Russia Eyes Rebuilding Syrian Oil: Will Big Oil Corporations Try and Stop Them?

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As the political-military situation in Syria has increasingly stabilized, Russian companies have begun geological prospecting in the Arab country. Representatives of Russia’s oil and gas sector have expressed their readiness to participate in the restoration of the country’s energy infrastructure.

In early July, the Russian Ministry of Energy reported that industry leaders have shown interest in projects in Syria, including Zarubezhneft, Zarubezhgeologiya (Rosgeologiya subsidiary), Tekhnopromeksport (part of Rostekh) and STG, which already have experience in the region.

“We are interested in cooperating with Syria and in carrying out a series of works, but for the time being we are in the initial stages of negotiations,” said the official representative of Rosgeologiya, Anton Sergeev.

However, Russian companies will not only be limited to prospecting, but will also be feeling out opportunities for restoring Syria’s energy infrastructure, including oil refineries, oil pipelines and thermoelectric power plants.

“Russia has built infrastructure in northeastern Africa, particularly in Libya. We have extensive experience in pipeline construction and we use it successfully in the Middle East and North Africa. If there is no additional military disaster, in two or three years we can restore them in Syria,” said Vitaly Bushuev, director general of the Energy Strategy Institute.

It is worth noting that, before the war, Syria’s electricity grid was one of the most developed and powerful in the region. Now, more than half of the mills do not work. The main task at this stage is to provide electricity to the homes of millions of people, something which Russia might step in to help see through. 

Memorandums of understanding have been signed between Syria and Russia regarding the reconstruction of Syrian power plants, for example: the Aleppo thermal power station, we need to launch the second, third and fourth generators, and we will also explore the possibility of launching two steam generators to generate 700 MW,” Syrian Electricity Minister Zuhair Kharboutli said.

If we take statistics alone into account, what Russia’s interest in Syria’s oil and gas projects might be in purely quantitative terms is yet to be clarified. According to a report from last year, the country’s known oil reserves are only 2.5 billion barrels and of natural gas – 0.3 trillion cubic meters. In comparison, in Iran, the corresponding figures are 158.4 billion barrels and 33.5 trillion cubic meters.

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However, these are only known reserves, whose inventories have been declining all over the world. In particular, in early July, analysts at the US investment firm Sanford C. Bernstein & Co. announced a catastrophic decline in major producer investment. As a result, inventories decreased by an average of 30%.

The approach of Russian companies in the oil and gas sector in Syria is a strategic plan to restore not only the economy of the Arab Republic, but also to make significant profits over a long term period. And already at this stage it is possible to talk about the Mediterranean Sea, where probably the largest reserves of natural gas in the world is located. Territorial access to them, among other countries, also passes through Syria.

Of course, this large-scale work involves large investments, and the Syrian government lacks these resources. Therefore, the burden of financing will evidently fall on Russian companies.

“We will restore and the Syrians will pay us with part of the oil produced in the fields,” said Vladimir Isaev, a professor at the Asia and Africa Institute at Moscow State University.

Given the current foreign policy situation, Russian companies are achieving successes in the oil and gas sector in Syria and attempts by other countries to expel Russia will most likely intensify. First and foremost, international oil and gas giants might seek to keep Russia from investing in Syria.

Undoubtedly, world corporations will try to integrate their business into Syria when the war is over. But the Syrian government is unlikely to accept them with open arms. Memories of Shell and Total stocks are too fresh, leaving the country in December 2011 amid the growing aggressive rhetoric of Western leaders against the legitimate government. But even friendly countries should not be able to “fend off” Russia. Most likely, they will take on projects that are more familiar to them. The first on the list is China, with its huge investment potential.

“Beijing has no experience, because the oil refining industry was set up by the Soviet Union. China will build roads, have already been signed contracts, as well as restore agriculture or, for example, textile factories,” said Vladimir Isaev.

In the very least, deliberations over the future of Syrian infrastructure and energy are signs that the situation in Syria is expected to improve. This is by and large thanks to both anti-terrorist operations in the country and international diplomatic initiatives which were given impetus by Russia’s agreement to intervene on Syria’s behalf in September 2015. 

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