Why is Gulfsands Petroleum Still Drilling in Syria?

Authors note: After publication this week, Gulfsands Petroleum announced Thursday it was ending its exploration campaign in Syria while sanctions are in place.

Independent energy company Gulfsands Petroleum announced this week that it made oil and natural gas discoveries during drilling operations in the country's northeast. Gulfands was forced to halt production activity in Syria late last year because of sanctions pressure but that did little to curb its Syrian exploration campaign. The 10-month-old conflict in Syria is looking more and more like full-blown civil war and, with most oil majors headed for the exit doors, unless there's some sort of protective force manning the oil and gas fields in Syria, sanctions might be the last of Gulfsands' concerns.

Late last year, as supermajors like Royal Dutch Shell said they were postponing operations in Syria, Gulfsands continued drilling away in an effort to find recoverable reserves in the country. The London-listed company had cut back on production but continued on with its drilling campaign despite ongoing bloodshed. This week, Gulfsands said the reservoir characteristics from fields in northeast Syria were in line with previous estimates of 19.2 million barrels of oil equivalent.

The same week Gulfsands made its announcement, anti-government forces in Syria blew up a natural gas pipeline in the restive city of Homs near the country's west coast. Syrian authorities blamed "terrorists" for the attack, which wasn't the first such incident since the uprising began mid-March. The U.N. puts the death toll at around 5,000, anti-government groups say it's closer to 6,000 and even if somehow Security Council members can convince Moscow to at least abstain from voting, a resolution of any sort is unlikely to halt the violence with the crack of the gavel.

In 2010, before things got real ugly in Yemen, a security guard opened fire in the Sanaa headquarters of Austrian energy company OMV. While company officials said they didn't see a political motive in that attack, the incident was a sign of things to come. In Libya last year, global energy traders were in a tizzy after the conflict there choked off much of the oil from one of Africa's most prolific producers. But NATO was in Libya and transitional leaders were quietly talking with energy companies even before Gadhafi's regime officially collapsed.

Syria is no Libya. There will be no NATO role in Syria. There's nobody talking with international oil companies working in Syria because most of them left last year, at least on paper. Moscow objects to any foreign intervention so it seems like this conflict is going to drag on for awhile. Granted, companies like Gulfsands rely heavily on the work they do in counties like Syria -- the world needs oil -- but at some point someone's going to get hurt. For Gulfsands, and for members of the Security Council for that matter, there's more at stake in Syria than just oil.

By. Daniel J. Graeber of Oilprice.com