19-03-03 With proven oil reserves expected to last only about 10 more years and a population growing at 2.5 % per year, Syria may become a net importer of oil within the next decade. Thus, the exploration for oil and natural gas is a top priority in Syria.
The information contained in this report is the best available as of March 2003 and can change.

Recent developments
On June 10, 2000, President Hafiz al-Asad died, and was replaced by his son, Bashar al-Asad, who promised to undertake a variety of economic, administrative, and political reforms. Progress in implementing economic reforms has been slow, however, due in part to the influence of holdovers from the regime of the elder Asad.
Growth in real gross domestic product (GDP) was 3.3 % % in 2002, only slightly higher than the rate of population growth. Real GDP growth for 2003 is projected at 3.0 %.

According to the Syrian government, the country's unemployment rate is under 10 %, although according to foreign diplomats, the rate is more likely over 20 %. The ultimate goals of economic reform in Syria are to move the country away from a state-run economy and towards a more market-based, modernized one, to reduce the country's high rate of unemployment (particularly given the country's rapid population growth), and to diversify the country's economic base for the day when oil reserves run out. In recent years, Syria has moved extremely slowly and cautiously in this direction.
For the most part, however, as of early 2003, large state corporations continue to control all strategic sectors, including oil, electricity, banking, and chemicals. The Syrian government announced in early 2002 that it had put on hold any immediate moves to privatise large state-owned enterprises, concentrating instead on increasing their efficiency. The main economic reform of the past year was the decision in October 2002 to allow banks to trade foreign currencies at rates closer to the "market-based" rates against the Syrian pound prevailing in neighbouring Lebanon.

Syria's relations with Iraq have improved significantly over the past few years, particularly in the economic sphere. In June 1997, Syria reopened its border with Iraq for businessmen, and since then a series of trade delegations has travelled between the two countries. On July 14, 1998, Syria and Iraq signed a memorandum of understanding on reopening an important oil pipeline -- closed in 1982 -- from northern Iraqi oil fields to Syria's Mediterranean port of Banias. The pipeline is now in operation.
On February 27, 2000, Iraq opened an interests section in Syria -- the first direct bilateral diplomatic link in over 19 years.

Oil
Syria's oil industry faces many challenges in the years to come. Oil output and production continues to decline due to technological problems and depletion of oil reserves. Since peaking at 590,000 bpd in 1996, Syria's oil output has fallen steadily, to an estimated 525,682 bpd in 2002, as older fields, especially the large Jebisseh field discovered in 1968, have reached maturity. Syrian oil production is expected to continue its decline over the next several years, while consumption rises, leading to a reduction in Syrian net oil exports. If this trend continues, it is feared that Syria could become a net oil importer within a decade.
Syria hopes to reverse this trend through intensified oil and natural gas exploration and production efforts, plus a switch from oil-fired to natural-gas fired electric power plants. Syria also has opened up new blocks for oil and natural gas exploration, with the Oil and Mineral Resources Ministry receiving bids from several international companies in December 2001 on five exploration areas. Awards for these blocks were made in January 2003, with Shell receiving exploration rights in the Damascus-Palmyra area and India's ONGC Videsh receiving another onshore block. Independents Ocean Energy and Stratic Energy also received awards.

Since the first round of bids closed, bids for a second round of 11 blocksclosed in October 2002. Bids for a third round of 11 blocks were solicited in December 2002. The current third bid round includes five blocks from the second round for which bids were not received, as well as six new blocks. No awards have yet been made from the second round. Syria's main oil producer (by far) is al-Furat Petroleum Co. (AFPC) a joint venture established in May 1985 between state-owned Syrian Petroleum Company (SPC -- 50 % share), Pecten Syria Petroleum (15.625 %), plus foreign partners Shell (15.625 %) and Germany's Deminex (18.75 %).
AFPC's fields are located in the north-eastern Syria -- particularly the Deir ez-Zour region, where commercial quantities of oil were discovered in the late 1980s -- and are producing about 400,000 bpd of high quality light crude. AFPC's main oil field is al-Thayyem, although production there has been declining since 1991.

Another important field -- Omar/Omar North -- began production in February 1989 at 55,000 bpd. Shortly thereafter, operator Shell was pressed by the cash-strapped Syrian government to step up production (against Shell's advice) to 100,000 bpd. The result was serious reservoir damage, and in April 1989, output plummeted to 30,000 bpd.
Currently, Omar produces about 15,000 bpd from natural pressure and 30,000 bpd from water injection. Other AFPC fields include al-Izba (light oil), Maleh (34 degrees API gravity oil), Sijan, and Tanak. Production from fields run by SPC peaked in the late 1970s at more than 165,000 bpd.

SPC's fields include:
1) Karatchuk -- Syria's first discovery, located near the border with Iraq and Turkey;
2) Suwaidiyah -- a giant heavy oil field located south of Karatchuk in the Hassakeh region (and extending into north-western Iraq) which currently produces around 85,000 bpd;
3) Jibsah -- a major field producing both oil and gas;
4) Rumailan -- a small field near Suwaidiyah which produces heavy oil; and
5) Alian, Tishreen, and Gbebeh -- three small, depleting fields producing heavy oil. China's CNPC signed a contract with SPC in March 2003 to undertake an enhanced oil recovery project for Gbebeh, which is to increase production from the current 4,500 bpd to 10,000 bpd. Other Syrian oil fields include Maleh, Qahar, Sijan, Azraq, and Tanak.

Jafra, discovered in late 1991 and located near Deir ez-Zour, is operated by TotalFinaElf and has current production of around 60,000 bpd. Besides conventional oil reserves, Syria also has major shale oil deposits in several locations, mainly the Yarmouk Valley stretching into Jordan. Oil exploration activity in Syria has been slow in recent years due to unattractive contract terms by SPC, and poor exploration results.
For these reasons, only a few companies (i.e., TotalFinaElf, Shell, Deminex) out of more than a dozen operating in the country in 1991 remain in Syria at present. The recent bid rounds are an attempt to reverse this trend, but it is unclear how successful this will be. Officials of TotalFinaElf have publicly expressed their intention to scale down their Syrian operations in May 2002.

Refining/downstream
Syria's two refineries are located at Banias and Homs. Total current production from these refineries is 239,865 bpd (132,725 bpd and 107,140 bpd, respectively). Syria is planning to construct a third refinery, with an initial capacity of 60,000 bpd (possibly increasing to 120,000 bpd), at Deir ez-Zour to supply products to the eastern part of the country.
A feasibility study on this project reportedly was completed in January 1998, but it has not been implemented. In addition, Syria plans to upgrade its two current refineries, both of which are in urgent need of overhauling, to replace output of fuel oil with lighter products.

Syria markets all of its crude oil, including that produced by foreign companies, solely through state marketing company Sytrol. Prices for Syrian Light, a blend of light and sweet crudes produced primarily from the Deir ez-Zour and Ash Sham fields, and heavy Suwaidiyah crude, produced from the Suwaidiyah and Jebisseh fields, are tied to the price of dated Brent and are adjusted monthly.
Since January 1994, Sytrol has had a clause in its term contracts prohibiting customers from re-selling Syrian crudes without written permission from Sytrol. This is intended to curb spot trading in Syrian crudes and especially sales to Israel. Besides crude oil, Syria also exports fuel oil and other products. Syria is a member of OAPEC (the Organization of Arab Petroleum Exporting Countries), although not of OPEC.

Syria's major oil export terminals are at Banias and Tartous on the Mediterranean, with a small tanker terminal at Latakia. Banias can accommodate tankers up to 120,000 dwt, and has a storage capacity of 437,000 tons of oil in 19 tanks. Tartous can take tankers up to 210,000 dwt, and is connected via a pipeline to the Banias terminal.
Latakia can handle oil tankers up to 50,000 dwt. All three terminals are operated by the Syrian Company for Oil Transport (SCOT), a sister company of SPC.

SCOT also is in charge of Syria's pipelines, including:
1) a 250,000-bpd export line from SPC's north-eastern fields to the Tartous terminal, with a connection to the Homs refinery;
2) a 500,000-tpy refined products pipeline system linking Homs refinery to Damascus, Aleppo, and Latakia;
3) a 100,000-bpd spur line from al-Thayyem and other fields to the T-2 pumping station on the old Iraqi Petroleum Company (IPC) pipeline;
4) a spur line from the al-Ashara and al-Ward fields to the T-2 pumping station. In early March 2000, both the Iraqi and Syrian sections of the IPC pipeline, which links the Kirkuk oil fields in northern Iraq with Syria's port of Banias on the Mediterranean, were reported as ready for operation.
The 552-mile, 1.1-1.4 mm-bpd (nameplate capacity) pipeline was closed in 1982 after a break in diplomatic ties, then severely damaged during the 1991 Gulf War. Beginning in late 2000, numerous press reports indicated that Syria and Iraq had reopened the IPC pipeline, and were using it to export Iraqi crude oil (most likely Basrah Light) to Syria, where it reportedly is refined and consumed domestically, freeing up Syrian crude oil for export.

These exports earn Syria extra hard currency revenues, plus provide Saddam Hussein with potentially significant revenues outside the UN "food-for-oil" program. Since Iraq remains under UN sanctions, with oil exports allowed only under the "food-for-oil" arrangement via approved export routes, the use of the Kirkuk-Banias line represents a potentially serious breach of UN sanctions against Iraq.
According to the International Energy Agency's Monthly Oil Market Report, indications are that Iraqi oil flows through Syria ceased in January 2001, but apparently increased in early February back to 150,000 bpd. On January 23, 2001, the Bush administration offered to allow Iraqi oil exports through Syria as long as they were regulated by the UN food-for-oil program.

In late January and early February 2002 at the UN Security Council, the United Kingdom accused Syria of importing 100,000 bpd or more. Syria denies the charges, but its export levels since 2001 would have been impossible if much of its own petroleum consumption needs were not supplied from Iraq. Independent analysts have put the probable volume of imports from Iraq in the range of 150,000-200,000 bpd.
As a replacement for the aging IPC, Syria and Iraq reportedly signed an agreement in November 2001 on building a new, $ 200 mm pipeline from Kirkuk to Banias. The two countries also have discussed plans for a joint, 140,000-bpd refinery at Banias to handle the Iraqi (and possibly Syrian) crude being pumped through the pipeline

Natural gas
Syria's proven natural gas reserves are estimated at 8.5 tcf. Most (around three-quarters) of these reserves are owned by SPC, including about 3.6 tcf in the Palmyra area, 1.6 tcf at the al-Furat fields, 1.2 tcf at Suwaidiyah, 0.8 tcf at Jibsah, 0.7 tcf at Deir ez-Zour, and the remainder at al-Hol, al-Ghona, and Marqada. About half of Syria's gas is non-associated, with the rest either associated (with oil) or "cap" gas. In June 1999, a new natural gas field, called North al-Faydh, reportedly was discovered by SPC. The field reportedly has production potential of 35 mm cfpd.
In 2001, Syria produced about 206 bn cf of natural gas, a slight decline from the 213 bn cf produced in 2000 after a steady increase over the last decade. Syria plans to increase this production in coming years as part of a strategy to substitute natural gas for oil in power generation in order to free up as much oil as possible for export. A number of new gas-fired power projects are currently under construction or being planned.

Another possible source of natural gas is imports. Syria signed agreements with Egypt, Jordan, and Lebanon in early 2001 for an onshore pipeline network (the "Arab Gas Pipeline") which would link the four countries and make Syrian imports of natural gas from Egypt a possibility. The section of the pipeline running from Egypt to Jordan currently is inthe final stages of construction, but it remains to be seen whether the extension to Syria will be built.
The primary original rationale for including Syria -- possible exports to Turkey -- looks less likely due to Turkey's economic problems. Another possible link into this network would be Cyprus, which has held talks about a possible subsea extension of the pipeline network from Lebanon or Syria.
Meanwhile, Syria itself is set to begin exporting a small quantity of natural gas to Lebanon. In May 2001, Syria signed a deal with Lebanon to build a 26-mile pipeline that would supply power stations in Lebanon with natural gas from Syria.

A key challenge for the Syrian natural gas industry is logistical, with reserves located mainly in north-eastern Syria, while population is centred in western and southern Syria. SPC currently is working to increase Syria's natural gas production through several projects. The Palmyra area in central Syria is the site of much of this activity, including development of the Al Arak gas field, which came onstream at the end of 1995.
Other gas fields in the Palmyra area include Al Hail and Al Dubayat -- both of which are "sweet gas" and two "sour gas" fields -- and Najib and Sokhne, which came onstream in 2000. Syria is attempting to expand output at Najib through its central area gas project. Foreign energy companies have been invited to submit proposals on gas projects in the Palmyra region. Several have reportedly held discussions with the Syrian government on the project, but no contracts have been awarded.

In October 1997, Syria announced discovery of a large new natural gas field in the Abi Rabah area of the Palmyra region. In addition to supplying a new (completed in 1997), 375-MW, power plant at Zaisoun in central Syria, the Palmyra fields have been linked with a new pipeline to Aleppo, as well as to the Tishreen power plant in Damascus and the Mhardeh power plant in Homs.
Najib, the fourth and final field to be developed in the Palmyra region, started production in 2000 at a capacity of 100 mm cfpd. A modest-sized new discovery was reported in the Palmyra area in August 2002 by the Croatian company INA Naftaplin, which tested at about 9 mm cfpd.

Syria's Jibsah natural gas treatment plant, which came online in 1988, accounts for more than one-quarter of the country's total natural gas processing capacity. Jibsah's capacity was increased 88 % in a project completed during the first half of 1997, and now is being increased again (to 105 mm cfpd from 60 mm cfpd currently). Other Syrian gas processing plants include: the Deir ez-Zour Gas Treatment Plant (since 1991); the Jafra Gas Separation Plant (late 1996); and the Palmyra Gas Processing Plant (late 1996).
In September 2001, several months ahead of schedule, an important new, integrated natural gas project (called "Desgas") was completed in the Deir ez-Zour region, three years since a $ 430-mm service agreement was signed between SPC on the one hand, and Conoco and TotalFinaElf on the other.

The new complex utilizes approximately 175 mm cfpd of previously-flared, "associated" (found together with oil) natural gas, in the Deir ez-Zour oil fields. TotalFinaElf and Conoco each hold 50 % interest in the project, with Conoco as lead operator. The Deir ez-Zour complex now includes a natural gas gathering system and processing plant, plus a 155-mile pipeline to carry 150 mm cfpd of natural gas to the grid serving western Syria. Natural gas also is being transported to the Tabiyeh oil field for processing and reinjection/enhanced oil recovery.
As increased volumes of natural gas feedstock become available, and given abundant phosphate reserves, Syria is adding capacity to produce fertilizer. At present, Syria has two nitrogenous fertilizer plants and one phosphate-based unit, both located at Homs.

Electric power
As of January 2001, total installed Syrian electric generating capacity was reportedly around 4.7 GW, about half of which is oil-fired, two-fifths natural-gas-fired, and 10 % hydroelectric. With Syrian electric power demand growing rapidly, adding electricity supply capacity is an important national priority.
Also, Syria is aiming to replace its oil-fired power plants with natural-gas-fired plants, in order to free up oil for export and to avoid becoming a net oil importer in a few years. In September 1993, with Syria suffering a severe electricity shortage, and with the country's power demand growing at a rapid, 9 % annual rate, President Hafiz al-Asad declared that a secure supply of electricity was the right of every Syrian.
Since then, existing power stations have undergone maintenance and four new generating plants have been built (including the 600-MW al-Zara gas/oil plant near Hama, completed by Mitsubishi in November 2000). Also planned are the 300-MW Zeizoun plant and the 630-MW Tishreen hydro station.

Overall, Syria hopes to add 3,000 MW of power generating capacity by 2010, at a probable cost of around $ 2 bn, but progress toward implementing these projects has been slowed by a lack of investment capital. Foreign-owned power projects are still not under consideration.
While power generation capacity in Syria now appears adequate, the country's power distribution network remains a problem. Transmission losses are estimated as high as 25 % of total generated capacity due to a variety of factors including poor quality wires and transformer stations.

In December 2000, the European Investment Bank (EIB) agreed to lend Syria 75 mm Euro for expansion and upgrading of the country's power transmission network (in February 2001, the EIB agreed to lend another 115 mm Euro). The project, scheduled for completion by 2005, will involve construction, upgrading, and expansion of sub-stations, overhead power lines, and underground cables.
In addition to the EIB, funds for this project is coming from Arab Gulf states and the Syrian government. Also, in March 2001, Kuwait agreed to loan Syria $ 65 mm to help double the size of a natural-gas-fired power plant at Nasriyeh, northeast of Damascus. Nasriyeh currently has capacity of 300 MW.
In March 2001, a project to link the electric power grids of Syria, Egypt, and Jordan was completed, with an inauguration ceremony attended by Egyptian President Husni Mubarak and Jordan's King Abdullah. Linking the three countries' grids together creates a network of approximately 45 GW.

In the future, the intention is to link up with Lebanon, Turkey, and Iraq as well. A 217-mile connection to Turkey is tentatively scheduled for completion sometime in 2002. The link between Jordan and Syria is via 400-kilovolt cable, while the Jordanian-Egyptian link is via underwater cable in the Red Sea.
In August, 1998 Turkey reported that its 115-mile transmission line from the Ataturk Dam to the border region with Syria was completed, but that the electricity could not be provided due to Syria's delayed construction on the connecting grid. In June 2001, Syria and Iran signed an agreement on joint cooperation in power production, transmission, and distribution.

As part of its strategy to save oil for hard currency exports, Syria has plans to build several natural gas, combined-cycle power plants, and to convert the country's major oil-fired plants to natural gas. Two of Syria's largest power stations -- the Mahrada and Banias plants -- have been converted from fuel oil to natural gas in recent years.
Natural gas for these two plants comes from the Palmyra fields. Syria also plans to increase natural gas usage at the dual-capacity (fuel oil or natural gas) Tishreen power plant. Gas for Tishreen is to come from the Omar treatment plant. In addition to these plants, Suwaidiyah Station II had five new natural gas turbines installed in 1989, while Suwaidiyah I operates mainly on associated gas from nearby fields.

On May 19, 1999, the director-general of Syria's Atomic Energy Commission signed an agreement with Russia on cooperation in peaceful uses of nuclear power, including construction of two nuclear reactors in Syria. On February 23, 1998, Syria and Russia had signed an agreement on the peaceful use of nuclear energy, and in July, 1998 the two countries had agreed on a timetable for a 25-MW light-water nuclear research centre project in Syria with the participation of Russia's Atomstroyeksport and Nikiet.
The project appears to have been abandoned, however, due to lack of financing. Russia's Minister of Atomic Energy stated in January 2003 that the project is no longer under discussion.

Country overview
Head of State: President Bashar al-Asad (assumed office on July 17, 2000, following the death of his father, Hafiz al-Asad)
Prime Minister: Muhammad Mustafa Miru (since March 13, 2000)
Independence: 17 April 1946 (from League of Nations mandate under French administration)
Population (07/2002E): 17.2 mm
Location/size: Middle East, at eastern end of the Mediterranean Sea, between Turkey and Lebanon/71,498 sq miles (slightly larger than North Dakota)
Major cities: Damascus (capital), Aleppo,Latakia, Homs
Languages: Arabic (official), Kurdish, Armenian, Aramaic, Circassian, French and English widely understood
Ethnic groups: Arab 90 %; Kurd, Armenian, other 10 %
Religion: Sunni Muslim 74 %, Alawite, Druze, and other Muslim sects 16 %, Christian (various sects) 10 %, Jewish (tiny communities in Damascus, Al Qamishli, and Aleppo)

Economic overview
Finance Minister: Muhammad al-Atrash (since 12/01)
Economy and Foreign Trade Minister: Ghassan al-Rifai (since 12/01)
Currency: Syrian pound
Market exchange rate (3/11/03): $ 1 = 47.8 Syrian pounds
Gross Domestic Product (GDP) (2002E): $ 21.0 bn
Real GDP growth rate (2002E): 3.3 % (2003F): 3.0 %
Inflation rate (consumer Prices, 2002E): 2.4 % (2003F): 6.4 %
Unemployment rate (2002E): Under 10 % (official statistic); 20 % or higher (unofficial estimate)
Merchandise exports (2002E): $ 9.1 bn
Merchandise imports (2002E): $ 7.8 bn
Merchandise trade balance (2002E): $ 1.3 bn
Major trading partners: Germany, Italy, Lebanon, France, Saudi Arabia, Japan, Spain
Major export products: Petroleum, fruits and vegetables, textiles, cotton
Major import products: Manufactured goods, machinery, food and livestock, chemicals and chemical products
Oil export revenues/total export revenues (2002E): around 60 %

Energy overview
Minister of Petroleum and Mineral Resources: Ibrahim Haddad (since 12/01) Minister of Electricity: Munib bin-Asad Saim Al-Dahar
Proven oil reserves (1/1/03E): 2.5 bn barrels
Oil production (2002E): 525,682 bpd, of which 517,682 bpd was crude oil
Oil consumption (2002E): 268,000 bpd
Net oil exports (2002E): 257,682 bpd (not counting smuggled Iraqi oil, which reportedly is in the 150,000 bpd-200,000 bpd range)
Crude oil refining capacity (1/1/03E): 239,865 bpd
Major crude oil customer: European Union
Major ports: Latakia, Banias, Tartus
Natural gas reserves (1/1/03E): 8.5 tcf
Natural gas production/consumption (2001E): 206 bn cf
Electric generation capacity (2001E): 4.7 mm kW (80 % thermal, 20 % hydroelectric)
Electric generation (2001E): 23.3 bn kWh (58 % thermal, 42 % hydroelectric)

Environmental overview
Minister of State for Environmental Affairs: Adnan Khuzam
Total energy consumption (2001E): 0.9 quadrillion Btu* (0.2 % of world total energy consumption)
Energy-related carbon emissions (2001E): 14.0 mm tons of carbon (0.2 % of world carbon emissions)
Per capita energy consumption (2001E): 51.6 mm Btu (vs. US value of 341.8 mm Btu)
Per capita carbon emissions (2001E): 0.8 tons of carbon (vs. US value of 5.5 tons of carbon)
Energy intensity (2001E): 14,139 Btu/$ 1995 (vs. US value of 10,736 Btu/$ 1995)**
Carbon intensity (2001E): 0.23 tons of carbon/thousand $ 1995 (vs. US value of 0.17 tons/thousand $ 1995)**
Fuel share of energy consumption (2001E): Oil (65.1 %), natural gas (23.0 %), coal (0.0 %)
Fuel share of carbon emissions (2001E): Oil (78.6 %), natural gas (21.4 %), coal (0.0 %)

Status in climate change negotiations: Non-Annex I country under the United Nations Framework Convention on Climate Change (ratified January 4th, 1996). Not a signatory to the Kyoto Protocol.
Major environmental issues: Deforestation; overgrazing; soil erosion; desertification; water pollution from dumping of raw sewage and wastes from petroleum refining; inadequate supplies of potable water.
Major international environmental agreements: A party to Conventions on Biodiversity, Climate Change, Desertification, Hazardous Wastes, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution. Has signed, but not ratified, Environmental Modification.

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar and wind electric power.
The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 2001

Oil and gas industries
Organization: The state-owned SPC (SPC) controls all oil resources, and directly produces about one-fourth of Syrian output. Al-Furat Petroleum Company (AFPC), of which 50 % is owned by the SPC, and the other 50 % by three foreign companies (Shell, its US affiliate Pecten, and Germany's Deminex), is responsible for about 65 % of Syrian output. Sytrol is the state oil marketing company.
Major foreign energy company involvement: Conoco, Deminex, Shell, TotalFinaElf, Veba
Major oil fields: Deir ez-Zour and Jafra in eastern Syria; Karatchuk in the far northeast
Major refineries: Syria's two refineries are located at Homs and Banias, with crude refining capacities of 107,140 bpd and 132,725 bpd, respectively.
Major oil export terminals: Banias, Tartous, Latakia