed as proposals for a 60,000 b/d refinery in Deir Ez Zor changed the basic parameters of the UOP study.
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Title Annotation:International Pages
Comment:SYRIA - The Refining Sector.(International Pages)
Publication:APS Review Downstream Trends
Geographic Code:7SYRI
Date:Mar 13, 2000
Previous Article:SYRIA - Industrial Uses.
Next Article:SYRIA - The Refineries.

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