Oil still accounts for one third of total imports and the same for exports, justifying plans to push back the day Syria will be a net importer

Syria: Looking to the Future
4 June 2007

Recently released figures from the Syrian Central Bureau of Statistics detailing the country\’s foreign trade contained good news and bad news for the economy, with exports rising strongly but overseas sales still underpinned by oil, a rapidly diminishing resource.

The preliminary report on Syria\’s foreign trade for 2006 showed there had been an overall increase of 12% compared to the previous year, with the total hitting a record of almost $21bn. Of this, exports surged 19% to slightly more than $10.1bn, while imports were valued at $10.6bn, a rise of 5.7% year-on-year. Last year saw Syria\’s trade deficit cut to $480m, well down on the $1.74bn of 2005.

As has traditionally been the case, oil represented the largest single export commodity, combining with other minerals to bring in 40% of the country\’s earnings from foreign sales, with the high returns from oil exports boosted by ongoing strong international prices.

On the other side of the ledger, in 2006 Syria imported refined oil products worth $3.12bn, its single largest overseas sourced requirement, representing almost one third of the annualised total.

This closing of the gap between oil exports and imports has been a trend since the1990s, when production peaked at 600,000 barrels per day (bpd). Some industry experts are putting the date when the country has to become a net energy importer as early as 2010.

However, on May 7, Oil Minister Sufian al-Allao said Syria\’s daily output of crude this year would fall to an average of 380,000 bpd, down from the 400,000 bpd of 2005. The minister said in the next few years, production would settle at 300,000 bpd until at least 2020, unless new reserves were identified.

The Syrian government has worked to diversify the economy to prepare it for the time when the oil industry will no longer be its driving force. It has also sought to increase the role of the private sector, which according to official estimates, now accounts for 68% of GDP.

Despite the anticipated fall in oil revenues this year, Economy Minister Amer Loufti has predicted stronger growth this year compared to the 5.1% of 2006.

According to the government\’s five-year plan, the economy should expand by 7% in 2007, he said in an interview with a local newspaper on May 27. These are the results of economic reforms based on a mixed economy with limited state intervention.

Still, the government looks to the energy sector to bolster the economy, although it is now taking a new approach to the old standby.

In early May, the Syrian oil ministry formally opened bids for exploration rights in four blocks off the coast, covering a combined area of 5000 sq km. This represents half of undersea area surveyed by the Norwegian firm Inseis Terra on behalf of the state, with the remaining 5000 sq km to be offered up for tender at a later date.

The offer marks a shift for Syria, as it is the first time that there has been an active effort to locate reserves offshore. Under the conditions being offered to prospective bidders, winning companies will be granted two terms of 30 months each in which they must drill at least one well. Two extensions of two years will be given in which a further well must be sunk in each period.

These conditions make for a certain degree of urgency, rather than companies having the blocks in their back pocket for a rainy day. Not only does Syria want to see revenue start to roll in, with the state guaranteed 12.5% of production revenue, it also wants to push back the day when imports exceed overseas sales.

Another string to Syria\’s energy bow was the announcement that Kuwait-based investment firm Noor Financial Investment Company is to head up a consortium to build a $1.2bn oil refinery in northeastern Syria, with construction scheduled to start before the end of this year. The refinery, which will have a capacity of 140,000 bpd of oil and derivatives, is expected to come online within five years of work starting. Combined with the output of Syria\’s two existing refineries, which have a joint output of 230,000 bpd, the new plant should meet local demand of 350,000 bpd and cut the imports bill.

However, the government has wider plans for the country\’s refining sector, hoping further capacity expansion will see Syria play an increasing role in the energy sector.

Syria will become, in coming years, an important regional centre for the refinery of petroleum and gas, said Deputy Prime Minister and Economic Affairs Minister Abdullah Dardari said on May 24 at a signing ceremony attended by Noor officials to formalise the scheme.