VZCZCXRO8747
OO RUEHAG RUEHBC RUEHDE RUEHKUK
DE RUEHDM #4161/01 2351353
ZNY CCCCC ZZH
O 231353Z AUG 06
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1174
INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHOT/AMEMBASSY OTTAWA PRIORITY 0176
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 1243
RHEHNSC/NSC WASHDC PRIORITY
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0155
RUCNMEM/EU MEMBER STATES COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 DAMASCUS 004161 
 
SIPDIS 
 
SIPDIS 
 
NEA/ELA 
NSC FOR SINGH 
TREASURY FOR GLASER/LEBENSON 
EB/ESC/TFS FOR SALOOM 
 
E.O. 12958: DECL: 08/21/2016 
TAGS: ECON EPET ETTC SY SANC
SUBJECT: ROYAL DUTCH SHELL LARGEST WINNER IN CURRENT BID 
ROUND 
 
REF: A. DAMASCUS 1664 
     ¶B. DAMASCUS 2189 
 
Classified By: CDA Michael H.Corbin for reasons 1.5 b/d 
 
¶1. (C) Summary.  In addition to being awarded new concessions 
in the most recent bid round, Royal Dutch Shell is 
aggressively pursuing a number of new initiatives which, if 
successful, would expand the company's already considerable 
presence in Syria.  More quietly and with a much lower 
profile, PetroCanada is poised to expand its own operations 
as the road is now clear for it to acquire Marathon Oil's 
potentially lucrative natural gas concession.  Hunt Oil 
Middle East is the only company with US ties that was awarded 
a new concession in this round and is reportedly about to 
conclude a production sharing agreement.  A company 
headquartered in the US that is still active in Syria, 
Gulfsands Petroleum, is pursuing its drilling program despite 
an initial setback.  End summary. 
 
¶2. (C) Royal Dutch Shell has won two of the nine concessions 
offered in the SARG,s latest bid round for oil and gas 
concessions (ref A).  Executives from a number of western 
International Oil Companies (IOCs) have complained bitterly 
to us about Shell,s aggressive bidding practices during the 
round, which they argue lowered the competitiveness of their 
own bids and were more generous than any terms offered 
previously by a major.  In addition to the generous bids, 
Shell offered to upgrade Syria's two decrepit refineries at 
no cost to the SARG, and submitted other unsolicited 
proposals to the Ministry of Petroleum and Natural Resources. 
 For their part, Royal Dutch Shell managers are unapologetic 
about their tactics.  Obviously aware of how he has put off 
Shell's competitors, the resident Shell general manager, 
Campbell Keir, commented to us recently that he &doubts8 he 
is currently very popular with his peers.  Keir declined, 
however, to elaborate to us on why his company felt compelled 
to offer such competitive terms for a concession, in which he 
previously told us his company had only lukewarm interest. 
Though the generosity of Shell,s offer reportedly surprised 
even the managers at the state-owned Syrian Petroleum Company 
(SPC), Shell,s favorable terms have predictably not 
translated into a quick conclusion of a production sharing 
agreement (PSA), largely because of SARG bureaucratic 
inefficiencies and SPC's own suspicions of Shell motives. 
 
¶3. (U) Despite the SARG,s failure to make public which 
companies were awarded which concessions in the current bid 
round, the round,s results are known to everyone active in 
the sector.  Reportedly, no other majors won a concession, 
and PetroCanada, whose managers told us months ago they had 
been quietly assured of at least one new concession, were 
also left out in the cold.  Hunt Oil Middle East reportedly 
won a concession though we have yet to meet anyone from the 
company here in Syria.  The rest of the concessions have been 
awarded to small independents, including one French and one 
Ukrainian. 
 
¶4. (C) In unrelated oil sector news, Houston-based, Gulfsands 
Petroleum is about to start drilling its first deep well in 
its much-hyped concession in northeast Syria after suffering 
a disappointment with its recently completed shallow well. 
Gulfsands deputy general manger, Mazen Mohanna, told us that 
in spite of the shallow well,s failure to uncover a 
commercial quantity of oil, the company remains confident 
that the next two wells, both planned to be 5000 meters deep 
and take 100 days to complete, would bring on-line a light, 
sweet crude that could be as much as 10,000 bpd.  (Note: 
Gulfsands's concession is generally considered potentially 
important if Syria is to reverse its current declining oil 
production.  End note.) 
 
¶5. (C) Resident PetroCanada general manager, Hisham Yazigi, 
told us that President Asad has approved PetroCanada,s 
purchase of Marathon Oil,s gas concession in the center of 
the country (ref B).  Yazigi commented to us that PetroCanada 
executives in London and Calgary had, however,  decided to 
keep the profile of the company,s operations in Syria low as 
 
DAMASCUS 00004161  002 OF 002 
 
 
long as the hostilities were continuing in Lebanon.  Now that 
a cease-fire appears to be holding, Yazigi anticipates 
PetroCanada,s board will soon reevaluate the decision and 
give him a green light to significantly expand the company,s 
presence in Syria in order to develop the Marathon 
concession, which has already identified commercial 
quantities of both natural gas and oil. 
 
¶6. (C) Comment. With the conclusion of hostilities in 
Lebanon, Syria,s oil and gas sector is quickly returning to 
business as usual.  Both Royal Dutch Shell and PetroCanada 
see new opportunities in Syria,s oil and gas sector.  This, 
coupled with persistently high oil prices, may account for 
their local executive's zeal in pursuing new investments 
here.  Contrasting with Shell and PetroCanada,s sometimes 
aggressive pursuit of new opportunities in Syria, Total is 
noncommittal at best.  Its executives continue to tell us 
that their Paris headquarters hopes to retain a presence in 
Syria, but has directed them to avoid any new commitments. 
Still, Shell,s recent generous bid offers have Total 
managers and others worried Shell may be hoping to take 
advantage of the current lack of competition from western 
OICs to gain a dominant position in the sector at their 
expense. 
CORBIN