VIENNA – UK-based Gulfsands Petroleum has declared force majeure on its oil and gas operations in Syria to comply with EU sanctions, but intends to retain its presence in the Middle Eastern country, the company said Monday.
The new EU measures, which came into effect on December 2, blacklist state-owned General Petroleum Corporation (GPC), which is effectively Gulfsands’ partner in the block 26 production sharing contract.
GPC is the Syrian government’s principal holding company responsible for investments in the oil and gas sector and coordination of oil and gas production by foreign operating companies.
“Gulfsands and its subsidiaries are subject to these EU sanctions, have at all times complied with them and will continue to comply with them,” the company said in a statement.
“The fundamental effect of the additional sanctions is to preclude the group, until further notice, from engaging in activities, including funding activities, connected with the production, delivery or sale of crude oil from its block 26 fields.”
Gulfsands said it hoped it would be able to return to normal operations in Syria when allowed, and vowed to maintain its presence there.
“The group has built, over the past few years, an asset base of substantial long-term value in Syria,” Gulfsands said.
“It is to be presumed that Syria will eventually emerge from the present upheaval and it is the directors’ resolve to seek to ensure that, when that day arrives, the group is positioned to retain its assets and to recommence production activities. Accordingly, the group will for the time being, continue to maintain its presence in Syria,” the company said.
Gulfsands owns a 50% working interest and is operator of block 26 in northeast Syria.
Emerald Energy, a wholly-owned subsidiary of Chinese state-owned Sinochem which owns the other 50% in the block, had agreed to the issuing of the force majeure, Gulfsands said.
Gulfsands added that GPC had indicated it would continue to produce oil and gas from the block at its own cost and that the group would be compensated for the oil produced during the emergency period.
CONTRACT APPEARS SAFE
It also said its PSC would not be impacted by the declaration of force majeure.
“Based upon preliminary indications from GPC, the Syrian state is prepared to accept this notice of force majeure. In this eventuality, the PSC will not be terminated and the group’s rights under the PSC will be preserved,” it said.
Gulfsands added that GPC had indicated that the Syrian state intends, during the force majeure period, to produce oil from the block at its own cost and using its own resources.
“The PSC provides that the Syrian state has the power to effect such a requisition during a period of national emergency. The PSC also provides that such requisition shall be limited to the period of the emergency and that the group shall be compensated for the oil so produced,” Gulfsands said.
Despite the assurances Gulfsands’ shares, which have already halved in value since the Syrian unrest began earlier this year, dropped further in London and by 1030 GMT were down almost 9% at GBP1.70.
The company said the immediate consequence of the force majeure declaration is that the group cannot expect for the foreseeable future to receive any revenue from its Syrian assets, “which comprise substantially all of its revenue-generating activities.”
“In this connection, it should be noted that the group has no debt and substantial net cash balances, which as of November 30 exceeded $120 million,” it said.
Block 26 encompasses fields which currently produce over 100,000 b/d and are operated mainly by GPC.