ROYAL DUTCH SHELL LARGEST WINNER IN CURRENT BID

C O N F I D E N T I A L SECTION 01 OF 02 DAMASCUS 004161

SIPDIS

SIPDIS

NEA/ELA
NSC FOR SINGH
TREASURY FOR GLASER/LEBENSON
EB/ESC/TFS FOR SALOOM

E.O. 12958: DECL: 08/21/2016
TAGS: ECON EPET ETTC SY SANC
SUBJECT: ROYAL DUTCH SHELL LARGEST WINNER IN CURRENT BID
ROUND

REF: A. DAMASCUS 1664

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

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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