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Gulfsands Petroleum unveils Syrian oil operation

Gulfsands Petroleum unveils Syrian oil operation

By Andrew Cave, in Damascus

Last Updated: 11:31pm BST 20/07/2008

An oil minnow quoted on London’s Alternative Investment Market will this week announce the beginning of the largest new production of oil in Syria for up to 20 years.

  Mahdi Saijad
Mahdi Sajjad: From Iraq to Syria via London

Gulfsands Petroleum, which has a stock market capitalisation of just £240m, will begin extracting “first oil” at the initially modest rate of 10,000 barrels per day.

However, it expects this to increase to up to 40,000 barrels per day in the next 18 months.

That would see the new site account for about 10pc of Syria’s annual production.

The announcement, which could come as early as tomorrow, will also reinforce Gulfsands position as one of only a handful of British firms to operate in Syria, which is prevented from dealing with the US by strict economic sanctions imposed by the US government.

Sources in Damascus, a distinctly unglobalised economy, could point only to the longstanding natural gas and oil involvement of Shell and a branch of Costa Coffee when asked for other examples of British investment in the nation.

“We are proud to be one of the very few British companies operating in Syria,” said Mahdi Saijad, Gulfsands president. Mr Saijad, an Iraqi national, co-founded the company in 1999 with a strategy of using cashflow from existing oil wells in Texas to help finance exploration and discovery in Syria.

“We do have operations in the US but we are a British company. We are based in the UK and this is a significant British investment in Syria. Together with our partners we have already invested £30m in Syria to bring about early production and we would expect to invest a further £30m-£40m to get to full-field development. Our block of oil rights in Syria is estimated by independent analysts to hold a recoverable reserve of between 60m and 70m barrels.”

The block, in which Gulfsands holds a 50pc working interest, is sited in Khurbet East in north-east Syria, about 30 miles from the Iraqi border. The Khurbet East field was discovered in June 2007 in a block that already accounts for 100,000 barrels of oil production per day, mainly by the state-owned Syria Petroleum Company (SPC).

The rights are 50pc owned by fellow London-listed oil group Emerald Energy, though Gulfsands is the sole production operator through Dijla Petroleum Company, a joint-owned company established with SPC under a production sharing agreement.

Mr Saijad said: “Syria is averaging 350,000 to 360,000 barrels of oil per day so by the time we ramp up production we will be accounting for roughly 10pc of Syria’s oil production. It’s very significant for Syria and for us and we’re very excited about it.”

Inward investment sources in Syria stress that the US sanctions provide opportunities for British firms to become involved in the nation’s economy, although clearly they create difficulties too.

“The US restrictions make it difficult to work with American goods and services, particularly technical products,” said Mr Saijad. “However, we have Europe and Japan to deal with and can overcome those difficulties.”

Some commentators also linked the departures of Texas-based Americans John Dorrier and David DeCort as chief executive and finance director respectively earlier this year to difficulties relating to their status as US citizens.

“Obviously the sanctions did not help,” said Mr Saijad, “but it was simply the right time for us to part company at this stage of development.”

Gulfsands will announce today that Richard Malcolm, 57, managing director of the UK subsidiary of Austrian oil group OMV Holding, is to join as its new chief executive. Former Burren Energy finance director Andrew Rose was appointed as Gulfsands’ finance director earlier this year.

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