Syria grants Shell oil rights, seeks higher output http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-10-05T114345Z_01_OWE528360_RTRIDST_0_ENERGY-SYRIA.XML&rpc=66&type=qcna
Thu Oct 5, 2006
By Khaled Yacoub Oweis
DAMASCUS, Oct 5 (Reuters) - Syria has awarded Royal Dutch Shell (RDSa.L: Quote, Profile, Research) oil and gas exploration rights in two blocs as part of efforts to reverse a decline in production that could squeeze the government financially.
A 20-year agreement was signed late on Wednesday at the oil ministry granting Shell the right to explore and share production in the Amouria bloc near city of Deir al-Zour and in the Buthaina bloc south of the ancient city of Palmyra.
Under the contracts Shell will spend $42 million, mainly to study the two fields and dig exploration wells.
"These are highly prospective, under-explored areas," said Raoul Restucci," head of Shell's operations in Syria.
"The two key contracts are underpinned by a long, established relationship we have with Syria," Restucci said, adding that Shell has produced two billion barrels of Syrian crude in the 25 years it has been operating in the country.
Syrian Oil minister Sufian Alao said the government had already granted exploration and production rights for six blocs out of the 12 to which it hopes to attract international bidders.
"We are banking on advanced technology to increase volumes of recoverable reserves," Alao said.
The minister said production was averaging 400,000 barrels per day so far this year, compared with 414,000 bpd in 2005.
A recent International Monetary Fund report said the surge in oil prices had provided Syria with a windfall, but the country would still turn into a net oil importer around 2010.
"The decline of oil reserves poses a threat to fiscal and external sustainability and the associated fall in oil revenues will make it harder to preserve, much less expand, living standards," the report said.
Syria already imports around $1 billion a year worth of refined oil products, due to under-investment in its domestic refining capacity. Its crude oil production peaked at around 590,000 bpd in 1996. The main producer is Al-Furat Oil Company, owned by Shell, Petro Canada (PCA.TO: Quote, Profile, Research) and the Syrian government.
The number of international companies operating in Syria has declined in recent years due to worsening relations with the West and what several companies saw as unattractive terms.
The United States imposed sanctions on Syria in 2004 for allegedly supporting terrorism. U.S. Secretary Condoleezza Rice threatened recently to expand the sanctions and invite other countries to join in.
A report by Banque Audi Syria, however, said the government has started to offer attractive terms to lure international companies.
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