Gulfsands faces risk of extra EU sanctions on Syria

Reuters, Friday 19 Aug 2011

A European ban on Syrian oil will spell trouble for the British firm which relies on the eastern desert for over 90 per cent of its total output

British oil firm Gulfsands Petroleum could face difficulties with future projects if the European Union follows the United States in toughening sanctions against Syria.

The U.S. on Thursday imposed new sanctions on Syria, including a ban on U.S. imports of Syrian oil products, raising the possibility that the EU could also act as part of an effort to financially isolate the government of President Bashar al-Assad.

Oriel Securities analyst Nick Copeman said Gulfsands, which produces over 90 per cent of its total output in Syria, could be affected if the EU toughened its stance.

"If the EU were to put sanctions on that would make life quite difficult," Copeman said, explaining that Gulfsands has a contract with Italian oil services firm Saipem for its development projects.

Syrian oil is primarily exported to Germany, Italy and France but Copeman said in the event of tougher EU sanctions Gulfsands would likely find other markets for its oil and the biggest risk was to the company's future projects.

Foreign policy chief Catherine Ashton said on Thursday the EU was preparing to broaden sanctions against Syria, and EU diplomats were to meet on Friday to decide what additional measures, if any, the bloc should take.

A spokesman for Gulfsands told Reuters on Friday that the new U.S. restrictions would have little direct impact on Gulfsands. "We continue to monitor sanctions wherever they emanate from. We are vigilant to be compliant at all time," he said.

Gulfsands Petroleum is currently producing around 12,000 barrels of oil per day in Syria and has been able to raise production in recent months despite escalating violence in the country.

"Gulfsands haven't experienced violence where they are," said the spokesman.

Gulfsands's oil field is in Syria's north east, while the unrest has primarily been in the south and west of the country, although recent reports suggest Syrian forces carried out raids in Deir al-Zor, around 140 km away from the southern edge of the company's oil block.

Syrian tycoon Rami Makhlouf, a cousin of the president and a focus of the protests, owns a 5.7 per cent stake in Gulfsands.

Platform, a London-based campaign group for social and environmental justice, on Thursday called for an investigation into Gulfsands relationship with the Assad regime citing Makhlouf's shareholding in the company.

Shares in Gulfsands, which have lost 44 per cent since mid-March when protests were first broken up by Assad's forces, were 0.8 per cent lower at 178.5 pence at 1203 GMT, outperforming the European index of oil and gas companies which was down 1.9 per cent.

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