Author Topic: PludD/Syria: Royal Dutch Shell Largest Winner in current bid round  (Read 2212 times)

0 Members and 1 Guest are viewing this topic.


  • Guest

Date:2006 August 23, 13:53 (Wednesday) - Canonical ID:06DAMASCUS4161_a


 B. DAMASCUS 2189 Classified By: CDA Michael H.Corbin for reasons 1.5 b/d

1. (C) Summary. In addition to being awarded new concessions in the most recent bid round, Royal Dutch Shell is aggressively pursuing a number of new initiatives which, if successful, would expand the company's already considerable presence in Syria. More quietly and with a much lower profile, PetroCanada is poised to expand its own operations as the road is now clear for it to acquire Marathon Oil's potentially lucrative natural gas concession. Hunt Oil Middle East is the only company with US ties that was awarded a new concession in this round and is reportedly about to conclude a production sharing agreement. A company headquartered in the US that is still active in Syria, Gulfsands Petroleum, is pursuing its drilling program despite an initial setback. End summary.

2. (C) Royal Dutch Shell has won two of the nine concessions offered in the SARG,s latest bid round for oil and gas concessions (ref A). Executives from a number of western International Oil Companies (IOCs) have complained bitterly to us about Shell,s aggressive bidding practices during the round, which they argue lowered the competitiveness of their own bids and were more generous than any terms offered previously by a major. In addition to the generous bids, Shell offered to upgrade Syria's two decrepit refineries at no cost to the SARG, and submitted other unsolicited proposals to the Ministry of Petroleum and Natural Resources. For their part, Royal Dutch Shell managers are unapologetic about their tactics. Obviously aware of how he has put off Shell's competitors, the resident Shell general manager, Campbell Keir, commented to us recently that he &doubts8 he is currently very popular with his peers. Keir declined, however, to elaborate to us on why his company felt compelled to offer such competitive terms for a concession, in which he previously told us his company had only lukewarm interest. Though the generosity of Shell,s offer reportedly surprised even the managers at the state-owned Syrian Petroleum Company (SPC), Shell,s favorable terms have predictably not translated into a quick conclusion of a production sharing agreement (PSA), largely because of SARG bureaucratic inefficiencies and SPC's own suspicions of Shell motives.

3. (U) Despite the SARG,s failure to make public which companies were awarded which concessions in the current bid round, the round,s results are known to everyone active in the sector. Reportedly, no other majors won a concession, and PetroCanada, whose managers told us months ago they had been quietly assured of at least one new concession, were also left out in the cold. Hunt Oil Middle East reportedly won a concession though we have yet to meet anyone from the company here in Syria. The rest of the concessions have been awarded to small independents, including one French and one Ukrainian.

4. (C) In unrelated oil sector news, Houston-based, Gulfsands Petroleum is about to start drilling its first deep well in its much-hyped concession in northeast Syria after suffering a disappointment with its recently completed shallow well. Gulfsands deputy general manger, Mazen Mohanna, told us that in spite of the shallow well,s failure to uncover a commercial quantity of oil, the company remains confident that the next two wells, both planned to be 5000 meters deep and take 100 days to complete, would bring on-line a light, sweet crude that could be as much as 10,000 bpd. (Note: Gulfsands's concession is generally considered potentially important if Syria is to reverse its current declining oil production. End note.)

5. (C) Resident PetroCanada general manager, Hisham Yazigi, told us that President Asad has approved PetroCanada,s purchase of Marathon Oil,s gas concession in the center of the country (ref B). Yazigi commented to us that PetroCanada executives in London and Calgary had, however, decided to keep the profile of the company,s operations in Syria low as DAMASCUS 00004161 002 OF 002 long as the hostilities were continuing in Lebanon. Now that a cease-fire appears to be holding, Yazigi anticipates PetroCanada,s board will soon reevaluate the decision and give him a green light to significantly expand the company,s presence in Syria in order to develop the Marathon concession, which has already identified commercial quantities of both natural gas and oil. 6. (C) Comment. With the conclusion of hostilities in Lebanon, Syria,s oil and gas sector is quickly returning to business as usual. Both Royal Dutch Shell and PetroCanada see new opportunities in Syria,s oil and gas sector. This, coupled with persistently high oil prices, may account for their local executive's zeal in pursuing new investments here. Contrasting with Shell and PetroCanada,s sometimes aggressive pursuit of new opportunities in Syria, Total is noncommittal at best. Its executives continue to tell us that their Paris headquarters hopes to retain a presence in Syria, but has directed them to avoid any new commitments. Still, Shell,s recent generous bid offers have Total managers and others worried Shell may be hoping to take advantage of the current lack of competition from western OICs to gain a dominant position in the sector at their expense. CORBIN

Full cable/Source: