x Abu Dhabi, UAEMonday 22 January 2018

Mixed reactions by oil firms to new round of sanctions

Syria Sanctions: Royal Dutch Shell is pulling out of Syria's oil industry amid tightening sanctions against the Assad regime, but Total plans to stay.

Tougher European sanctions against Syria's oil industry have divided oil majors into two camps - those who are staying and those who have left.

The EU beefed up its embargo against Syrian crude imports on Friday with sanctions against three local oil companies. The restrictions are meant to cut off revenue from an industry that contributes about a third of Syria's export income.

Royal Dutch Shell, which had a stake in a company on the EU list, announced it would pull out of the country the day after the new sanctions were imposed. Al Furat Petroleum, Shell's joint venture with the state-owned General Petroleum Corporation, contributed about 13,000 barrels per day (bpd) to the Anglo-Dutch company's global output of 3 million bpd.

Its competitor Total, on the other hand, has said it would continue to operate in Syria. The EU has not blacklisted its local partner, Deir Ez Zor Petroleum.

The joint venture mainly feeds refineries that provide fuel for the local market, said Arnaud Breuillac, the head of Middle East exploration and production for Total.

"Our presence in Syria goes back a long way," Mr Breuillac said in October, before the latest round of sanctions.

"We would like to maintain this activity which is fully compliant with the sanctions.

"As long as we can operate safely and we do not have concerns for the safety and security of our staff - this is both expatriate and local staff - we really would like to continue our operations in Syria," he said.

Before the EU imposed its embargo in September, Syria pumped 370,000 bpd, with about a third of that going to customers clustered in the EU. Output has fallen from a high of 582,000 bpd in 1996.

To stem the decline in production, Syria relies on foreign investors, that include the UK independent producer Gulfsands Petroleum and the state-owned China National Petroleum Company. The government had also hoped to boost production by auctioning off rights to explore for offshore and oil shale resources for the first time.

Syria remains an importer of refined products, with its fuel import bill in the first three months of this year coming to US$1 billion (Dh3.67bn), the equivalent of 6 per cent of its GDP.