Syria, Energy and Reconstruction
War in Syria has entered its 7th year. The economic losses are estimated to be 226$ billion. According to a World Bank report published in 2017, about 530, 000 jobs have been lost and the refugee wave exceeded 5 million people.
Petroleum industry has always been the backbone of Middle Eastern economies. The reason behind this fact is simple – the region is rich on oil and gas. Syria makes no exception. Although not a major oil exporter, the “black gold” plays an important role for the Syrian economy. In 2010, Syria’s petroleum industry generated 25% of state budget revenue. In the same year, Syria’s oil production was 385, 000 barrels per day. Natural gas output amounted to 5,3 billion cubic meters. Syrian energy stocks may not be relevant to global energy markets, but they’re vital for domestic economy.
Where are the big energy fields?
The biggest oil reserves are primarily located in the eastern part of the country. The largest oil field is Al-Omar, near the city of Deir Ez-Zor. The oil-rich region is located on the eastern bank of Euphrates river. Succeeding ISIL’s defeat in Eastern Syria, the Al-Omar oilfields fell under the control of SDF (Syrian Democratic Forces).
The other major fields such as Sweidiyeh oil field, are located in the northeastern part of the country, near the Iraqi border. They are also under the jurisdiction of Syrian Kurds, although the Syrian state still plays vital economic role in exploiting and maintaining the fields. There are also smaller oil reserves, predominantly in Central Syria.
Oil wells and their associated infrastructure, such as pipelines, pumping stations and processing plants, are objects of strategic importance and their significance is comparable to the military bases and other key installations of a similar type. Islamic State group has survived for years, thanks to the fact that at one point, they had controlled almost all energy fields in Syria. This allowed the group to generate huge revenue from illegal sales of oil and gas.
Although relatively poor on oil resources, Syria is rich on natural gas reserves. The largest gas fields are mainly located in the central and eastern parts of the country, one of them being positioned south of Raqqa, and the other around Palmyra. Pipelines are also a major element of the strategic energy infrastructure. The Arab Gas Pipeline, build in 2003, supplies natural gas from Egypt to Jordan, Lebanon and Syria. Its length is 1200 km, and the maximum capacity is estimated to be 10.3 billion cubic meters. Terror attacks on pipeline infrastructure have rendered it inoperable at some degree, so today the pipeline is not working at full capacity.
Kirkuk-Banias is another pipeline, which is currently out of commission. It was built in 1952 and transported crude oil from the Iraqi city of Kirkuk to the Syrian port of Banias. The total length is 800 km and its capacity is relatively small – 300 000 barrels per day. Since 2003, this pipeline is severely damaged and is currently out of work. However, the pumping stations and the Syrian route are being used as logistic hubs for processing and transporting gas. Pumping stations T2, T3 and T4 are handling gas supplies from Deir Ez-Zor to the Syrian port towns.
The Syrian state is directly involved in the management of many oil companies throughout the country. The Syrian Petroleum Company (SPC) owns 50% shares in many regional companies. This is also the case with the largest foreign consortium operating in Syria – Al-Furat, where SPC holds 50% of the company stake. The remaining 50% is divided between Royal Dutch Shell, China National Petroleum Corporation and India’s Oil and Natural Gas Corporation. Prior the civil war, SPC had a 55% share of total oil produced in Syria. In the summer of 2011 SPC was sanctioned by the United States.
Many western companies were further involved in different kinds of economic partnership with Syria. A good example was the contract that had been signed back in 2008 between French’ Total and the Syrian Petroleum Company. The agreements, signed in September 2008 included investments in oil and gas fields in Deir Ez-Zor. Total has been operating in Syria since 1988. But in December 2011, only few months after the outbreak of the war, Total pulled out of the country.
Many gas fields and oil wells were returned back to government supervision following successful military operations conducted by the Syrian army and its allies. Facilities like Hayaan Gas Company and Tuweinan Gas Fields had been restored and put back into operation. These events would allow the Syrian government to put more focus on economic recovery and reconstruction. Of course Syria can’t cover all expenditures alone, so its main allies should come to play. Russia, Iran and China showed interest and are ready to invest in key sectors like energy, agriculture, military, telecommunications and industry.
Syria and Russia had already signed an agreement on energy cooperation at the beginning of February 2018. The road map includes deeper cooperation in number of key energy projects such as reconstruction of the damaged Aleppo Thermal Power Plant (which was rendered inoperable after being occupied by ISIS) and expanding the capacity other power plants throughout the country.
Iran is also involved in reconstruction projects. Iranian companies are set rebuild Syria’s damaged power grid, oil refineries and telecommunications systems. Those preparations are already being negotiated, as Iranian parliamentary delegation had visited Syria at the beginning of the year.
China wants a major role in rebuilding the Syrian economy as well. Beijing’s ambitious plans for establishing new trade route to Europe are known as the “One Belt-One Road” or the “New Silk Way”. This modern “Silk Road” intends to connect China, the Middle East and Europe, thus reshaping the economic cooperation between the continents. The New Silk Road passes directly through Syria. Chinese investors have already declared their intention to invest in post-war Syria. Big construction companies are getting ready to take part in the rebuilding process. Back in October 2017 the Chinese state-owned agency Xinhua confirmed that Chinese administration was considering participation in economic reconstruction of the war-torn country.
In modern economy, especially in the industrial sector, transfer of technology and knowledge is essential. Therefore, Syria will rely on foreign direct investment. This is a big responsibility for the Syrian government and politicians. Skilled economic diplomacy is a must for the Syrian state and would allow it to sign mutually beneficial contracts with foreign companies and investors. Regional and geopolitical interests further complicate the situation, but the responsibility of the Syrian government remains significant.