European oil ban to hit OVL spending in Syria

Vol 15, PW 14 (26 Jan 12) People & Policy

ONGC Videsh (OVL) investment plans in Syria are in trouble following the European ban on Syrian oil imports that began last month (December) when old contracts ended.

OVL and partners Shell, China National Petroleum Company (CNPC) and Syrian Petroleum Company were planning to jointly invest $200m this year to ‘arrest’ declining oil production from 36 onland fields, operated through the Al Furat Petroleum Company. Around $100m was to be spent on daily OPEX costs such as, ‘well repairs’ and ‘workovers’ while the remaining $100m was for new CAPEX, such as drilling 22 new wells, laying pipelines and buying new equipment.

“But if the EU ban on Syrian oil continues it will become difficult to implement the investment plan,” he adds. “We aren’t sure how much of this ($200m) can be spent and how many new wells can be drilled.

” Al Furat’s fields face an annual production decline of 10% - a decline that can be reversed only through new wells. But Syrian president Bashar al-Assad’s crackdown against protesters led the EU to announce its ban on Syrian oil imports last September.

Soon after, Al Furat stakeholder Shell began winding down its presence. “Shell has almost entirely walked out of this project,” we hear.

“It has only four or five people left to ensure co-ordination and keep accounts. Before the ban it had 50.

” Al Furat, we hear, cannot export its oil and has reduced production to 65,000 b/d from 82,000 b/d before the ban. “We cannot even send oil to other (non-EU countries),” he adds.

“Hiring oil tankers is not a problem but we can’t find insurance companies to insure them because most insurers are based either in Europe or the US.”