Syria's oil industry faces many challenges. Growing domestic demand for petroleum products continues to limit Syria’s oil exports, while oil output is in decline due to technological challenges and depletion of reserves. According to the Energy Information Administration (EIA), since peaking at 582,000 barrels per day (bbl/d) in 1996, Syria’s crude oil production, which is split between heavy and light grades, has steadily declined. In 2007, crude oil output fell below 400,000 bbl/d for the first time, reflecting declining production in fields such as Jebisseh, al-Thayyam and Omar. Crude oil production totaled an estimated 393,000 bbl/d (including lease condensate) and total liquids production was estimated to be 446,000 bbl/d. Syria has approximately 130 producing oil wells.

Syrian oil production is expected to continue its decline over the next several years, while consumption rises, leading to a reduction in net oil exports. In December 2007, Syria’s Oil and Mineral Resources Minister, Sufian al-Alaw, said that production is expected to drop by approximately 20,000 bbl/d a year in the near-term, or an estimated 360,000 bbl/d in 2008. To offset declining crude exports, growth in natural gas consumption - which will free crude oil for export - depends on Syria’s ability to develop domestic resources and secure imports from Egypt, Iran and elsewhere.

According to the EIA, in 2007, Syria’s net oil exports averaged an estimated 184,000 bbl/d of total oil and consumption reached an estimated 262,000 bbl/d, although estimates from other sources are as high as 280,000 bbl/d. According to the Oil and Gas Journal Syria has 2.5 billion barrels of petroleum reserves.

Syria’s upstream oil production and development has traditionally been the mandate of the Syrian Petroleum Company (SPC), an arm of the Ministry of Petroleum and Mineral Resources (MoPMR). The SPC currently produces an estimated 100,000 bbl/d from several fields, including Karatchok, Suweidiya, Rumailan, Alian and Jebissah, although these fields are in decline. The oil ranges from 18 to 48 degrees API. SPC fields produced around 160,000 to 140,000 bbl/d from development in the 1970’s until around 2002.

The SPC has undertaken efforts to reverse the trend toward declining oil production and exports by increasing oil exploration and production in partnership with foreign oil companies. In 2001, the MoPMR offered the first in a series of block tenders to international oil companies (IOCs) for oil and natural gas exploration with production sharing agreements. Since this time, the majority of foreign investment in Syria’s upstream oil and gas sector has been from smaller and medium-sized independent firms (“minnows”). Syria also aims to intensify oil production through enhanced oil recovery (EOR).

Since 2001, Syria has offered 5 onshore licensing rounds and one offshore round. The country is divided into 27 onshore and four offshore blocks, with the first awards made to IOCs in 2003. However, several of the blocks tendered remain vacant, and recent licensing rounds have attracted less interest then expected. In May 2007, Syria offered the first offshore licensing round although only a single bidder, a consortium of the U.K.’s Dove Energy and Norway’s DNO, participated. The offshore blocks have yet to be awarded.

Syria's largest foreign oil producer is Al-Furat Petroleum Co. (AFPC), a joint venture established in 1985 by the Syrian Petroleum Company (SPC), Shell and PetroCanada. AFPC also incorporated the fields belonging to the former al-Badiya (BOC) and al-Bishri (BAC) companies in the early 1990s. In 2005, PetroCanada’s stake was bought by the India-based Oil and Natural Gas Corporation (ONGC) and the China National Petroleum Company (CNPC). AFPC operated three-dozen fields located primarily in northeastern Syria, where commercial quantities of oil were discovered in the late 1980s. It is estimated that the company will produce an estimated 170,000 bbl/d of high quality light crude in 2008, compared to an estimated 200,000 bbl/d in 2007. Shell is the largest single foreign investor in Syria’s oil industry with a 37.5 percent share in the AFPC fields. AFPC's main oil field is al-Thayyem, although production has been in decline since 1991. Other AFPC fields include Azraq, al-Izba al-Ward, Maleh, Jido, Ishar East, Sijan, and Tanak.

In July 2007, minnow Tanganyika Oil Company announced results of newly inaugurated steam injection enhanced oil recovery operations at their heavy oil fields near Jbessa, announcing 16 percent improvement in recovery rates, as compared to 7 percent enhanced recovery using traditional EOR techniques.

Besides conventional oil reserves, Syria also has significant shale oil deposits, mainly the Yarmouk Valley, stretching into Jordan. In February 2006, the MoPMR announced a call for bids to develop the Darra oil shale deposit and Al-Bushri tar sand (west of Deir ez-Zour), although foreign interest has been reported to be limited.

Syria's two state-owned refineries are located at Baniyas and Homs. According to Oil and Gas Journal, total current capacity is 239,865 bbl/d (132,725 bbl/d and 107,140 bbl/d, respectively). Press reports indicate that Syria plans to upgrade its two existing refineries to process heavier crudes, including Iraqi, and replace output of fuel oil with lighter products and meet European Union (EU) standards for fuel imports. Syria’s refineries produce a surplus of heavier products, including fuel oil, but fail to meet demand for lighter products, including distillates.

Syria has announced plans to construct three new refineries and increase refining capacity by around 380,000 bbl/d by 2010-2011. In November 2005, the MoPMR reportedly signed a $1.2-billion deal with China National Petroleum Corp (CNPC) for the construction of a 100,000-bbl/d, 50/50 light-heavy blend refinery in Deir ez-Zoar. The facility is planned to come online in 2010. A second light-heavy 140,000-bbl/d refinery planned for nearby in Abu Khashab, is a joint venture of Syrian and several Arab-owned companies, and will be financed by the Kuwait-based Noor Financial Company.

In late October 2007, the MoPMR (15 percent), Venezuela’s PDAVSA (33 percent), the National Iranian Oil Refining and Distribution Company (NIORDC) (26 percent) and the Malaysian Al-Bukhari Company (26 percent) announced plans to construct a $2.6-billion, 140,000-bbl/d refinery at Furqlus, near Homs. Reportedly, the refinery will be supplied by three of the signatory countries under a long-term contract, including 42,000 bbl/d crude from Venezuela, 28,000 bbl/d of crude from Iran, and another 70,000 bbl/d from the SPC fields. The Malaysian firm has been contracted for the facility’s construction. The refinery is to produce almost 50 percent diesel (gasoil), which currently comprises the majority of Syrian petroleum product imports. However, a detailed development timeline and financing for both projects remain unclear. Talks with Russia’s Stroytranzgas/North-West Oil Group/CreditLine and France’s Total to build an integrated petrochemical plant and refinery at Deir ez-Zour and standalone refinery have reportedly been cancelled.

The Syrian Company for the Distribution of Petroleum Products (Mahrukat) manages all aspects of marketing of Syrian oil products, including the majority of gasoline retail outlets.

Syria has a developed domestic pipeline system for transporting crude and petroleum products managed by the Syrian Company for Oil Transportation (SCOT). Pipelines include the 250,000-bbl/d, 347-mileTel Adas-Tartous crude line links SPC and Tanganyika fields to the port at Tartous and the refinery at Homs.

In 2007, Syria’s net petroleum exports were estimated to be 184,000 bbl/d, all of which was facilitated through Sytrol, Syria’s state oil marketing firm. Exports are sold using one-year term contracts which include a clause preventing resale. The majority of Syrian crude is exported to the EU.

Much of Syria’s domestic need for petroleum products, an estimated 262,000 bbl/d in 2007, is met through local production. However, Syria is a net importer of high quality light distillate products, primarily of gasoil (for heating), LPG and diesel fuel for transport. Syria also imports small quantities of heavy fuel oil, for power production, from Iraq. According to various sources, total product imports averaged around 100,000 bbl/d.

In terms of product exports, Syria primarily sends low-quality gasoline to Iraq via truck. However, according to statements made by Minister Sufian al-Alaw in 2007, unofficial “exports” from the resale of subsidized products on the black market are not captured in the official statistics.

Currently, most Syrian oil is moved by trucks and tankers. The 40-inch, 1.4-million bbl/d Iraqi Petroleum Company (IPC) pipeline between the Syrian port of Baniyas and the "Strategic Pipeline" in Iraq, which connects its northern and southern oil infrastructure, has been inoperative since the Iraq war began in March 2003 (then carrying only an estimated 100,000 to 200,000 bbl/d). In August 2007, it was reported that talks were underway between the two countries to refurbish and reopen the pipeline, which could be used to export production from Iraq’s northern field. However, due to significant damage, degradation and ongoing security concerns, much of the pipeline will require replacement, and is not expected online in the immediate future.

Since the war, small quantities of Iraqi crude, between 7,000 and 10,000 bbl/d, have continued to be exported to Syria near Suwediya through a ten-mile pipeline that carries crude from the northern Iraqi Ayn Zalah and Sufaya fields. At present time, however, the status of this pipeline is unknown, and may be undergoing repair.

Syria has three oil export/import terminals located at Baniyas, Tartous and Latakia, all on the Mediterranean Sea. Baniyas, with seven berths, and Tartous, with two berths, are larger ports, and are connected to refineries through the domestic pipeline network. Latakia handles smaller cargoes. The ports are also operated by SCOT.

According to Syria’s Oil and Mineral Resources Minister, rapidly rising demand for refined fuels, mainly due to population increases, reported smuggling, and higher input costs, has put pressure on the government of Syria to adjust fuel prices, which are both fixed and subsidized. According to the IMF, in 2007, total energy price subsidies (petroleum and natural gas) were estimated to be 13.2 percent of GDP, or nearly US$5 billion dollars. The Syrian government estimated in 2008, subsides will increase to 19 percent GDP, or around US$7 billion (of a total budget of $US12 billion). The price of gasoline was last raised in November 2007 by 20 percent, to approximately $2.72 per gallon (SY£ 36/Liter). Diesel fuel retails for approximately $0.53 per gallon (SY£ 7.3/Liter). The Ministry of Economy and Trade is calling for subsidies on all petroleum products to be removed over a five-year window, starting in 2008. In December 2007, the MoPMR began a feasibility study to investigate the adoption of a smartcard fuel rationing program, similar to Iran.