Syria's Oil and Natural Gas Potential

With the Trump Administration leaving American military personel in place to “guard” Syria’s oil (from whom, we really don't know), I thought it was pertinent to look at some data regarding Syria’s oil potential.  As you will see in this posting, while its production of oil and natural gas is not large when compared to many of its Middle East neighbours, Syria is, in fact, currently the only producer of oil and natural gas among the nations on the eastern shore of the Mediterranean Sea.  It is also pertinent to note that the Energy Information Administration has not updated its Country Analysis Brief since August 2011 which is not terribly surprising given the nearly 9 year-long conflict in the region which makes oil production and reserve statistics impossible to acquire.  Fortunately, the EIA has updated its overview which can be accessed here.

Syria's first oil production began in 1968 with most of the current oil production being located along the Euphrates Graben in the northeastern part of the country.  Here is a map showing the geology of the region surrounding and including Syria: 

Here is a map showing the detailed geological setting of Syria's oil and gas fields:

 

Here is a map showing the contract areas and oil and gas fields in Syria:

 

For my Canadian readers, please note the participation of PetroCanada in the northeastern most part of the country.

  

According to the Energy Information Administration (EIA), Syria produced around 400,000 BOPD of combined oil and natural gas liquids in 2009 and 213 BCF of natural gas in 2008.  Syria's oil production had been in a state of decline for a decade and a half since peaking at 583,000 BOPD back in 1996.  Recent successful development drilling, new discoveries and field rehabilitation are expected to increase production capability and put a halt to production declines.  Over the last two years for which data was available, an additional 50,000 BOPD of productive capability has been added and in 2010, an additional 15,000 to 20,000 BOPD was expected to come on stream from new discoveries by Indian and Russian oil companies.  According to the Organization of Arab Petroleum Exporting Countries (OAPEC), Syria has 3 billion barrels of oil reserves (0.26 percent of the world's total and 0.46 percent of OAPEC's total).  According to the EIA, Syria had 2.5 billion barrels of proved oil reserves and 8500 Bcf of proved natural gas reserves.

Oil production and development are managed by the Syrian Petroleum Company (SPC), an offshoot of the Ministry of Petroleum and Mineral Resources.  Foreign oil companies have been offered a share of Syria's oil industry in an attempt to stem the country's production decline with formation of the Al-Furat Petroleum Company.  This joint venture is 50 percent owned by SPC, 32 percent by Shell Oil and China's CNPC.  China is also active in other parts of Syria through its Sinochem and Sinopec government oil companies.  Here is a table showing the companies that held producing contracts in Syria:

 

In the first quarter of 2011, SPC produced 1,7385,626 barrels and 1,133,354 thousand cubic metres of natural gas.  The company also drilled 49185 metres of hole.  As well, SPC has announced that it is offering another Bid Round for three offshore blocks in the Mediterranean Sea with a closing date of October 5th, 2011.  As well, the Ministry of Petroleum and Mineral Resources was inviting qualified companies to explore for and develop Syria's oil shale deposits which are estimated to be roughly 285 billion barrels over the 14 blocks that were being offered, a rather significant reserve.  The submission for bids was to be due on November 30, 2011, 8 months after the Syrian Civil War began.  

For the past 2 decades or more, Syria had consumed less oil than it has produced.  Domestic consumption had risen slowly over the past 2 decades from 200,000 BOPD to 263,000 BOPD in 2006 and 308,000 BOPD in 2010 according to OPEC statistics.  As shown in this chart, Syria had exported up to 400,000 BOPD back in 1996; this declined to 149,000 BOPD in 2010, again according to OPEC.  According the EIA, Syria's oil production dropped to less than 25,000 BOPD in May 2015 as shown on this graphic, resulting in the nation becoming a net oil importer:

 

According to the EIA, Syria made up its oil requirement shortfall by importing roughly 60,000 BOPD of crud oil from Iran, its only friend in the region.

Prior to the civil war, most of Syria's oil exports was shipped to European OECD nations including Germany, Italy and France as shown on this graphic:

 

In all cases, Syrian oil imports provided a very small portion of each countries daily oil needs.

Syria was estimated to have proven natural gas reserves of 8.5 trillion cubic feet (Tcf), half of which is associated with oil reservoirs.  Gas that is non-associated is found in the central and eastern part of the country.  In 2008, Syria produced 208 billion cubic feet (Bcf) of natural gas and consumed 213 Bcf.  Recent large discoveries had increased gas production to 361 Bcf per year by mid-2010 and it was expected to reach 412 Bcf per year by the end of 2010.  As you can see on this graph, the production of Syria's natural gas reserves did suffer significantly from the conflict although not as badly as its oil production:

 

Approximately 35 percent of Syria's natural gas production was injected into oil reservoirs in an attempt to boost oil production with the bulk of the remainder used domestically for power production and industrial usage.  According to the EIA, Syria had plans to substitute natural gas for oil by 2014 for both power production and industrial usage since Syria does not have the refining facilities necessary to produce refined oil for these purposes.  With Syria having producing more natural gas than it consumes, it was exporting small volumes to both Lebanon and Turkey.

As we can see, Syria's overall oil and natural gas production is rather insignificant when compared to other Middle East nations, particularly nations such as Libya, another nation that was subjected to an American-driven nation re-engineering experiment.  While Syria's conventional reserves of both oil and natural gas are relatively small, the nation's potential for non-conventional oil reserves is quite significant and may prove to be one of the reasons why Washington is intervening in yet another "party" to which it has not been invited.

Why Washington Cares About Venezuela

Venezuela has repeatedly hit the front page news over the past few months, first with the re-election of Maduro as president and most recently with the sabre-rattling from the United States who wants to replace the elected president with a hand-picked successor.  In general, the world, particularly the United States, pays relatively little attention to election results in developing economies, however, there is one main reason why Washington cares about what happens in Venezuela; oil.

Venezuela has been an oil producing nation since 1914 when commercial oil was discovered on the Easter shores of Lake Maracaibo.  Venezuela is a charter member of OPEC, joining/founding the group as a founding member in September 1960 along with Iraq, Iran, Kuwait and Saudi Arabia.  In the decades that followed, Venezuela became a world leader when its oil sector is measured in terms of proven reserves as shown on this graphic:

In total, Venezuela's proven oil reserves of 302.81 billion barrels represents nearly one-quarter of OPEC's total reserves, surpassing the proven oil reserves of Saudi Arabia by just under 40 billion barrels.  

Here is a map showing Venezuela's oil infrastructure:

Venezuela's oil is found in two main belts; the Orinoco belt and in the region around Lake Maracaibo located in the west of the nation.  Most of Venezuela's conventional crude oil is heavy and sour and requires specialized refining.   Here is a table showing Venezuela's oil crude grades:

In January 1976, Venezuela nationalized its oil industry under the economic plan "La Gran Venezuela".  It was at this time that the state-owned Petroleos de Venezuela S.A. (PdVSA) was launched as a replacement for all foreign owned oil companies that were doing business in Venezuela.  In the early 1990s, Venezuela re-opened parts of its oil industry to foreign investors in an attempt to gain technical knowledge to help increase their flagging oil production.  In 2002, conflicts between the state-owned oil company and its employees led to a massive strike which ultimately led to the laying off of thousands of highly experienced oil sector workers.  As a result, crude oil production never recovered to its pre-2002 levels.  In 2006, then President Chavez implemented a nationalization of oil exploration and production, requiring that joint ventures with PdVSA provide a 60 percent minimum share for PdVSA.  Here is a table showing PdVSA's crude oil loading terminals and their participating companies:

While Venezuela's oil reserves are massive, the same cannot be said for its crude oil production as shown on this graphic:

As of May 2018, Venezuela's daily oil production fell to a 30 year low of 1.4 million BOPD, however, even at that level, Venezuela is still the 12th largest oil producing nation in the world.  

One of the problems facing Venezuela's oil industry is a lack of capital investment by the state-owned petroleum company Petroleos de Venezuela, S.A. (PdVSA) which has led to decreased capital investments by its foreign partners.  As show on this graphic, this has led to a drop in the number of active oil rigs which has dropped from around 70 in Q1 2016 to 25 in Q3 2018:

As I noted above, Venezuela's production of oil has dropped substantially over the past decades.  This has had an impact on its crude exports to the United States, India and China (among other nations) as shown here:

At 1.1 million BOPD in Q1 2018, Venezuela's oil exports are 33 percent below their level in 2016.

As one of Venezuela's largest oil consumers, the United States also saw the volume of its crude imports from Venezuela drop from 840,000 BOPD in December 2015 to 506,000 BOPD in October 2018 as shown here:

In fact, if we look further back in time, U.S. imports of Venezuelan crude were as high as 1.1 million BOPD in 2007, putting the nation in third place after Canada and Saudi Arabia when measured in terms of oil supplied.

With massive oil reserves of over 300 billion barrels and Venezuela's close geographic proximity to the massive American market (particularly when compared to the Middle East), it is no wonder that Washington has such a keen interest in what happens in Venezuela, particularly given that it  could prove to be America's key supplier of oil in the future.  While the United States is currently experiencing an oil production windfall, the high decline rates of non-conventional oil production (i.e. fracking/horizontal drilling) will ultimately result in a very significant need for additional imports of oil.  Venezuela is the most likely candidate to fulfill America's never-ending need for oil.

Global Carbon Pollution - Who is Responsible?

A recent publication by the environmental charity CDP looks at the role that corporations play in greenhouse gas emissions.  The Annual Carbon Majors Report for 2017 uses data from the Carbon Majors Database which was established in 2013 by Richard Heede of the Climate Accountability Institute.  The database shows us how carbon emissions are directed linked to a relatively small group of companies termed "Carbon Majors".  The report looks at both industrial carbon dioxide and methane emissions derived from fossil fuel producers in the past, present and future, providing investors and other interested parties to better understand the amount of carbon being released by key companies.

In its current form, the Carbon Majors Database consists of the following:

1.) data on 100 fossil fuel producers (the Carbon Majors) which includes 41 publicly traded companies, 16 private companies, 36 state owned companies and 7 state producers.  Whenever possible, the data used in this report data was supplied by corporate responses to the CDP Climate Change information request.   Other data came from estimates of emissions that are directly related to the emissions factor that is specific to the industrial activity (i.e. oil production, natural gas production etcetera).

2.) data on 923 gigatonnes of carbon-dioxide equivalent from direct operational and product-related carbon dioxide and methane emissions between the years of 1984 and 2015.  This data represents 52 percent of the global industrial greenhouse gases that have been released since the beginning of the industrial revolution in 1751. 

3.) data on a wider sampling of 224 companies which representing 72 percent of global industrial greenhouse gas emissions in 2015.

Here is a graphic showing the contribution of the three main fossil fuels to greenhouse gas production since 1988:

Since 1988, 833 gigatonnes of carbon dioxide-equivalent has been emitted compared to 820 gigatonnes in the 237 years between the beginning of the industrial revolution and 1988.  Coal is making up a larger share of fossil fuel production over the past 15 years, leading to an emissions intensity increase of 2.4 percent since 1988 despite the increase in the share of natural gas production, a lower carbon alternative.

With that background, let's take a closer look at the top 25 companies responsible for over half (51 percent) of global industrial greenhouse gas production by year going back to 1988:

In total, all 100 active major fossil fuel producers are responsible for 70.6 percent of global industrial greenhouse gas emissions.  The highest emitting companies since 1988 are as follows:

1.) Investor-owned - ExxonMobil, Shell, BP, Chevron, Peabody, Total and BHP Billiton.

2.) State-owned - Saudi Aramco, Gazprom, National Iranian Oil, Coal India, Pemex and CNPC (PetroChina).

One of the great contributors to the growth of greenhouse gas emissions is connected to the expansion of coal mining in China.  Since 2000, China's coal production has tripled to nearly 4 billion tonnes annually, nearly half of global coal output.  Half of China's coal production in 2015 came from 15 company groups with one-third of national coal production coming from 7 companies; Shenhua Group, Datong Coal Mine Group, China National Coal Group, Shandong Energy Group, Shaanxi Coal Chemical Industry, Shanxi Coking Coal Group and the Yankuang Group.

Here is a graphic showing the product mix for major oil and gas companies and their greenhouse gas emissions intensity:

For those of us who live in Canada, we can see that Suncor, Husky and Canadian Natural all fall high on the greenhouse gas emissions intensity scale, largely because of their oil sands operations, including both surface and in situ projects.  It is these unconventional oil projects that have higher greenhouse gas intensity than conventional crude oil and natural gas projects (i.e. higher carbon emissions on a per barrel of oil produced).

Let's close with this table which shows the top 50 companies in order of their cumulative industrial greenhouse gas emissions between the years 1988 and 2015:

The interesting data in this report will provide both the investing and non-investing public with an understanding of which global companies are responsible for the lion's share of carbon emissions.  Whether you believe that anthropogenic activities are leading to a changing global climate or not, it is interesting to see that a tiny fraction of the world's companies have long history of emitting pollutants that have the potential to create a much different world for the coming generations.  

Investing in the Global Oil and Gas Industry

The Fraser Institute's recent Global Petroleum Survey 2016, it's tenth annually survey of petroleum industry executives and other management, looks at a jurisdiction-by-jurisdiction analysis of barriers to investment in oil and gas exploration and production.  A total of 96 jurisdictions were included in this year's analysis, accounting for 75 percent of global oil and gas production and 66 percent of global oil and gas reserves.

Let's start by looking at the topics covered in the survey; respondents were asked to indicate how each factor influenced their company's decision to invest in various jurisdictions and were to rank each factor on whether the jurisdictions that they were familiar with encouraged investment, did no deter investment, mildly deterred investment, strongly deterred investment or whether their company would not invest due to this factor:

1.) Fiscal terms—including licenses, lease payments, royalties, other production taxes, and gross revenue charges, but not corporate and personal income taxes, capital gains taxes, or sales taxes.

2.) Taxation in general—the tax burden including personal, corporate, payroll, and capital taxes, and the complexity of tax compliance, but excluding petroleum exploration and production licenses and fees, land lease fees, and royalties.

3.) Environmental regulations—stability of regulations, consistency and timeliness of regulatory process.

4.) Regulatory enforcement—uncertainty regarding the administration, interpretation, stability, or enforcement of existing regulations.

5.) Cost of regulatory compliance—related to filing permit applications, participating in hearings, etc.

6.) Protected areas—uncertainty concerning what areas can be protected as wilderness or parks, marine life preserves, or archaeological sites.

7.) Trade barriers—tariff  and non-tariff  barriers to trade and restrictions on profit repatriation.

8.) Labor regulations and employment agreements—the impact of labor regulations, employment agreements, labor militancy or work disruptions, and local hiring requirements.

9.) Quality of infrastructure—includes access to roads, power availability, etc.

10.) Quality of geological database—includes quality, detail, and ease of access to geological information.

11.) Labor availability and skills—the supply and quality of labor, and the mobility that workers have to relocate.

12.) Disputed land claims—the uncertainty of unresolved claims made by aboriginals, other groups, or individuals.

13.) Political stability.

14.) Security—the physical safety of personnel and assets.

15.) Regulatory duplication.

16.) Legal system—legal processes that are fair, transparent, non-corrupt, efficiently administered, etc.








The responses were then used to calculate a Policy Perception Index (PPI) which is calculated using each jurisdictions average response to each survey question; jurisdictions that had less than five respondents for all sixteen factors were excluded from the rankings since their final score would not be as accurate.  The jurisdiction with the most attractive policies receives a score of 100 and the jurisdiction with the greatest investment barriers receives a score of 0. 

The Fraser Institute also divides the jurisdictions several ways.  First, let's look at the rankings of jurisdictions with large reserves which is defined as those jurisdictions that hold at least 1 percent of the sum of the proved hydrocarbon reserves of the 93 jurisdictions in the survey that have at least some proved hydrocarbon reserves:

Five of the jurisdictions in this ranking have PPI scores that put them in the top two quintiles (top 40 percent) and that two jurisdictions, Libya and Venezuela, have PPI scores that put them well into the bottom quintile.  Despite the fact that Russia has the largest proved ink reserves in the grouping, its PPI score of 39.21 shows that the oil industry deems it to have significant barriers to investment   It is interesting to note that Alberta, Canada's largest petroleum producing province, has slipped from 2nd place in 2014 and 3rd place in 2015. 

Second, here is a ranking of jurisdictions with medium/modest hydrocarbon reserves which is defined as those jurisdictions that hold at least 0.1 percent but less than 1 percent of the proved reserves of the 93 jurisdictions in the survey:

Ten jurisdictions in this grouping fall into the top quintile including three European nations, Norway, the Netherlands and the United Kingdom, and six states.  No jurisdictions fall into the bottom quintile, however, four jurisdictions fall into the fourth quintile including Ukraine, Ecuador, California and Bolivia.

Lastly, let's look at the Policy Perception Index scores in order from greatest to lowest without regard to the size of each jurisdictions' hydrocarbon reserves:

Of the top ten highest scoring jurisdictions, all but one was located in Canada or the United States.  Of the bottom ten lowest scoring jurisdictions, two were in Canada, three were in South America, one was in the United States, one in Africa, one in Australia and the remaining two were Russia and Ukraine.  As far as quintiles go, it is interesting to note that the the majority of the proved hydrocarbon reserves in the 96 nation study are located in nations with PPI scores that fall in the bottom two quintiles (bottom 40 percent).

As far as American jurisdictions go, Oklahoma, Texas, Kansas, Wyoming and North Dakota fall into the top five positions while California, Colorado, Michigan, Alaska and Illinois fall into the bottom five positions.

As far as Canadian jurisdictions go, Saskatchewan, Manitoba and Newfoundland and Labrador fall into the top three positions while Quebec, New Brunswick and the Yukon fall into the bottom three positions.  Interestingly, Canada's most prolific hydrocarbon producing province, Alberta, is right in the middle of the entire pack, coming in 43rd place out of 96 jurisdictions and British Columbia, the site of much of Canada's fracked reserves comes in 39th place overall.

As far as Middle East jurisdictions go, the United Arab Emirates and Qatar fall into the top two positions while Yemen and Iraq fall into the bottom two positions.

As far as African jurisdictions go, Morocco, Namibia and South Africa fall in the top three positions while Libya, Nigeria and Tunisia fall into the bottom three positions. 

Overall, the 2016 analysis of barriers to investment by the petroleum industry shows that industry executives are increasingly expressing negative sentiment about key factors that drive investment.    The United States remains as the most investor-friendly environment while Russia and Venezuela with their massive hydrocarbon reserves remain among the least investor-friendly jurisdictions.  Canada's fall to third place overall reflects the deterioration of Alberta as an investment target, a situation that is certain to put pressure on Alberta's current New Democrat government prior to the next provincial election.

Flaring Natural Gas - An Oil Industry Pastime

Update March 2018

This legislation has now been voted down 49 to 51 in the Senate with three Republicans including Lindsay Graham, Susan Collins and John McCain voting against it.

Back in November 2016, the Obama Administration announced its Methane and Waste Prevention Rule, a final rule that would have ultimately led to a reduction in the release of natural gas into the atmosphere from oil and gas operations on public and Indian lands.  This release is known as flaring, a procedure that is used to burn off what is generally considered to be a low-value product by the oil industry.  

Here is a video showing gas well flaring in the Bakken of the Williston Basin:

Sally Jewell, former Secretary of the Interior, stated that the purpose of the new final rule change was:

"....to prevent waste of our nation’s natural gas supplies is good government, plain and simple.  We are proving that we can cut harmful methane emissions that contribute to climate change, while putting in place standards that make good economic sense for the nation. Not only will we save more natural gas to power our nation, but we will modernize decades-old standards to keep pace with industry and to ensure a fair return to the American taxpayers for use of a valuable resource that belongs to all of us.”

The goal of the final rule was part of the Obama Administration's goal of cutting emissions from the oil and bas sector by 40 to 45 percent from 2012 levels by the year 2025 as well as getting fair value for the flared gas from the oil and gas industry.  To give us a sense of the dimensions of the issue, according to a study by the Bureau of Land Management, in 2014, 375 billion cubic feet of natural gas was flared from federally-controlled and Indian lands, enough to supply the energy needs of 5.1 million households for a year.

The Bureau of Land Management manages more than 245 million acres of surface land and 700 million acres of subsurface rights.  In 2015, production from the 100,000 federally-controlled wells reached 183.4 million barrels of oil, 3.3 billion gallons of natural gas liquids and 2.2 trillion cubic feet of natural gas, accounting for 5 percent of the nation's oil supply and 11 percent of the nation's natural gas supply.  The total production value of the produced oil and gas was in excess of $20.9 billion in 2015 with an additional $2.3 billion in royalties.

The rule change would have been phased in over time with an implementation date of January 17, 2017 and would have seen royalties charged to well operators on the flared gas to ensure a return to American taxpayers.  Royalty rates would have been set at or above 12.5 percent of the value of the natural gas produced.  The BLM estimated that the rule would pose costs to the oil and gas industry of between $114 million to $279 million per year over the next ten years and would produce benefits of between $209 million and $403 million annually.  Interestingly, a 2014 study by the Western Values Project found that the value of flared natural gas flared on federal lands ranged from $427.2 million and $508.6 million in 2013 with between $53.4 million and $63.6 million in federal royalties being lost.  Here is a table showing the volume of flared gas from onshore federal lands and its value going back to 2009:

The rule change was also aimed at protecting the environment since methane is roughly 25 times more potent as a greenhouse gas than carbon dioxide and accounts for 9 percent of all U.S. greenhouse gas emissions with one-third of that amount coming from the oil and gas sector.  The final rule was expected to reduce methane emissions by 35 percent from the 2014 emissions level.

Given all of that background and to little fanfare, the newly minted 115th Congress has changed things.  House Joint Resolution 36 provides for congressional disapproval under Chapter 8, Title 5 of the final rule of the Bureau of Land Management as noted above.   Here is the text of H. J. Res. 36:

Here's how the vote went:

And that puts a very quick end to the Bureau of Land Management's attempt to put an end to natural gas flaring by the oil and gas industry.  Congress certainly doesn't waste time when they have a "bee in their collective bonnets", do they?