Asfari's bid to invest in gas in Syria: Concerns and criticisms exposed

The Exclusivity Period

The first point is Novaterra's demand for a 120-day "exclusivity" period for its CEO, Ayman Al-Asfari. Zaman Al-Wasl viewed this as a stymie in transparency and free competition. The skepticism surrounding this "exclusivity period" is understandable, but it is a common practice, especially in large investments.

The exclusivity agreement typically stipulates that the same project may not be discussed with third parties during a specific period of time. The goal is to give the investor the opportunity to accurately evaluate the project without worrying about other competitors, enabling them to conduct what is known as "due diligence."

Many business management approaches consider the exclusivity agreement important during negotiations, as it allows for focus on closing the deal without diverting efforts between multiple parallel negotiations. It also enhances trust between the negotiating parties and demonstrates a serious commitment to closing the deal.

To better understand the situation, once the exclusivity agreement is signed, Ayman Asfari's Novaterra will send dozens of experts to assess the reality of Syrian gas fields on the ground and conduct the necessary technical studies to verify the accuracy of the data upon which they based their initial offer. This is a multi-million-dollar undertaking, under which Novaterra will negotiate with the Syrian government over the terms of the final agreement. If no agreement is reached, the Syrian government can seek another agreement with another company.

During this period of field research and negotiation, it is not considered fair for Novaterra to incur these financial costs without any commitment from the Syrian government. It should be noted that the latter has previous agreements that can be relied upon to assess whether the initial offer is commercially competitive.

Acquisition of Foreign Companies' Shares

One of the issues highlighted as controversial is that Novaterra's bid included an attempt to acquire foreign companies' shares in gas fields, which had been forced out by force majeure due to the events of the past 15 years. Zaman al-Wasl interpreted this as a project to establish a near-total monopoly over the Syrian gas sector. However, the discussion did not address the positions of these foreign companies themselves, which Novaterra's bid indicated were, at least for the most part, unwilling to return to exploration and production activities in Syria in the near future.

This is expected, given that Western insurance companies are still unwilling to provide insurance services for exploration and development of underground resources in Syria. This is due to the country's fragile security and political situation, as well as the issue of overcompliance with Western sanctions. Although most of these sanctions have been lifted, some remain partially in effect (such as the Caesar Act). Many Western companies remain in a state of anticipation, which could extend for a year or even several years, until they reach a state of certainty regarding the stability of the situation in Syria. This will ensure that their investments in the country are not subject to a recurrence of the setback they experienced shortly after 2011.

This is an issue that must be considered at length. The risk of investing in the rehabilitation of gas fields in Syria is high, given the ongoing security threat posed by the Islamic State (ISIS) on the outskirts of the Syrian desert, near which most of the affected gas fields are located. This is not to mention the uncertainty surrounding the stability of the general security and political landscape in Syria in the near and medium term. This makes the entry of Novaterra, owned by businessman Asfari, into the country a worthy investment risk. It undoubtedly seeks profit through a higher degree of risk than that accepted by Western oil and gas companies.

Gas Monopoly for a Specific Entity

One of the most prominent concerns raised by the Asfari Company's bid is the creation of a near-total monopoly over the Syrian gas sector. To be precise, the Asfari bid did not hide this aspect. It uses the term "our monopoly period" to refer to its planned investment in all "connected and unconnected" gas fields in Syria. This argument is countered by the need to open the door to competitive bidding, allowing other players to participate, rather than granting a "monopoly period" to a single company. Which of the two options is more appropriate in the current Syrian situation?

Of course, competition is always preferable in the long term. However, if there is a dire need for stability, generating revenue streams, and mobilizing investment quickly, in circumstances where the state lacks the necessary infrastructure and expertise, then granting a monopoly becomes appropriate. It provides rapid investment in large-scale projects, providing rapid financial resources—a resource we know Syria desperately needs today. Furthermore, in an unstable environment, companies investing in costly projects typically demand "monopoly" rights as a reward for taking risks.

Evaluating Al-Asfari's Offer Based on Figures

To illustrate the above with figures, Syria urgently needs gas to fill the massive electricity deficit, which will increase as the country's reconstruction accelerates. Syria currently produces approximately 7-8 million cubic meters of gas, contributing to the generation of less than 2,000 megawatts of electricity per day. To cover a limited portion of the electricity deficit, Syria imported 3 million cubic meters of gas from Azerbaijan at high prices, but with temporary funding from Qatar.

It should be noted that this temporary increase in gas flow will not achieve the desired difference in electricity coverage. Once the Qatari company UCC completes the construction of new combined-cycle gas turbine power plants, Syria will urgently need approximately 15 million cubic meters of gas to generate 4,000 megawatts of electricity, to drive the country's economy and living standards as hoped. Here, we point out estimates that locally produced gas saves 80% compared to imported gas—local gas is 80% cheaper than imported gas—which places Syria in dire need of urgently reclaiming local gas sources, which were previously available before 2011. However, its gas fields have suffered severe damage during the events of the past 15 years, as is well known. They require rehabilitation.

In light of the aforementioned figures and details, the following elements are combined: Ayman Asfari's experience and the cadres he can assemble in rehabilitating Syrian gas fields, based on his work there since 1986, along with his company's willingness to take greater risks compared to international gas companies, given the political and security uncertainty in Syria. We conclude that his offer is one of the best scenarios for the country's interests at the present time.

The above does not negate the need to trim the "nails" of the monopoly through the upcoming negotiations between the Ministry of Energy and Novaterra. These include, for example, placing restrictions on the sale prices of produced gas and "cost recovery" controls. However, "monopoly" remains a suitable option under extremely harsh conditions, and amid the urgent need for intervention to rehabilitate the infrastructure for producing and developing natural resources. This is clearly the reality today in Syria.

Political Background

Among the points discussed was the suggestion that Asfari is linked to global oil networks and Western service companies. This is, in our view, an unfortunate suggestion. Any foreign or Arab company we hope to invest in our country will have some external connections. Furthermore, most of the influential Syrian businessmen hold Arab or foreign nationalities and also have their own connections. Limiting this description to the case of Ayman Asfari is ill-advised.

Also, the suggestion that Asfari's offer to the transitional government in Damascus was suspected of "blackmail," given his political stances critical of the government's performance a few months ago, was ill-advised. The discussion here should be limited to the procedural and detailed aspects of the investment offers, not the man's political background. For a Syrian businessman to be barred from investing in his country because he criticized the government would represent a regression to the era of the Assad regime.

Questioning the patriotism of any Syrian figure based on their stance toward the government also represents a relapse into the same mentality of the former regime. It should be noted that Asfari's stance toward the government in Damascus has been limited to overt criticism and has not led to the formation of an organized opposition. He cooperates and deals with the government.

Embracing the Initiatives of the Syrian Emigrant Bourgeoisie

Ultimately, we believe that Asfari's offer to revive the Syrian gas sector is an opportunity worthy of discussion, both from a realistic procedural perspective and from an economic interest perspective, setting politics aside. The investments we were promised have yet to materialize. What has come, under memoranda of understanding, remains within the realm of intentions. For the most part, we have yet to see a single ray of light from these foreign investments. Therefore, Syria needs to embrace any serious initiative from its migrant bourgeoisie, rather than belittling it and diminishing its patriotism. This bourgeoisie is the one that established the Syria we know today, nearly 80 years ago, with a combination of investment audacity and a refined sense of political patriotism.