Syria’s oil and gas resources are too small to be considered a prize in the struggle over the country’s destiny, but energy issues still play an important part in the conflict. The regime of Syrian President Bashar al-Assad has had to contend with the loss of export revenue since its oil production collapsed, and it is becoming increasingly reliant on imports, thereby deepening its dependence on Iran.
Rebels fighting the Assad regime have by now taken over several oil fields and processing facilities. While this provides them valuable revenue, it has also sparked conflict between factions.
Unlike the oil sector, Syria’s natural gas production has not been as seriously affected by the war, partly because of a shared interest between regime and opposition in the continued supply of electricity—and despite the disruptions caused by the war, all sides have, in fact, so far managed to deal reasonably well with their energy challenges.
A State-Dominated Sector
Syria has two principal oil-producing regions. The first fields to be developed were those discovered in the 1950s and 1960s around Sweidiyeh in the northeastern Hasakah Province, which have been operated by the state-owned Syrian Petroleum Company (SPC).
A second wave of oil production started in the 1980s in the Euphrates Valley, running from Deir ez-Zor down to the Iraqi border, following discoveries by Pecten, a U.S. arm of multinational oil company Royal Dutch Shell. Production from this region reached a plateau of about 400,000 barrels per day (b/d) in the mid-1990s, but it started to decline in the middle of the next decade. By 2011, it had fallen to only about 100,000 b/d. The SPC’s production had meanwhile held steady at about 200,000 b/d and was actually increasing in some areas thanks to investment in enhanced recovery.
In March 2011, Syria was producing about 385,000 b/d, of which about 55 percent came from SPC-operated fields and the remainder from SPC joint ventures with foreign companies. Of the total, about 230,000 b/d were processed through the Homs and Baniyas refineries to produce gasoline, diesel, and fuel oil for the local market, while 150,000 b/d were exported. To make up the gap between supply and demand, about 70,000 b/d of products were imported—mainly gas oil or diesel (mazout), which is widely used in Syria for domestic heating, agriculture, and transport. The mazout was generously subsidized, resulting in extensive smuggling to neighboring countries.
Sanctions and War Damage
Government income from oil made up about 20 percent of total budget revenue in the years leading up to 2011, but by the second half of that year the conflict had taken a heavy toll on the oil industry. By autumn 2011, EU sanctions banned the import of oil from Syria—most exports had previously gone to Europe. By the time the government could find new buyers, the war had started to disrupt oil production and most foreign companies had withdrawn.
According to periodic statements from the Ministry of Petroleum and Mineral Resources, crude oil production dropped to an average of 164,000 b/d in 2012 and to just 28,000 b/d in 2013. Recent ministry statements indicate that production is now only 14,000 b/d, although this figure does not include output from rebel-held areas.
Relying on the Baniyas Refinery
The collapse in upstream oil production meant that the government needed to import crude oil in order to keep its refineries running. It also needed imported products to meet demand for gasoline, liquefied petroleum gas, and mazout.
The Homs refinery has barely operated for the past year because of fighting in the surrounding area and the difficulty of securing crude supplies from abroad, owing to its inland location. But Baniyas is in a more secure area, and tankers can dock on the coast. The Baniyas refinery is comprised of four units with total processing capacity of about 120,000 b/d. Two of these units are configured to process Syria’s heavy-grade Sweidiyeh crude, while the other two were originally designed for light crude from Iraq but have instead mainly been used for Syrian light crude from the Euphrates Valley oil fields.
An Iranian Lifeline
At the start of 2013, the Central Bank of Syria reached an agreement with Iran for $3 billion worth of letters of credit to cover oil supplies, as part of an overall line of credit of up to $7 billion.
According to a Reuters report from late 2013, a total of 17 million barrels of crude were shipped to Baniyas between February and October 2013, financed by Iranian letters of credit and transported by tankers from Iran and Iraq via the Sumed pipeline that runs through Egypt.
A surprise in the report was the inclusion of Iraqi Basra light crude cargoes, but this fits the specifications of Baniyas. Since the Iranian crude was likely of a heavy grade similar to that from Sweidiyeh, it would need to be supplemented by lighter crudes to enable the refinery to operate at more than 50 percent of capacity.
These shipments would be equivalent to 90,000 b/d, worth roughly $1.7 billion in total and corresponding to the Baniyas refinery running at 75 percent of capacity.
Rebels Get Into the Oil Business
In areas outside regime control, rebel groups have taken over oil production facilities. The UK-based Syrian journalist Malik al-Abdeh has described how rival rebel groups have seized oil fields in Hasakah and the Euphrates Valley. Crude oil and locally refined products are transported by tanker to Manbij east of Aleppo, which has become a sort of rebel oil trading hub. According to Abdeh, the border town of Tal Abyad is now the site of at least six refineries that turn out diesel and gasoline, much of which is smuggled into Turkey.
The scale of oil production in rebel areas is difficult to gauge. Given the damaged infrastructure and the lack of pipelines to serve the new trading routes, crude output is unlikely to be more than 20,000 b/d. However, even assuming a significant discount from world market prices, this could correspond to revenues of some $50 million per month.
There have also been reports of deals whereby rebels sell oil to the regime. These are hard to authenticate, but there is evidence of cooperation in one case, involving the associated gas plant in the Euphrates Valley known as “Conoco” (after the U.S. company that built and operated it between 2001 and 2005). According to a January 2014 report on Kulluna Shuraka, a Syrian opposition news site, a sharia court backed by the al-Qaeda-aligned Nusra Front executed a man accused of attacking the Conoco plant and disrupting electricity supplies to the Deir ez-Zor region. That incident implies that gas from the plant is transported through existing pipelines to power stations in regime-held areas of central Syria.
Limited Damage to Gas Production
The Conoco arrangement reflects the fact that natural gas and electricity are much harder to trade or smuggle than oil and petroleum products. According to government figures, Syria’s natural gas production has declined much less steeply than oil output in the course of the conflict, falling to 5.9 billion cubic meters in 2013 compared to a peak of 8.7 billion cubic meters in 2011. Last year’s production was actually higher than in 2009, thanks to the start-up of two large projects (Hayyan and Ebla) in 2009 and 2010.
Thanks to these continued natural gas supplies and to the fact that most thermal power stations are located in the regime-held center of the country—running from Aleppo through Homs to a cluster of plants around Damascus—electricity generation has held up reasonably well during the war.
Data from the Public Establishment for Electricity Generation (PEEG), a Syrian government-owned electricity company, show power output of 38.5 billion kilowatt hours in 2012, compared with a peak of 43.8 billion kilowatt hours in 2011. Active installed capacity was listed as 6,700 megawatts in 2012, down from 8,500 megawatts in 2011. As of February 2014, the PEEG announced peak loads of about 5,800 megawatts, suggesting that Syria’s power infrastructure is still relatively robust.
After years of war, it might come as a surprise that so much of Syria’s energy sector is still running. With a little help from his friends and thanks to pragmatic interactions with rebel groups, Assad has managed to muddle through the crisis. There is certainly a risk of further damage to the natural gas and electricity infrastructure as the war goes on, but for the time being the regime’s energy strategy seems sustainable—provided that Iran continues to bankroll crude oil supplies to the Baniyas refinery.
David Butter is a writer on energy and the political economy of the MENA region and an associate fellow at Chatham House.