Headlines over these first days of September have centred on oil and gas geopolitics, Syria and rising crude prices, as the cost of a barrel recently hit a two-year high. Syria dominated the 2013 G-20 Saint Petersburg Summit, where US President Barack Obama and Russian President Vladimir Putin clashed over a united response to last month’s chemical weapons attack on civilians, which left more than 1400 dead in a suburb of Damascus. No one has taken responsibility for the assault, and at time of press, a promised preliminary UN report on the chemical attack has yet to be published. The US states it has proof that the attack was carried out by government forces, while Moscow, an ally of President Bashar al-Assad’s regime, claims the attack was the work of rebels to attract a foreign-led strike.
Earlier this summer, President Putin told journalists that the Syria question was an appropriate topic for the summit and brazenly added that: “I will be addressing Obama not as my colleague, not as the US President but as the winner of the Nobel Peace Prize.” In the aftermath of the summit, Russia has set forth a plan to put Syria’s chemical weapons under international control. Although requirements remain vague, the Russian news agency Interfax has quoted Syrian Foreign Minister Walid Muallem as saying that his country agrees with Russia and that the initiative would “remove the grounds for American aggression”. The US and France have spoken out in support of Moscow’s plan, but will want to keep military options open to avoid a game of cat and mouse.
Although not a major exporter, Syria holds 2.5 billion bbls of crude oil as of January 2013, the largest proved reserve of crude oil in the eastern Mediterranean, besides Iraq.1 However, after two and a half years of civil war, exploration has come to a standstill, with international oil companies once operating in Syria abandoning their operations due to escalating violence and sanctions targeting the country’s energy sector.
Currently, Russia is the only remaining international partner still working to develop Syria’s oil and gas resources over the past year.
Understandably, when there is the threat of trouble in the Middle East, oil prices tend to climb. Representative of traders growing worried about seemingly likely military intervention in Syria, West Texas Intermediate crude for October delivery settled at US$ 110.53, its highest since May 2011. October Brent rose to trade above US$ 116/bbl. Analysts anticipate supply to recover in due course, yet not quickly enough to check a short-term spike in prices.
Despite the fact that Syria neither exports much oil nor controls a critical trade route, its civil war has become a proxy battle for the world’s largest energy producers, with Russia and Iran backing President Bashar al-Assad, and Saudi Arabia, Qatar and the US supporting the rebels. Adding to the world’s unease and pushing up prices, production is currently down in several OPEC countries such as Iran (down 1.2 million bpd); Libya (1.2 million bpd); Nigeria (300 000 bpd); and Iraq (250 000 bpd) due to sanctions, labour strikes, thefts and attacks.
Perhaps this is why some have chosen to focus on innovation coming out of the US Eagle Ford Shale this month, where producers are driving down the cost of their wells by using techniques such as ‘pad drilling’: sending multiple wells radiating off in different directions from a single site.
William Thomas, Chief Executive of EOG Resources, said last month that it had cut the average cost of a well in the Eagle Ford Shale from US$ 6 million to US$ 5.5 million. The long-term outlook on this US industry is still debatable, although the International Energy Agency has predicted that before the end of the decade the US would be the world’s largest oil producer2 and the shale revolution has undoubtedly a large part to play in realising this goal.
As the oil and gas industry soldiers on we look forward to hearing about new technologies and successful case studies from across the globe.
If you’ve picked up a copy of this issue at SPE ATCE, then come and say hello to the Oilfield Technology team at booth 353. To share news and interact from further afield, join our discussions on LinkedIn (Oilfield Technology group), Twitter (@Energy_Global), and on Facebook (EnergyGlobal). Looking forward to hearing from you!
References
KLING, M., ‘Why Is Syria Important for Oil Prices?’, Moneynews.com
NGUYEN, L., ‘U.S. Oil Output to Overtake Saudi Arabia’s by 2020’, Bloomberg