Middle East oil and gas are vulnerable to crises—but what are the alternatives?by Michael Jefferson / September 18, 2013 / Leave a comment
A Syrian distils crude oil in Al Raqqua. The county has “substantial reserves.” Pipelines pass through it to the Mediterranean. (© Alice Martins/AFP/Getty Images)
Forty years ago this month, the world entered a period that Shell’s planning group referred to as “The Rapids.” This was a period of strong economic growth in the industrialised world, rising US oil imports, and a significant oil price rise. The main trigger was the October 1973 Yom Kippur War between Israel and a coalition of neighbouring Arab states, including Egypt and Syria.
Now, as then, the global economy is showing signs of a return to growth, at least in the developed economies of the west, the oil price is rising and there is grave instability in the Middle East. In June, the price of a barrel of oil was down at close to £100—it is now at £115. In late August, the price spiked sharply, a rise that coincided with the deterioration of the situation in Syria.
The roots of the Syrian crisis are deep and the threat to energy security is considerable. Ever since 1964 there has been fighting between the Alawite Shia minority in Syria and the Sunni communities. As James Harkin’s article, “The Syria trap,” in the July issue of Prospect made clear, there is a long history of this deep-rooted religious strife.
Where do things stand now, for oil supplies and prices, and what options are available to countries buying these supplies? Syria itself, bound by sanctions imposed by many nations and with its oil production in 2012 less than half of 2005-09 levels, currently has limited options. It continues to produce some oil and gas from its substantial reserves (over 2bn barrels of oil and over 8 trillion cubic feet of natural gas), and has oil and natural gas pipelines passing through it to the Mediterranean. Further potential lies offshore in the Levant Basin, but several countries have interests in exploring for oil and gas there—Israel, Lebanon and Cyprus among them. There are numerous territorial disputes.
Elsewhere in the region there is concern about the effects of any foreign military action on Syria. There are worries about Sunni-Shia divisions in Iraq, and alarm in some Gulf states, potentially also Saudi Arabia’s eastern province, as well as about Iran. Pipelines, terminals, refineries, and sea passages remain vulnerable to conflict.