Syrians Turn to Backyard Refining as War Reaches Oil

In an open field northeast of the Syrian city of Aleppo, teenagers set fires under large vats of crude oil and siphon the byproducts into jerry cans.

The scene, captured on footage and uploaded onto YouTube, shows a young man walking around fires and through smoke near the town of Al Bab, explaining the production of mazut, used for home heating, and diesel at his homemade refinery.

“Of course, it’s dangerous,” the young man says with a shrug and a half smile. None of the children, some as young as five or six, wears any kind of protective gear.

Two years after the start of the uprising against President Bashar al-Assad, “significantly more” than 4 million Syrians are homeless, short of food and reliant on aid within the country, while an additional 1.1 million have fled abroad, the United Nations says. Syria’s oil exports, which once provided a quarter of all government revenue or about $3 billion a year, have almost completely ended.

“Oil is the only thing that Syria has going for it,” says Joshua Landis, who runs the Middle East program at the University of Oklahoma. “Farming has collapsed, and that is why we are seeing this outflow of refugees, they are starving, they don’t have the basics to sustain them.”

The European Union eased an oil embargo to allow crude exports from rebel-held territory on April 22, saying it sought to promote the economy in opposition-controlled areas. Even so, it’s unclear who controls the oil fields and whether shipments can be resumed.

‘Very Sketchy’

“There is also little proof the national coalition has much oil under its control,” David Butter, associate fellow of the Middle East and North Africa program at London-based Chatham House said. “It’s all very sketchy.”

The fields of the east and northeast are in areas where Islamist militants predominate, the Economist Intelligence Unit said in an April 24 report.

“The majority of the fields are controlled by al-Qaeda; some by the Free Army; some others by the Kurds,” said Rami Abdurrahman of the Coventry, England-based Syrian Observatory for Human Rights. “We cannot confirm what percentage each controls.”

Syria’s Cabinet denounced the EU move on April 23 as an attempt to buy “terrorist” oil and said no one would be allowed to steal the country’s resources. A month earlier, Minister of Petroleum and Mineral Resources Suleiman al-Abbas met the Russian and Chinese ambassadors to discuss oil and gas exploration and development, the state-run SANA agency said.

Oil Concessions

Syrians endured winter temperatures as low as minus 8 degrees Celsius (18 degrees Fahrenheit) this year, with thousands of internally displaced families seeking shelter in barns, caves and parks.

The lifting of the EU embargo will allow crude exports from rebel-held territory, the import of oil and gas production technology, and investments in the Syrian oil industry. Syria began issuing concessions to oil companies in the 1930s, when it was run by the French, and production began in the late 1960s. Royal Dutch Shell Plc, Chevron Corp., and Total SA were among companies working in ventures with the state-run Syrian Petroleum Co. before the war.

In other footage, men are seen collecting output from the homemade refineries in Darat Izza, northwest of Aleppo city, their efforts filmed and uploaded to Syria Video, a website funded by the Center for Middle Eastern Studies at the University of Oklahoma.

Child Deaths

Against a backdrop of olive trees and rocky hills, a man in an open shirt and jacket details his prices: Benzene fetches 11,000 Syrian pounds ($157) per barrel and mazut 12,500-13,000 Syrian pounds.

It’s dangerous work, two children died shortly before the filming, one of them immolated during the refining process, he says. “We abandoned farming,” he tells the film crew. “Everything we had is gone.”

Syrian oil production averaged 400,000 barrels per day between 2008-2010, according to the U.S. Energy Information Administration. In the 12 months leading to the start of protests in March 2011, virtually all of Syria’s oil exports went to Europe and Turkey, the EIA said.

Contested Territory

Proven reserves stood at 2.5 billion barrels as of January 2013, according to estimates in the Oil & Gas Journal. That’s more than all its neighbors except Iraq, which has proven reserves of 141.35 billion barrels, according to OPEC.

Yet this wealth, and the power and heating it produces for homes and vehicles, is tantalizingly beyond the reach of all Syria’s warring parties.

While Syrian state-owned refineries in Homs and Banias remain under government control, oil supply from the contested fields is limited.

As for the opposition, trucking crude across contested territory to Turkey or Iraq would be difficult, while much of the internal pipeline network is controlled by Assad’s forces, Landis said.

“Syria is not going to be able to right itself until it can establish a reasonable economic regime and oil is at the heart of that,” Landis said.

Until that happens, the boys of Al Bab and their homemade refinery will be among the few Syrians profiting from the country’s natural wealth.

Do they make any money, they’re asked on the video? “We want to help people, brother,” the boy says. “Mainly for food and drink.”

Before it's here, it's on the Bloomberg Terminal.