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Syria says Iraq oil, gas pipeline tenders to be issued soon

Highlights

Syria and Iraq have reached final agreement to build two oil pipelinesand a gas pipeline between their two countries and tender invitations will beissued soon, Syrian Oil Minister Sufian Alao was quoted as saying Tuesday.

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Alao was quoted by Syrian newspaper Al-Thawra as saying an existing oilpipeline from Iraq to Syria was being repaired.

The pipeline, linking the northern Iraqi oil region of Kirkuk to theSyrian Mediterranean port of Banias, was shut down in the 1970s when relationsdeteriorated between the rival Ba'ath parties in power in Damascus andBaghdad.

Iraq reopened the line in 2000 to bypass UN sanctions, shipping some200,000 b/d of Kirkuk crude to Syria, which used the crude in its ownrefineries and exported an equal amount of its own oil to markets.

The leaky pipeline, which has a capacity to carry 300,000 b/d of crudeoil, has been shut since the US-led invasion of Iraq in March 2003, when themain K3 pumping station along the pipeline was damaged by US air strikes.

Alao did not say when work, which has already been delayed since initialagreement was reached to repair the pipeline in 2007, would be completed.

Iraq has said it plans to build three pipelines through Syria for heavyand light oil as well as natural gas to cope with new export capacity onceincremental production comes on line from fields being developed by foreignoil companies under long term service contracts.

The heavy oil pipeline would likely transport heavy crude from thenorthern Qayara and Najmah oil fields, which were awarded to Angola'sSonangol.

The light crude oil pipeline would carry Kirkuk crude oil to Banias.

Iraq currently exports its Kirkuk blend crude oil to the Turkish port ofCeyhan, which lies north of Banyas. There are plans to rehabilitate the existing Kirkuk-Ceyhan twin pipeline system, which has a design capacity of1.6 million b/d, following a deal with Ankara to extend the transit agreement.

A senior Iraqi official said recently that while the Syrian pipelineoption had been discussed for years, there was now movement on the issue withBaghdad seeking foreign investors for the projects.

One of the Iraqi gas fields awarded in last year's gas auction, Akkas,lies in the north near the border with Syria. The field, which is slated toproduce 400,000 Mcf/d of gas when developed, has been earmarked as a potentialsource of exports in the future to the European market, possibly through theArab Gas Pipeline that carries Egyptian Gas through Jordan, Syria and Lebanonand is being extended to the Turkish border.

Alao referred to plans to build a 56-inch pipeline with capacity totransport 110 million cu m/d of natural gas from Iran's South Pars gas fieldthrough Iraq and Syria, where it would link up with the Arab Gas Pipeline.

The agreement with Iran was reached during talks January 20 in Damascuslast week with Iranian Oil Minister Masoud Mirkazemi. The two sides signed acooperation agreement allowing Iranian gas exports through Syria and then onto Europe with the proposed pipeline.

Syria has been ramping up its gas production in recent years to meet highdomestic demand. Alao said total gas output last year rose to 10.07 Bcm, upfrom around 9.1 Bcm/year in 2009. Syria produced an average 27.5 million cum/d last year.

Because Syria cannot produce sufficient gas domestically, it has to relyon imports to meet rising demand for power generation as it phases outreliance on fuel oil. At present Syria is importing around 1.45 Bcm/year fromEgypt but is seeking additional supplies.

Alao said that the electricity sector accounted for 87% of total gasusage, taking 6.704 million cu m/d of the 8.9 million cu m/d of clean gassupplied by gas processing plants.

Oil production rose marginally to a total 140.931 million barrels in2010, an average of 386,000 b/d, a slight increase over 383,000 b/d producedthe previous year, he said.

--Kate Dourian, kate_dourian@platts.com

Similar stories appear in Oilgram News. See more information at http://bit.ly/OilgramNews