Gulfsands given go-ahead over Syrian oilfield

Gulfsands given go-ahead over Syrian oilfield

By Toby Shelley

Published: February 5 2008 19:25 | Last updated: February 5 2008 19:25

Gulfsands Petroleum expects to push ahead with production in Syria by the end of the year following approval from the Damascus government of development of the country’s Khurbet East oil field.

The go-ahead from the Syrian government on Tuesday helped boost shares in Gulfsands and Emerald Energy, its partner in the development consortium. Gulfsands share price rose 10¼p to 175¼p on Tuesday while shares in Emerald closed up 7¾p at 218¾p.

An initial production facility will pump about 10,000 barrels a day of crude, half of it attributable to the Aim-listed company. Cash flow from early production will help finance Gulfsands’ share of full development of the field in 2009 as production builds to 40,000 b/d.

Khurbet East, which is estimated to have proven and probable reserves of 66m barrels, of which 11.3m barrels is attributable to each of Gulfsands and Emerald after royalties, taxes and the Syrian government’s share are taken into account.

Further small discoveries have been made in the vicinity and they will be appraised in the second half of the year. Analysts at Seymour Pierce said these were likely to boost the reserves to 80m barrels with further upside possible from nearby prospects.

The cost to Gulfsands and Emerald of the early production system will be a modest $10m (£5.1m) as the development will have access to the pipeline infrastructure of the state-owned Syrian Petroleum Company.

Damascus launched a block tender system for foreign oil companies in 2001 as a means of combating the country’s falling output. From a peak of 590,000 b/d in 1996, output fell to about 400,000 b/d in 2006, threatening the country with becoming an oil importer.

In 2003 Gulfsands became one of the first companies to win a share in a concession. In 2005, the year it listed on Aim, Gulfsands bought out its larger partner, Devon, and took over operational responsibility for the block.

Gulfsands’ current production is running at about 2,500 b/d, generated from US assets. It also has a memorandum of understanding with the Iraqi government to capture and market gas that is currently flared during oil production in part of southern Iraq. Emerald, meanwhile, currently produces about 3,600 b/d in Colombia.