British Company Concerned over its Oil ‘Rights’ in Northeastern Syria

British company Gulfsands Petroleum has distanced itself from the partnership agreement between the United States’ Delta Crescent Energy company and the Kurdish autonomous administration east of the Euphrates River in northeastern Syria.

Officials from the firm told Asharq Al-Awsat that they will “defend the company’s rights” to invest in oil in Block 26, which is located east of the Euphrates and believed to produce 20,000 barrels of oil per day.

Gulfsands had signed a deal with the Syrian government in 2003 to invest and develop Block 26. According to the agreement, two-thirds of production will go to the government after calculating costs. Since 2011, the block came under the control of the Kurdish People’s Protection Units (YPG) and later the Syrian Democratic Forces (SDF) due to the ongoing Syrian conflict and the American and European sanctions against the Damascus regime.

Officials from Gulfsands told Asharq Al-Awsat that more than 26 million barrels of oil have been produced from Block 26 in four years. The production was unlicensed and it is unknown who received the oil or the extent of the damage that has been inflicted on the field.

Gulfsands has invested more than 350 million dollars in Block 26, which experts estimate is worth billions of dollars.

American investment
Prior to the eruption of the conflict in 2011, Syria used to produce some 360,000 barrels of oil per day. Production has since dropped to around 60,000. Some 90 percent of its oilfields and half of its gas fields are controlled by the SDF, which is backed by the US-led anti-ISIS coalition.

In Aril, Delta Crescent Energy struck a deal with the autonomous administration to obtained a license from the US Treasury to operate in northeastern Syria seeing as the war-torn country’s oil sector is under American and European sanctions.

Delta Crescent Energy was established in the US state of Delaware in February 2019. Its partners include former US ambassador to Denmark James Cain, James Reese, a former officer in the Army’s elite Delta Force, and John Dorrier Jr., a former executive at GulfSands Petroleum, reported Politico in August.

In July, Republican Senator Lindsey Graham, who is close to President Donald Trump, declared before Congress that SDF chief Mazloum Abdi had informed him of the signing of an oil investment agreement with an American company. US Secretary of State Mike Pompeo said the administration supports the deal and said it is intended to “modernize” the oilfields. “The deal took a little longer ... than we had hoped, and now we’re in implementation,” he said.

The deal was, however, widely criticized by Damascus, Moscow, Tehran and Ankara. They slammed it as “political recognition of the Kurdish administration” and violation of the Astana agreement reached between Russia, Iran and Turkey. Washington defended the deal, saying: “Syrian oil is for the Syrian people and we remain committed to the unity and territorial integrity of Syria. The United States government does not own, control, or manage the oil resources in Syria. The populations in areas liberated from ISIS make their own decisions on local governance.”

Protecting oil
“The goal is to get the production back up to where it was before the civil war and sanctions,” said Ambassador Cain according to Politico.

“I think this company’s going to improve the viability of the northern oil fields to make them more productive,” Graham said. “Conceptually it makes sense that we should, instead of just writing checks, help people help themselves.”

In October 2019, Graham played a role in persuading Trump to keep American forces deployed east of the Euphrates River after he had announced that he wanted to pull back the troop to the border with Turkey. Trump later confirmed that a small number of forces will remain in oil-rich areas, stressing that the US has “secured and protected” the oil. Indeed, some 500 soldiers remain east of the Euphrates and they have been supplied with better military gear to protect the oilfields.

Many questions have been asked about the role the American military and administration are playing in the new oil deal. Pentagon spokesperson Jessica McNulty noted that the Department of Defense “does not have an affiliation with any private companies in regard to the oilfields in northeast Syria.” However, she added that US forces in the region are “securing critical petroleum infrastructure in northeast Syria to deny ISIS access to critical resources and revenue,” reported Politico. McNulty also noted that the oil resources "currently provide some of the funding necessary for the SDF to conduct operations" against ISIS.

Sovereign rights
The deal between the American company and autonomous administration calls for the establishment of at least two makeshift oil refineries in the region east of the Euphrates that can produce 20,000 barrels of oil per day. The production will meet some of the local demand.

Other sources, however, weighed the possibility that the deal could allow operators to expand their work and invest in other oilfields. This would raise concerns among other oil companies, including Gulfsands.

Officials at the firm said they were “surprised” with the deal that was struck between Delta Crescent Energy and the Kurdish administration. One official said Gulfsands continues to investigate the details of the agreement and was determined to “protect” its rights. Moreover, he said that the firm was not involved in politics, but hopes that peace and stability will be restored in Syria.

Gulfsands remains committed to its project in Syria and is determined to protect its rights in line with international laws, he added. The company has signed a binding agreement with a sovereign state and it expects that its rights be recognized, hoping that it will resume its work when conditions permit it.

On the other end of the divide, Kurdish officials defended their deal with Washington, saying it had political undertones seeing as it was signed directly between an American company and the autonomous administration without having to obtain the Syrian government’s approval.

“The political significance of the deal is important and is tantamount of recognition” of the autonomous authority, he explained. Furthermore, it eases concerns that the US may suddenly pull out its troops from the region east of the Euphrates.

Baristas and servers linger outside a cafe in Tehran, smoking and chatting, as scheduled daytime power cuts due to energy shortages plunge businesses in Iran's capital into the dark.

"When the power is out, we are almost completely out of service," said Ali, a 30-year-old employee, of the nationwide rolling electricity outages imposed daily since November 11.

"We use mostly electrical equipment here in the cafe such as an electric oven and espresso machine," he told AFP, asking that only his first name be used.
Years of Western sanctions and a lack of investment in infrastructure have exacerbated the situation, especially during peak consumption months in summer and winter.

To deal with the shortages, the government has introduced two-hour blackouts, which rotate between various neighbourhoods in cities between 9:00 am and 5:00 pm.

President Masoud Pezeshkian attributed the decision to "low fuel reserves", saying Iran must "adjust the fuel for power plants so that we do not face problems in winter".

- 'Poison' -

Fatemeh Mohajerani, government spokeswoman, said power cuts were necessary to cut down on a relatively cheap low-quality fuel -- known as mazout -- used at some older-generation power plants.

The heavy fuel oil has been used for years to address power shortages despite its emissions causing heavy air pollution.

She said the public would need to deal with blackouts for a limited time, to find an alternative to what she described as "poison".

"It is unfair that part of the society should pay with their lives for the production of electricity," she added.

But for Mona, another employee at the cafe in Tehran -- home to about 10 million people -- it isn't worth the cost.

"The government says it has stopped burning mazut in a number of power plants in other cities, but we need to pay for that in Tehran," the 36-year-old told AFP.

Repeated power cuts have angered citizens of the Islamic republic in recent years, especially during the hot summer months.

In July, the authorities ordered the working hours of civil servants to be halved for several days in an attempt to save energy.

But energy shortages go beyond just electricity in Iran.

On November 12, National Iranian Gas Company announced daily gas consumption in the country had set a new record of 794 million cubic metres.

Economic expert Hassan Forouzanfard cited poor infrastructure, mismanagement and in particular Western sanctions as responsible for Iran's energy problems.

"Sanctions and the cutting of the ties with international energy companies have deprived us of both the necessary technology and investment to develop our oil and gas sectors," he told AFP.

- 'Warm clothes' -

"If we have a cold winter this year, we will have to collectively deal with both gas and electricity problems in the country," Forouzanfard said.
Iran, despite holding some of the world's largest natural gas and oil reserves, has grappled with massive energy shortages in recent months

"I do not think that the government would be able to either control the negative effects of the pollution or to resolve the energy imbalances in a reasonable and serious way in the short term," he added.

But Tehran says consumers must do their part to conserve energy.

"We have no choice but to consume energy economically, especially gas, in the current conditions and the cold weather," said Pezeshkian.

"I myself use warm clothes at home, others can do the same," the president added.

During one of the scheduled power cuts, a queue formed outside a supermarket in Tehran.

"Since it is dark inside and our CCTVs are offline, we allow just one customer at a time so we can better handle them," said Sina, a 24-year-old employee, who did not want to give his full name.

"We are afraid that in the dark and without the help of surveillance cameras, we can't figure out if an item goes missing," he said, arguing that the power cuts are hurting the small business.

British Company Concerned over its Oil ‘Rights’ in Northeastern Syria