Can foreign energy investment help power Syria’s recovery after years of war?

LONDON: Syria’s battered energy sector faces a daunting challenge after nearly 14 years of war, sanctions and underinvestment that have left much of the country struggling with chronic electricity shortages.

As Damascus seeks to rebuild, international investment is increasingly viewed as essential to restoring oil and gas production, improving power generation and reviving wider economic activity.

One of the most closely watched tests of that effort is a major gas development project involving US energy giant ConocoPhillips and Novaterra Energy, which are working with the state-owned Syrian Petroleum Co. to develop new gas fields and increase output from existing assets. An implementation deal was reportedly signed on June 16.

Syrian officials hope the project will help stabilize the electricity network and support economic recovery, while analysts say its broader significance lies in whether it can deliver tangible improvements and encourage further foreign investment.

The deal has been hailed as a strategic breakthrough in economic and political ties between Syria and the US since the fall of Bashar Assad’s regime in late 2024.

Mohammed Al-Bashir, Syria’s energy minister, said the deal is intended to stabilize the country’s electricity network and support broader economic recovery.

At a news conference in Damascus, Ryan Lance, chairman and CEO of ConocoPhillips, said the company’s return to Syria, in partnership with Novaterra, is intended to “grow the gas production in the country.”

Alex Macdonald, CEO of Novaterra Energy, said the company would offer “training and providing access to cutting-edge software and technology” as it expands operations in Syria.

Still, analysts say the agreement’s significance will depend less on the announcement itself than on whether it produces tangible results.

“Politically and commercially, I’d say the deal is quite important because ConocoPhillips would be one of the first major US energy companies to re-enter Syria after the collapse of the Assad regime and years of sanctions and conflict,” Benjamin Feve, a senior consultant at Karam Shaar Advisory, told Arab News.

“That sends a positive signal, especially when combined with other recent moves in the energy sector involving TotalEnergies, QatarEnergy, and the discussions surrounding Block 3 offshore near Latakia.”

Before the civil war erupted in 2011, Syria produced about 900 million cubic feet (25 million cubic meters) of gas and an average of 400,000 barrels of oil per day, including roughly 109,000 barrels per day for export, making it the Mediterranean’s only significant crude producer, according to reports.

By 2021, oil production had fallen about 80 percent, leaving it at just 50,000 to 80,000 barrels per day, much of it reportedly smuggled, while gas output had nearly halved.

Syria’s energy infrastructure has been badly degraded by the war, division and Western sanctions, leaving the country able to generate only a fraction of the electricity needed to meet domestic demand.

While most oil fields were under the control of the Kurdish-led Autonomous Administration of North and East Syria during the civil war, gas production in areas held by the Assad regime fell to 3 billion cubic meters in 2023 from 8.7 billion cubic meters in 2011, Reuters reported on Dec. 9, 2024, a day after Assad’s downfall.

The World Bank estimated that oil and mineral revenues declined from 26 percent of Syria’s gross domestic product in 2012 to 16 percent of total budgeted revenue in 2023.

In February, however, the interim government took control of key oil and gas areas, boosting its share of national oil output from about 20 percent to roughly 88 percent.

Last year, Yousef Qiblawy, CEO of Syrian Petroleum Co., said the deal with ConocoPhillips was intended to increase gas output by 4 million to 5 million cubic meters per day within a year.

“In a single year, that would amount to about 1.5 billion cubic meters, which would increase Syria’s gas production by about 50 percent, which is very positive for future prospects,” Feve said.

Even so, he said it would not resolve the broader crisis. “In practical terms, it would not solve the serious energy crisis, but it could materially reduce the gap between available gas and what power plants need to operate more regularly.”

For ordinary Syrians, who have endured prolonged power cuts since at least 2012, that could still bring meaningful relief. But with about 90 percent of the population living below the poverty line, many are unlikely to benefit from lower costs anytime soon.

“The main effect would likely be felt first through electricity supply rather than cheaper prices because more gas means existing power plants can run for longer hours, obviously, and thereby reduce reliance on expensive diesel generators,” Feve said.

“More gas and more electricity would also help factories, workshops, hospitals, bakeries, water systems and households operate more predictably.

“This does not automatically mean cheap or cheaper electricity. Syria does not produce, or actually receive, a huge amount of gas, so there is still a major gap between actual supply and demand.”

That gap is visible in daily life across the country.

With much of the electricity generation system down, many businesses and some homes in Damascus rely on noisy diesel generators that are expensive, available only for limited hours and vulnerable to fuel shortages and rising prices.

In some areas that have borne the brunt of war, including parts of rural Damascus, residents have improvised by running cables from roadside transformers to their homes, further overloading the network and sometimes causing fires.

Damascus-based graphic designer Salma Saleh said Syria’s electricity infrastructure “is not ready today.”

“The government cannot equip it; it cannot, for example, buy meters,” Saleh told Arab News. “There is simply no financial capacity, so you need to bring in a private investor — there is no way around it.

“It is important for an investment company to come in, whether Qatari, American, or any other nationality. You have entire streets where the electricity situation is a mess.”

At her family home in rural Damascus, she said, the burden of restoring basic services has fallen on residents themselves.

“For example, at our home, which we were displaced from, when we go there and want to do any work, we have had to run an electricity line from the transformer to our house at our own expense,” she said.

“We went and bought the cable ourselves and extended it, because there is no one who will do that for us.

“There is simply no capacity to ask the government to come and install an electricity cable. In destroyed areas, there is no proper cabling. Each person has to wire things up on their own.”

As a result, billing is often beside the point.

“So naturally no one is really going to be paying a bill when they are connected directly to the transformer and there is no meter or anything to measure usage,” she said. “This is not really theft. The authorities know that people are wiring things up themselves.

“You could have about 50 cables all tangled together. Sometimes, when things get bad, one of the cables burns out and everything erupts. So this is where companies would need to come in, assess all of this, dig up the ground and lay the cables underground.

“Then you would have a proper system — of course, that is for the future.”

At the start of this year, many Syrians reported a spike in electricity bills months after the interim government introduced a tiered electricity pricing system that effectively raised consumer costs. Authorities said the move was necessary to ensure a more consistent supply.

State-owned Syria TV reported on Jan. 26 that the new pricing system had increased bills by more than 600 percent for some groups, in some cases pushing charges above household income.

That trend reinforces Feve’s view that Syria is moving away from energy subsidies, not toward them.

“What we also know, just from looking at the recent moves by the authorities and the government, is that the Syrian government is not interested in subsidizing the price of electricity, gas, or oil,” he said. “Quite the contrary, we have seen subsidies being lifted.

“I see the government selling electricity at least at production cost, which means it would not be subsidized. Of course, it may still make a profit rather than sell electricity below cost, but the key point is that it is unlikely to subsidize it.

“So, I think the most likely short-term impact would be fewer and shorter blackouts, but not any dramatic fall in prices.

“We could perhaps see lower overall costs if state electricity becomes available more frequently and people reduce their reliance on private diesel generators, which are obviously more expensive than state electricity.

“So, in that sense, people might end up paying less overall, even if state electricity prices themselves remain the same.”

For workers who depend on a stable connection, even that limited improvement could matter.

A more reliable power grid could improve working conditions for small-business owners and freelancers such as Alexandra Hammoud, an independent English teacher based in the coastal city of Tartous who teaches online.

“Electricity is critical for my work because I rely on my mobile phone and laptop, sometimes for long, continuous hours,” Hammoud told Arab News.

“So, when I have electricity available all the time, I feel reassured that my laptop will not suddenly shut off in the middle of a session or that my phone will not run out of charge and force me to cancel work plans.”

Speaking about rising energy bills, she said her own consumption was relatively limited compared with that of a shop or a larger household. Official promises of an improved power grid were “something I feel optimistic about, especially if it takes ordinary citizens into account.”

For now, ConocoPhillips’ return to Syria comes as a welcome development for ordinary Syrians, many of whom are still struggling to make ends meet.