Syria invites Russian oil companies to East Med

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Lebanon's East Med blocks
Lebanon's offshore blocks.

Syria invites Russian oil companies to explore in the Eastern Mediterranean Sea. Syria’s parliament has approved contracts for oil exploration with two Russian companies in an effort to boost production hit by more than eight years of war and Western sanctions.

Meanwhile, Lebanon is preparing for its first-ever maritime oil and gas exploration in early 2020 in Block 4 off the coast of Beirut, Ricardo Darré, General Manager of Total E&P Liban, told LOGI that the results of the drill should be clear by June.

Syria’s State news agency SANA said the deals between Damascus and Moscow cover exploration and production in three blocs, including an oilfield in northeast Syria and a gas field north of the capital Damascus.

It said the contracts, passed in a Syrian parliament session shortly after New Year, were signed earlier this year with two Russian firms it identified as Mercury LLC and Velada LLC.

Syrian Oil Minister Ali Ghanem said handing contracts to these companies was in line with the government’s strategy “towards friendly states that stood by Syria, with Russia and Iran at the forefront.”

Shunned by Western powers, Syrian President Bashar al-Assad has looked to allies Russia and Iran to play a role in rebuilding, after they helped Syria’s army reclaim most of the country.

Syria produced around 380,000 barrels of oil per day before the war but production collapsed after fighting hit the oil-rich east. Oil fields have largely been in the hands of Kurdish fighters who seized swathes of north and east Syria from Islamic State with U.S. help.

Syrian state media cited Ghanem as saying the oil ministry would seek to sign offshore contracts for oil investment which has been hindered by economic sanctions.

With regard to Lebanon, Total heads up the consortium which also includes Novatek and ENI that in 2018 signed contracts to drill in two Lebanese maritime zones, Block 4 and Block 9.

Speaking during a phone interview, Darré also revealed the names of a number of companies that have been subcontracted to provide services for the exploratory phase, which he said was still set to begin in January.

Darre also said instability in Lebanon over the past months “won’t delay drilling.”

Darré said the consortium had originally been told that a drillship contracted by the consortium would arrive in Lebanese waters between Jan. 13-15, but he noted there were some delays related to a current mission it was undertaking in Egypt.

Darré said it would now likely arrive in the second half of January. The drill process will take around 60 days once it commences, he said.

Then, three scenarios may occur. If the well is dry, meaning no discovery is made, this will quickly be visible. Similarly, if a clear commercial discovery is made, this will be known relatively quickly after the end of the drilling.

But, he added, those two scenarios rarely occur. “90 percent of the time, something is unclear and you are not sure of the volume or quality of the find. In this case, around 2 additional months are necessary to make a decision on whether we move forward or if we have a look at another prospect,” he said.

This means that it should be clear by June whether Block 4 contains a find that is worth further developing. Darré said the information obtained from Block 4 would help the consortium determine where exactly to drill in southern Block 9 later in the year.

U.S.-based companies are taking subcontracts.

Darré said that most major contracts for the exploration phase had already been signed.

“We’ve been doing our due diligence to make sure we are not contracting or buying services from anyone under economic sanctions or facing corruption charges,” he said.

He noted the call for tenders had been open to qualified international and local bidders.

The largest piece of equipment, the drill ship, has been contracted from U.S.-based Vantage Drilling, he said.

Then there were “three major very technical packages which include the acquisition of small pieces of equipment that are highly specialized.” These were awarded to U.S-based oil field services company Schlumberger.

A contract for drilling fluids was assigned to Baker Hughes, a contract for technical drilling services was assigned to U.S.-based Franks International.

The local logistics base supporting the drilling operation has been assigned to Fast-Bollore, a 25 percent Lebanese, 75 percent French company.

Darré said there are still a number of outstanding contracts in the final phases of negotiations. These include a contract for platform supply vessels – i.e. boats to transfer equipment to and from the drill vessel, and a large contract for the supply of marine gas oil.

He said the total cost of drilling the well in Block 4 is around $60 million.

Source: LOGI Newsletter and www.lebanongasnews.com

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