The North African country of Sudan has been beset by civil
wars, famine and poverty seemingly for decades. The ancient land
recently divided into two, with the formation of a new country
called "South Sudan" -- however, this partition has not ended the
ethnic and tribal conflicts.
While much of the outside world has long ignored Sudan, the
territory has vast reserves of oil and gas, which make it an
attractive investment target for foreign companies and might
eventually help to lift its people out of poverty in the coming
years. But given its lack of sufficient infrastructure and
endless political instability, Sudan's energy sector faces many
International Business Times
spoke with an energy expert on the future of Sudan as an oil
Peter Kiernan is lead analyst-energy at the Economist
Intelligence Unit in London.
: How much in oil reserves are there believed to exist in Sudan
(including South Sudan)?
: Estimates vary between several sources, but 5 billion barrels
is the most common one for all of Sudan before it was broken up
into two nations.
Since the break-up, it is estimated that 75 percent of Sudan's
productive oilfields are now in the new South Sudan. However,
South Sudan claims that its own reserves total 4.5 billion
barrels. With more exploration, in both the north and south,
these figures could be revised upwards.
: When did oil drilling first commence in Sudan?
Production began in Sudan in 1999.
: Are gas and oil reserves in Sudan severely under-explored and
: There are plenty of blocks that have not been explored fully
yet, so there could be more finds. Sudan has announced licensing
rounds for several blocks in its own territory, while South Sudan
claims that there is plenty of reserve potential in blocks on its
side of the border as well. But it is hard to put a figure on
: Since most of the oil located in South Sudan -- is this the
principal reason for the cross-border conflicts?
: Three-quarters of the productive fields in all of Sudan are now
in South Sudan. The conflict has arisen as South Sudan still
depends on Sudan as the only transit route for the export of the
Disputes have arisen about the transit fees that Sudan is
charging South Sudan for oil transport. South Sudan only wants to
pay Sudan 69 cents per barrel, while Sudan wants to charge $36
per barrel, according to one recent report from early March.
You can therefore see the disparity between the two positions.
At the moment South Sudan depends on Sudan as a sole transit
country for its oil exports, which gives Sudan considerable
leverage. South Sudan also accuses Sudan of diverting some of the
oil flow to its own refineries.
South Sudan's dependence on Sudan to transport the oil to
customers/markets must be a very difficult problem for the
: Yes, as it currently stands the only export route for South
Sudan's oil is via pipeline to the Sudanese coast on the Red Sea.
South Sudan has looked at pipelines to be constructed elsewhere,
but this takes time, several years, in fact, and a lot of money.
South Sudan has reportedly signed memorandums of understanding
with Kenya and Ethiopia for alternative pipeline routes, but
these are just on paper and need financing.
Have the seemingly endless civil wars and now cross-border
conflicts between Sudan and South Sudan severely hampered
development of the area's oil industry?
: Obviously that has had an impact, as poor security and
sanctions have left exploration and development to just a few
Often Chinese firms go where other companies fear to tread.
The fact that South Sudan's exports have shut down because of a
dispute over transit fees shows that the political risks of
getting involved in Sudan's energy sector is high.
The two major producing areas, Blocks 1, 2 and 4 and Blocks 3
and 7, are expected to decline quite rapidly in production by the
end of this decade, so exploration efforts need to be stepped up.
The resources might be there, but it is the above-ground risks
that still may prevent Sudan, both north and south, from reaching
their full production potential.
In the north, however, it will be easier, as it can export its
crude oil quite easily, while the south depends on the north to
get its oil out to the markets.
Thus, exploration opportunities are there but have not been
tapped. The current major producing fields are reaching a peak in
output, so in the coming years output from other blocks will be
needed to maintain exist production rates.
Who are currently the largest buyers of Sudanese/South Sudanese
: The major customers of Sudanese and South Sudanese oil is and
will continue to be China.
In 2010, China acquired 67 percent of Sudan's oil exports,
followed by Malaysia, Japan and India.
In 2010, Sudan produced 470,000 barrels per day (b/d), of which
100,000 b/d was used for domestic consumption, leaving about
370,000 b/d left for export. Of this latter total, about
two-thirds were exported to China.
With Sudan now broken up, South Sudan now produces about
345,000 b/d and Sudan about 150,000 b/d - but these figures are
: What foreign companies are involved in Sudanese oil exploration
: U.S. sanctions have prevented American companies from being
involved in Sudan's energy sector, while public pressure has kept
away other Western energy firms as well.
As a result, the major players in Sudan/South Sudan's oil sector
are from China (China National Petroleum Corp.-CNPC), Malaysia
(Petronas), and India (Oil and Natural Gas Corp.).
U.S. sanctions have since been lifted to allow investment in
South Sudan, but we expect Asian oil companies to dominate
Sudan's oil scene. For Western companies the political risk may
still be considered too high.
: Discuss China's involvement in Sudanese oil/energy
: China is the dominant foreign force in Sudan's oil sector, with
CNPC the lead player in the two consortiums that currently
produce most of Sudan's oil -- these are Petrodar in Blocks 3
& 7 (mainly South Sudan), and the Greater Nile Petroleum
Operating Company (GNPOC) in Blocks 1,2 and 4, which
inconveniently overlaps the Sudan/South Sudan border.
Sudan also has Block 6 (CNPC), and South Sudan 5a (Petronas),
which are also producing.
CNPC also constructed the pipeline that traverses Sudanese
territory to Port Sudan, where the oil is then exported, mostly
to China. This pipeline transports oil from the Petrodar fields,
which are now mainly in South Sudan.
: Does South Sudan have any other industry aside from oil, or are
they wholly dependent on energy exports for their income?
: South Sudan is virtually entirely dependent on oil exports for
its national revenue -- 98 percent, in fact. Moreover, half of
Sudan's government revenue and 90 percent of Sudan's export
revenue is dependent on oil sales.
: Does Sudan/South Sudan have any kind of infrastructure to
sustain its energy industry and its economic development?
The oil fields are located in both countries, but the pipeline
branches run through Sudan to the Red Sea. Sudan's and South
Sudan's economies are heavily undeveloped, and thus rely on oil
exports for both their export income and national revenue. Much
of the infrastructure has been financed, built and operated by