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Major Syria Oil Find Reported : Fever Grips Damascus; Real Estate Prices Soar

January 28, 1985|CHARLES P. WALLACE | Times Staff Writer

DAMASCUS, Syria — In a remote corner of eastern Syria, appropriately located in a field behind a windblown gas station, an American firm has discovered an apparently significant amount of oil.

Neither the Syrian government nor the American company, a Shell Oil Co. subsidiary named Pecten International Co., has released any details of the discovery. However, Western diplomats and businessmen in Damascus are estimating that the find will eventually produce between 100,000 and 150,000 barrels of oil a day.

A discovery of such magnitude would be worth between $1 billion and $1.5 billion a year at current prices, at a time when Syria's socialist-based economy is in chaos.

Despite efforts to keep the details of the discovery secret, Damascus is in the throes of oil fever. Real estate prices have skyrocketed 300% in some areas in the expectation that the oil discovery will mean a sudden influx of American workers, after years of nationalization in which expatriates have all but deserted Syria.

Perhaps more significant, there is persistent speculation that an infusion of petrodollars into the moribund Syrian economy may alter Syria's close relationship with Iran, which has been a major source of financial aid to the Damascus regime.

The oil discovery was made near the town of Dayr az Zawr on the Euphrates River, about 250 miles northeast of Damascus.

The Pecten firm has so far drilled three wells, each of which is reportedly producing between 6,000 and 10,000 barrels a day.

The oil is said to be extremely light and low in sulfur content, the two benchmarks of high-quality crude oil. The Syrians already produce about 170,000 barrels a day of less valuable heavy crude in an operation that was set up with the help of the Soviet Union.

The Dayr az Zawr exploration is a joint venture of Pecten, Royal Dutch Shell and the West German oil firm Deminex.

By a fluke, Pecten took over exploration of the area last year from another American firm, the Syrian-American Oil Co., a subsidiary of Coastal States Gas Corp., which concluded after four years that there were no commercially exploitable deposits of oil on the land.

According to one Syrian official, the government now expects to begin commercial production of about 35,000 barrels a day by early next year, rising to 150,000 a day by 1990.

To transport the oil to the sea, the Syrian government has given Pecten permission to use a pipeline that formerly belonged to the Iraqi Petroleum Corp. but which has been closed for several years in a dispute between the rival regimes in Damascus and Baghdad. The pipeline passes through Dayr az Zawr on the way to the Syrian oil terminal at Baniyas on the Mediterranean Sea.

Pecten has already begun preparatory work for the construction of a feeder pipeline to carry oil produced at the new field to the Iraqi pipeline, a distance of about 20 miles.

Despite the obvious joy of Syrian officials about the discovery, there is also considerable concern that the country may be left worse off by an abrupt reduction in financial assistance from Iran and the Arab states of the Persian Gulf region before the pumping of commercial quantities of oil can begin.

Syria receives an estimated 44 million barrels of oil each year from Iran, with 7.3 million barrels of it reportedly free of charge and the remainder sold at substantial discounts.

In return, Syria serves as a middleman for Iran to receive weapons for its war against Iraq and facilitates the movement of Iranian "revolutionary" forces into Lebanon.

Because of the shortage of foreign exchange in recent months, Syria has failed to make any payments for Iranian oil, according to Western diplomats, and Iran has reportedly rolled over about $1 billion of Syrian oil debt into long-term loans.

The concern now is that upon learning of the extent of the Syrian find, the Iranians will balk at continuing their assistance at such a high level, although few analysts see a chance of Tehran cutting off Damascus entirely.

Syria also receives around $700 million a year from Saudi Arabia and Kuwait as assistance for being a so-called front-line state in the conflict with Israel. Diplomats said it is unlikely that either country would reduce that aid because of the discovery.

While $1 billion in oil income would not seem all that significant to a major oil producer such as Saudi Arabia, it could considerably alter Syria's economic fortunes.

"There is a crying need for imports and no money to pay for them," said one Western diplomat familiar with the Syrian economy.

The country currently has a trade deficit of about $2 billion annually, with little hope for improvement. The government is so strapped for internationally acceptable currency that it reportedly has had to trade soft-currency Syrian pounds on the black market recently to obtain $60 million to finance food imports.

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