Gulfsands Petroleum quits Syria under sanctions
EU sanctions drive out AIM-listed independent & Sinopec
Gulfsands Petroleum has declared force majeure under the terms of its contract to pump crude in Syria.
The AIM-listed independent firm was widely expected to suspend operations, as its effective partner in developing Block 26 in Syria, the state-back General Petroleum Company, was blacklisted by EU sanctions on 2 December.
This is the case for all foreign companies operating in Syria, several of which are also subject to the EU sanctions, with supermajors Shell and Total pulling out first, and Suncor following earlier today.
Security risk has increased in the country after an attack on the main transit pipeline from the North oil fields to Homs.
“Gulfsands and its subsidiaries (collectively "the Group") are subject to these EU sanctions, have at all times complied with them and will continue to comply with them,” said a Gulfsands company statement today.
“The Directors have taken and will continue to take legal advice and to liaise as appropriate with HM Treasury to this end.”
“Emerald Energy, a wholly-owned subsidiary of Sinochem, a Chinese state-owned company and the Group's 50% working interest partner in Block 26 (together the "Contractor"), has agreed to the issuing of this declaration of force majeure and to it being binding upon the Contractor under the PSC,” said the statement.
“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 30 November exceeded $120 million.”
Gulfands also says it will take care of the 100 or so Syrian staff at its facilities. “All of these employees have played some role in building the Group to its present state and a number of the senior team have contributed extremely valuable technical competence,” said the statement. “These people represent both an important intangible asset of the Group and a team to whom the Group owes considerable humanitarian obligations at this difficult time. It is accordingly the Directors' present intention that these employees will be retained and will continue to be paid in full.”
“The Group will for the time being, continue to maintain its presence in Syria.”
Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria. The Khurbet East oil field was discovered in June 2007 and commenced commercial production within 13 months of the discovery. This field has been producing at an average gross production rate of approximately 21,500 barrels of oil per day through early production facilities during August 2011.
Sinopec, Gulfsands's partner in the Block 26, is also barred from further work as - notwithstanding that Chenese firms are not bound by EU sanctions - they obtained their interest in the block by acquiring a UK company.