It is an oft-repeated accusation that the United States started wars in the Middle East to get oil. If there was some truth to this in the past, the Americans have by now become the world’s largest oil producer, and no longer need Middle Eastern energy – especially not Syria’s not very substantial reserves. Nevertheless, there is still a US military contingent of around 2,000 troops stationed in the country. On the one hand, to eliminate Islamic State cells, and on the other hand, completely openly, to guard the oil fields in Kurdish areas. However, the overthrow of Syrian President Bashar al-Assad has made the blocking of oil and money pipelines unnecessary and even damaging. And now that the government forces and the Kurds have reconciled, the question is: what about the Americans? The state of the Syrian energy sector is disastrous: it has gone from being an exporter to an importer. Can international companies, including the Hungarian MOL, return? Without it, the Syrian economy is unlikely to recover.
There isn’t much, but it is important
Syria is not an energy-rich country by Middle Eastern standards. According to US estimates, it has roughly 2.5 billion barrels of oil reserves, which is dwarfed by Saudi Arabia’s 300 billion barrels, Iran’s 155 billion barrels and Iraq’s 147 billion barrels. The same is true for natural gas: Syria’s 240 billion cubic metre (BCM) reserve ranks 42nd in the world.
Still, before the civil war started in 2011, energy was an important part of the country’s economy, accounting for around a fifth of GDP. Syrian oil production peaked in 1996 at around 600,000 barrels per day, but was still approaching 400,000 barrels per day in 2010, and 8.7 billion cubic metres of natural gas were extracted per year. This was enough to meet the country’s domestic needs and even for export. At that time, the main buyers were European: Germany (32%), Italy (31%) and France (11%).
The figure can be referenced here: https://public.flourish.studio/visualisation/23291959/
From exporter to importer
However, with the outbreak of war, a large part of the oil and gas fields fell into the hands of various militias and were severely damaged by the fighting. During its rule from 2014 to 2019, the Islamic State derived a significant part of its revenues from energy sources, which led to infrastructure being targeted by coalition forces and Russian air strikes. Production plummeted: oil production fell to 40,000 barrels a day last year, and natural gas extraction decreased by two thirds.
This meant that Syria went from being an exporter to an importer in the space of slightly more than a decade. The shortfall was covered mainly by Iranian supplies; essentially aid. These stopped overnight when Hayat Tahrir al-Sham took power last December. Tehran immediately presented the new regime with a cheque for USD 30 billion, saying that this was roughly the worth of oil it had supplied so far. Damascus hit back by demanding USD 300 billion for the damage caused to the country.
But the dispute does not solve Syria’s serious energy shortage. For the time being, Iranian supplies are being replaced mainly by Saudi Arabia, Turkey, Qatar and Azerbaijan. Qatar recently indicated that it would supply gas via Jordan.
Who owns the Syrian oil now?
In terms of indigenous capacity, a significant proportion – estimates range from 70 to 90 per cent – of the operating Syrian oil fields are now located in Kurdish-controlled areas. Production, which is also carried out by US companies, is guarded by roughly 2,000 US troops. The Bashar al-Assad government could get some energy sources on the black market at most, and some of the proceeds were returned to Damascus.
According to news reports, this changed in February after many years: oil shipments from the Kurdish areas started. And in March, the Syrian Democratic Forces (SDF) and the Syrian government reached an agreement that will see the Kurdish militias integrated into the Syrian army. But the devil is in the details: it is unclear what will happen to the US troops stationed there and to the oil wealth that Donald Trump said in 2019 brings in $45 million a month. According to unconfirmed press reports, the reconciliation was also backed by the United States, both for the sake of a settlement in Syria and because it did not see Kurdish autonomy as assured under pressure from the new government and Turkey. In any case, the Kurds have indicated that they are even willing to hand over control of the infrastructure, as long as all provinces – including theirs – receive a fair share of the revenues.
Sanctions are strangling the sector
However, the security situation is now less of an obstacle to boosting production than international sanctions. Before the outbreak of the war, several international companies, such as the Dutch-English Shell, the French Total and the Canadian Suncor, had significant investments in the country.
In fact, as we recalled in our analysis of Hungary’s involvement, MOL bought into two Syrian oil and gas fields through its Croatian subsidiary Ina in 1998 and again in 2004. After an investment of almost $1 billion at the then exchange rate, production started in 2006 and peaked in 2011. This meant 20,300 barrels per day (by comparison, domestic production today is ~32,000 barrels). However, the war and sanctions put an end to the profitable business in 2012 – according to Zsolt Hernádi’s statement at the time, they lost $60 million per month. Since then, the gas and oil fields have been controlled by government forces, the Islamic State or other organisations. As to whether MOL could still return to Syria, the company’s CEO told Mandiner that it was too early to say.
Although the new administration’s energy minister has already said that foreign investors are welcome, other international companies will hardly be in a hurry to return either until the security situation is clearly resolved and sanctions are lifted.
It is also unclear whether the contracts concluded with the previous regime are continuous. Nobody knows what state the infrastructure is in, how much it would cost to repair it, and what is left in the ground at all after years of free plundering.
By the way, there are still possibilities: the so-called Exclusive Economic Zone (EEZ) along the Syrian coastline has not yet been explored, but it could in all likelihood hold additional reserves. Other states, such as Turkey or Saudi Arabia, are keen to exploit these reserves, or indeed the country’s reserves in general.
Why is this important for Europe?
Without the energy sector, Syria’s economy has no chance of recovering, leaving instability and the risk of migration.
If European companies don’t reap the profits, others will.
In time, Syria could become a transfer country: it could even supply Egyptian and Israeli gas via the so-called Arab Gas Pipeline.
The long-cherished project to bring Qatari gas to Europe via Syria and Turkey could become a reality – although Doha recently called this speculation.
It could help to alleviate energy hunger in the region, including Lebanon, or even in Europe.
Foreign policy expert, journalist, press officer. He was a foreign policy journalist and editor for fourteen years, mainly at Magyar Nemzet. He specializes in the Middle East and North Africa. As a journalist, he has visited several countries and conflict zones in the region. He has reported from Israel and Palestine, Lebanon, Iraq, Turkey, Jordan, and Saudi Arabia, but he has also visited Ukraine, Nagorno-Karabak, and Cyprus.
