Sanctions Push Shell to Depart Syrian Oil Fields

[frigidmagi]

WSJ

Royal Dutch Shell PLC said it was pulling out of Syria, a day after the European Union imposed new sanctions on the regime of Bashar al-Assad.

Lawyers for other oil companies active in Syria are now poring over the text of the latest bans to assess the implications for their operations there. Some have already indicated that they may follow Shell's lead.

The Anglo-Dutch energy company was forced to act after the EU blacklisted an operating company in which it holds a stake, Al Furat Petroleum Co. It is one of 11 companies that were added to the EU's sanctions list on Thursday. Syria's state-owned national oil company, General Petroleum Corp., or GPC, is also on the list.

Shell has also experienced financial problems in Syria recently, according to industry observers. Companies working there sell the oil they produce to GPC. But GPC has struggled to make payments as Syria's cash reserves dwindle. According to Egbert Wesselink of IKV Pax Christi, a Dutch group that advocates for peace in conflict areas, Shell hasn't been paid at least for the last week.

The tightened sanctions are the latest response to the bloody crackdown on opponents of Mr. Assad. U.N. officials have estimated the death toll in Syria's eight-month uprising at more than 4,000.

The EU also announced an export ban on key technology for Syria's oil and gas industry, a ban on trade in Syrian public bonds and a prohibition on Syrian banks opening new branches in the EU.

Shell said it was ceasing its activities in Syria "in compliance with sanctions."

The move will not have much of an impact on Shell's business. Its operations in Syria are run through a subsidiary called Syria Shell Petroleum Development, or SSPD, which is 65% owned by Shell and 35% by China National Petroleum Co. SSPD in turn holds a 31.3% stake in Al Furat, which operates three production licenses in Syria. That means Shell's share of Al Furat's oil production is only 13,000 barrels a day, a tiny fraction of the company's global output of 3 million barrels a day.

Total SA, the French oil major, which produces three times more oil in Syria than Shell, said it was "assessing the situation" and insisted it would comply with all sanctions. But its situation is less clear-cut than Shell's. Total's joint venture partner is the Syrian Petroleum Co. or SPC, which, unlike Al Furat, is not on the sanctions blacklist. However, SPC is an affiliate of Syria's state oil company, which is.

Another company that faces difficulties is Gulfsands Petroleum PLC, a small independent. Since the EU banned imports of Syrian crude in September, the company has had to reduce its production there by about two-thirds, to 7,000 barrels a day.

A spokeswoman said it "will comply with all of the latest EU sanctions" but declined to comment on how the latest measures would affect its Syrian operations.

Syria pumps about 370,000 barrels of oil a day, about 150,000 of it exported, according to the International Energy Agency. Those exports make up about one-third of Syria's export income—and nearly all of it is sold to Europe.