FACTBOX: Syrian rebel victory leaves former oil exporter at crossroads

The regime of President Bashar al-Assad assumed office in 2020 and ruled over Syria throughout the country's protracted civil war. The fall of Assad's regime is seen as a regional setback for Russia and Iran which were supporting the Assad government. The Iranian-backed militant group Hezbollah was also active in the country.

The rebel victory in Syria is led by the Islamist group, Hayat Tahrir al-Sham, which is both a political and paramilitary force. It emerged from the Syrian uprising of 2011 initially as an affiliate of Al-Qaeda but broke ties with it in 2016.

Given Syria's oil production has shrunk significantly since the civil war started in 2011, market watchers see little threat of an oil supply impact.

"I think it will not have a major impact on oil markets," Christof Ruhl, senior research scholar at Columbia University's Center on Global Energy Policy, told the Gulf Intelligence podcast Dec. 8, when asked if Assad's fall will cause oil prices to surge when trading resumes Dec. 9.

Trade

Formerly the eastern Mediterranean's leading oil and natural gas producer, Syria itself used to produce over 380,000 b/d of oil and 300 MMcf/d of natural gas before the civil war that began in the spring of 2011. Since then, Syria has seen its production fall to a fraction of pre-conflict levels and the country is no longer able to export oil.

• Before the 2011 uprising, Syria was a net oil exporter and demand for oil derivatives was met by refining crude domestically.
• After the civil war started, at one point in 2015, ISIS controlled many of Syria's oil fields and sold production mostly domestically in the rebel-held territories of northern Syria, and eastern territories held by the Syrian Kurdish militia. The group sold most of its crude directly to independent traders at the oil fields.
• By 2015, when it was under the control of ISIS, crude production was down to 40,000 b/d. Some oil was also smuggled into Turkey but even that small amount of oil earned ISIS about $500 million/year, making it the richest terrorist organization in the world, according to a report by S&P Global Commodity Insights
• With the defeat of ISIS, control of most oil fields passed into the hands of Kurdish forces and the Syrian Democratic Force. Production was estimated at 15,000-30,000 b/d by 2019, according to the report.
• Syria's major trading partner on energy is Iran, which supplied about 121,000 b/d of crude to Syria in November, compared with 59,700 b/d in October, according to Kpler data.
• Clean products were last imported in June, averaging 1,900 b/d, according to the data. Russia and Turkey have also been suppliers. Syria hasn't made any exports since October 2019 when it shipped out an average of 33,300 b/d of fuel oil, with the destination unknown, according to Kpler.
• The share of Syria's domestic crude oil production is currently 31%, according to the International Energy Agency.

Infrastructure

• Most of Syria's oil fields are in the east of the country but are either not operational or operating in a limited capacity since the civil war.
• Syrian oil demand is currently averaging around 100,000 b/d, some 80% of which is diesel/gasoil and the rest is gasoline and jet, according to Commodity Insights.
• Syria currently has two refineries, Homs with a capacity of 107,100 b/d and Banias, at 120,000 b/d.
• As of Dec. 6, Russian forces had not evacuated the Russian naval base in Tartus and it was unclear whether Russia would keep its vessels at the port as Syrian rebels advanced swiftly across regime-held territory.

Prices

With little domestic oil production, the price impact on global crude futures is expected to be limited with a geopolitical threat of further escalation seen as unlikely as Assad's backers Russia and Iran are occupied with wars against Ukraine and Israel.

• Any effect on oil and natural gas from fighting in Syria and the reported fall of President Bashar al-Assad will be just as limited as what's happened from fighting between Israel in Gaza and Iran's proxies in Lebanon, Vitol's Asia head Mike Muller told the Gulf Intelligence podcast.
• "It didn't have much impact because the trading community quickly concluded the threat to supply was limited" and that some initial shutdowns in the Levant "didn't last long," he said. "I think Syria falls into the same bucket," he added, noting that most of the oil majors exited the country years ago.
• Platts, a unit of S&P Global Commodity Insights, assessed Dated Brent at $72.74/b on Dec. 6, a 1.5% fall on the day as markets largely shrugged off the OPEC+ decision to stall any production increase for another three months to focus on a softening demand sentiment and potential market oversupply picture in 2025.