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LONDON (Reuters) - Gulfsands Petroleum has agreed with Syria that the government will resume payments to the company for oil, and it plans to continue operating there unless British or European Union sanctions make it illegal to do so, its president said.
The firm, which produces more than 90 percent of its total output from the troubled country, said last month it had not received payments for its August output.
"They advised us they will make a partial payment for our operating costs. They said they will pay us the rest if they can resume exports," Gulfsands President Mahdi Sajjad told Reuters on Thursday, adding that the government had skipped two months of oil payments.
He said that Damascus had pledged to resume full payments to international oil firms including Gulfsands once it resumes exports of oil.
The EU, which imports the bulk of Syria's oil, has placed sanctions on Syrian crude oil exports, leading to an unsustainable build in stocks. It was not immediately clear how Syria intends to start crude oil exports again.
Gulfsands, among other international companies with investments in Syria, have been asked by the government to make deep production cuts.
Sajjad said that Gulfsands' output was just 5,000 barrels per day (bpd), or around a fifth of normal levels.
But he said he expected the firm's operations to become easier now an agreement to resume payments had been reached.
"We have to stay. We have a contract and staff. Until the government tells us to get out, we are not going to get out," he said, referring to the EU and the UK governments.
Major oil firms Total and Royal Dutch Shell with investments in the Syrian oil sector have also been forced to cut production.
The European Union is mulling further sanctions on Syria's oil sector which could make it illegal for international firms to have investments there. No concrete proposal has yet emerged.
Syrian oil represents less than 1 percent of daily global production but accounts for a vital portion of Syrian government earnings, which Western powers say could be used by President Bashar al-Assad for military action against the opposition.
More than 3,500 people have been killed in the crackdown on protesters, the United Nations said earlier this month.
Sajjad said that further sanctions on Syria would not be effective as Syrian oil firms could easily take over the operations of international companies.
"They will just go on and produce it themselves if sanctions come in," he said.
Opponents of the Syrian government have targeted oil infrastructure using improvised explosive devices in an apparent attempt to debilitate the key industry.
Sajjad said this has been a problem for at least one other oil company in Syria but it had not affected Gulfsands' operations.
"Our facilities are in the middle of the Kurdish area, and the Kurds seem happy," he said.
Gulfsands is the operator of the block 26 Production Sharing Contract in northeastern Syria.
Reporting by Emma Farge; Editing by Anthony Barker