Syrian oil areas look promising - but US warns companies away
European oil companies are busy signing oil exploration pacts with Syria. But US oil companies are under government pressure to get out. The moves highlight differing government attitudes on either side of the Atlantic toward Syria - a country more and more interesting to oil companies, but viewed suspiciously by the United States government due to its terrorist connections.
A British independent oil company, Tricentrol PLC, and its Norwegian partner, Norsk Hydro, have been the first companies to sign a new contract with the Syrian government. These are for the Abdul Aziz concession in north central Syria.
Damascus is also expected to approve another contract, this time with France's Total and Belgium's Petrofina. The Total/Petrofina deal has been approved by the ministry of petroleum, according to deputy oil minister Nadr al-Nabulsi, and awaits confirmation from higher authorities.
In addition, the Canadian subsidiary of Occidental Petroleum is negotiating for a concession in southeastern Syria adjacent to the Jordanian border. Oil industry sources say Belgium's Petrofina is also vying for the area. Petrofina recently signed an exploration concession in northern Jordan which specialists say holds similar geological characteristics to southern Syria.
Up to a few years ago, Syria was largely ignored as a prospective oil source. The country was producing 180,000 barrels a day of heavy sulphurous crude, and this was difficult to market from fields in the far northeast, which were discovered decades ago. But new oil and gas discoveries in 1983 and '84 changed attitudes.
In 1983, Marathon Oil (now a division of USX Corporation) discovered possibly commercial quantities of gas in its Palmyra concession in central Syria. In 1984, a consortium which included Royal Dutch/Shell and West Germany's Deminex and was led by a Shell US affiliate, Pecten International, found low-sulfur light crude at Thayyim field, south of the town of Deir ez Zor.
The Thayyim field, managed by the Al-Furat Petroleum Company (50 percent owned by state-controlled Syrian Petroleum and 50 percent by foreign partners) now produces 60,000 barrels a day. It will expand to 100,000 barrels a day by 1988, when two additional fields, al-Ward and al-Asharah, 60 kilometers south of Thayyim, come on stream.
Many US and European oil companies have been visiting Damascus, hoping to sign concession agreements. Negotiations have been difficult, especially following terrorist bomb trials in Britain and West Germany which implicated Syrian diplomats.
Britain severed diplomatic relations with Syria and the British Foreign Office sees no imminent restoration of formal relations. But the Foreign Office has been at pains to reassure companies seeking business in Syria that their negotiations will not be adversely affected. West Germany did not break off relations, and a Deminex spokesman said at the time that they did not expect the West German government to require the company to leave Syria.
The situation is completely different for US companies. The State Department has called the involvement of US oil companies in Syria ``inappropriate'' and has been pressuring companies to leave. A State Department spokesman says there have been discussions with US companies operating in Syria to cease activities by July 1. There are no legal measures under way at the moment, he adds; to date there has only been ``jawboning.''
As a result, Pecten International submitted a compliance plan to the State Department. Its operatorship of the Thayyim field has been transferred to Royal Dutch/ Shell. Profits will be placed in escrow. Although the company will be no longer active in Syria, it will retain legal title to its equity share in the venture.
Marathon so far has not submitted any plan to the State Department. There have been reports that the Syrian government intends to develop the Marathon gas discoveries, with or without the company. The World Bank was at one time quite enthusiastic about providing funds for the project. This, sources say, has now been shelved, apparently because of US government pressure. Oil industry sources say that Marathon has no desire to leave a potentially profitable investment and is digging in its heels.
The State Department spokesman said he was aware the government moves would hurt the US oil industry, but ``our foreign policy interests have to supersede the rights of private enterprise.'' The department, he added, had no objection if US allies (the Europeans) took over US interest. He questioned the wisdom of US oil companies going into Syria in the first place, as the country has been on top of the US terrorism list since 1979, when the list was first drawn up.
This is a sharp contrast with the European attitude. Although Total, Petrofina, Deminex, and Norsk Hydro are private companies, the French, Belgian, West German, and Norwegian governments, respectively, hold substantial shareholdings. Certainly, in the French and Belgian cases there appears to have been substantial government support for investment in Syrian exploration.
The State Department spokesman said that Syria could have been ``brought to its knees'' if sanctions had been applied by the Europeans.
The irony of the situation is that Syria could be an important factor in any negotiations over the release of hostages in Beirut, even though the State Department questions Syria's ability to help.
If the object of US sanctions against Syria was to hurt the country's economic development, given that the oil sector is the only positive part of the country's economy, this is clearly not working. European companies are simply stepping into the void left by Americans.
In addition, foreign subsidiaries of US corporations are exempt from the sanctions. Therefore, to comply with government requirements, US companies indulge in musical chairs, as Pecten's move illustrates.
Meanwhile the Europeans seem happy to profit from the US policy, and are even mildly amused at the contradictions arising from the Syrian situation.
Said a Deminex spokesman: ``If we had to react to every action of the [US] government, we would never go anywhere.''