South Sudan Orders Oil Production Restart
�Having ratified in parliament last month�s cooperation deals with Sudan, South Sudan has said it hopes to begin exporting its oil through the North by January next year.
South Sudan�s Minister of Petroleum and Mining Stephen Dhieu Dau said his government has completed all the necessary checks to the oil infrastructure in the south, and has deemed the facilities ready to once again begin producing oil by year-end.
�The foreign oil companies and pipeline operators operating in [South Sudan] are hereby ordered to resume any and all petroleum operations within the territory that may have been halted as a result of the government�s prior shutdown instruction,� the minister was quoted as saying by France�s AFP.
South Sudan became Africa�s newest nation in July last year, and had for more than 12 months been locked in a bitter dispute with its northern neighbor over a number of issues including debt, citizenship of northerners in the South and southerners in the North, and the division of oil revenues.
Tensions came to a head in January this year when Juba shut down its 350,000 b/d oil output in retaliation, it alleged, against Sudan for seizing some of its oil and holding it in tankers off the coast of Port Sudan.
The oil shutdown, Mr Dau said, �had served its purpose to protect the sovereignty and patrimony of the nation,� while ensuring �once again that the South Sudanese people may exercise the right to enjoy the full benefits of their resources.�
90 Days And Counting
Both parliaments in Sudan and South Sudan approved last week the bilateral agreements, which were aimed at bringing an end to hostilities between the oil civil war foes, and restarting southern oil exports through the North (MEES, 19 October).
In signing and ratifying the accords, Juba agreed to pay Khartoum an average of $9.48/B for the use of its oil infrastructure in the North over a 3.5 year period. A fee of $11/B would need to be paid for the use of the main Greater Nile Petroleum Operating Company (GNPOC) export pipeline linking Block 5A in South Sudan�s Unity state to Port Sudan; and $9.10/B for the use of the PetroDar pipeline linking Blocks 3 and 7 in the South�s Upper Nile state, also to Port Sudan.�
In announcing the restart, the minister also said he believed it would take at least three months before the South�s crude exports would reach international buyers, as there was still work that needed doing to fully reopen the pipelines after a near 10-month closure.
�We assume that in 90 days part of our oil may be making its way to the international markets,� Mr Dau said. �Not [at] 100%, but we will be able to produce and export the crude oil of South Sudan within three months,� he continued, warning the eventual timeframe would depend on �technical preparations.��
These timeframes mirror those given by a Dar Petroleum official earlier this month when he said the company was aiming for a return to production of about 180,000 b/d of crude oil within three months of the deals being ratified (MEES, 5 October).
Dar Petroleum, also known as the PetroDar Operating Company (PDOC), is a consortium comprising China�s state-owned CNPC (41%), Malaysia�s Petronas (40%), Sudan�s state-owned Sudapet (8%), Sinopec (6%) and Egypt�s Tri-Ocean Energy (5%); and operates Blocks 3 and 7 in South Sudan�s Upper Nile state.
Around 70% of the country�s oil is currently produced in these two blocks, with Blocks 1 and 5 in the South�s Unity state contributing the balance. Total output from Blocks 3 and 7 was estimated to have hit 230,000 b/d of waxy Dar blend in 2011, compared to around 200,000 b/d in 2008. The company said in 2010 that it expected production from the fields in these concessions to begin declining from 2013.
This impending production restart could provide a much needed boost for the economies of both Sudan and South Sudan for which oil is the main lifeline. The governments in both countries had imposed a series of austerity measures to take into account the loss of their respective oil revenues during the shutdown.
The value of the Sudanese and Southern Sudanese Pound was also seen to fluctuate heavily since the shutdown. Last month, the value of the Sudanese Pound fell to a near historic low of $1=S�6.10 from the previous official rate of $1=S�2.70. In the South, the Southern Sudanese Pound hit a rate of near $1=SS�5.10 in September, relative to the $1=SS�3.55 seen in January this year. This rate has recovered somewhat since the announcements of the oil deal last month.
IEA: Limited Oil Output Through 2017
In its Medium-Term Oil Market Report 2012 meanwhile, the International Energy Agency (IEA) said it did not expect to see any significant increase in either country�s production over the coming five years, despite best efforts by both the Sudanese and Southern Sudanese governments to raise output.
The IEA said last week it expected Sudan to produce 70,000 b/d on average this year, which should jump to 90,000 b/d in 2014, before dipping to 60,000 b/d in 2017. �Sudan and South Sudan are expected to rebound to a combined 360,000 b/d by 2015, though still 100,000 b/d less than 2010�s sum total, and remain broadly at these levels until 2017,� the agency said.
These figures are in stark contrast to latest figures being quoted by Sudan�s Minister of Petroleum �Awad Ahmad al-Jaz, who said last week his country was currently producing 120,000 b/d, and was hoping to hike production up to 150,000 b/d by the end of this year (MEES, 19 October).
Copyright MEES 2012.
