Sudan National Petroleum Commission Formed, A Possible Model For Iraq

Sudan’s oil sector took a step forward on 30 October with the creation of its long-awaited National Petroleum Commission (NPC) – a body which could provide a template for the management and control of Iraq’s petroleum resources. Sudan’s producing oilfields lie in the south of the country and helped to fuel the 20-year long civil war which devastated the country since the 1980s; and it has proved to be a divisive issue since the signing of the Comprehensive Peace Agreement (CPA) in January. The NPC will provide a framework for the two sides to hammer out their differences; but given recent history its task is unlikely to be easy.

The creation of the NPC was delayed by the slow implementation of the January peace accords and the death of John Garang, the leader of the southern Sudan Peoples’ Liberation Movement (SPLM) on 30 July. In a July report, the International Crisis Group (ICG) said that disagreements in the oil sector were “symptomatic of CPA implementation obstacles” and warned that they posed an immediate challenge to the viability of the peace process. But following the formation of the Government of National Unity in September (MEES, 26 September) and south Sudan’s autonomous government last month (MEES, 31 October), the way was being opened for the establishment of the NPC and other inter-governmental commissions.

NPC Membership

The membership of the NPC will follow the outline agreed in the Sudan Agreement On Wealth Sharing During The Pre-Interim And Interim Period (MEES, 19 January 2003), MEES understands. According to that document, the President of the Republic of Sudan ('Umar al-Bashir) and the President of the Government of South Sudan (GOSS – Salva Kiir) will act as co-chairs and will be permanent members. There will be four permanent members from the national government and four permanent members of the GOSS. Finally, there will be up to three representatives (non-permanent members) of an oil producing state/region in which petroleum development is being considered.

It is as yet unclear when the NPC will be formed in practice, and hold its first meeting. When it does, the issue at the top of its list of priorities will be the approval of current oil contracts and the resolution of concession disputes. Against a backdrop of political manoeuvring on both sides, the south’s government-in-waiting has awarded contracts for oilfields within its territory already licensed by Khartoum. French company Total maintains its claim to the whole of Block B under an agreement signed with the Khartoum government in the early 1980s, while the UK’s White Nile has a license for Block Ba (a sub-division of Block B) awarded by the south in April this year (MEES, 9 May). Another deal made in June threatens to pit Malaysia’s Petronas against a Moldovan independent, Ascom (MEES, 24 October). SPLM officials admit that the White Nile deal goes against the spirit of the wealth-sharing agreement, but say the Khartoum Government has done the same by selling off other remaining concessions in the country (MEES, 1 August). 

Sudan Border Commission Next

Also crucial to the development of the oil sector will be the creation of the border commission which will tackle the question of where the border between the north and south lies. The border defined in the peace accords – that of 1 January 1956 – is disputed and affects the Heglig oilfield, one of the country’s largest fields. Khartoum argues that it is in the northern state of Western Khordofan, white the south argues that it is part of the southern Unity state.

Assessment And Evaluation Commission Positive Step For Peace Process

Looking to the broader question of the continuing implementation of the CPA, the establishment of the Assessment and Evaluation Commission (AEC) – also on 30 October – is a positive step for the peace process, a diplomatic source in Khartoum told MEES. The international community has been pushing for the formation of this body, MEES understands, as it will oversee the implementation of the CPA and judge whether the various parties are delivering their side of the bargain. The AEC will be chaired by Norway and will include international representatives including the UK, US, UN and EU, as well as Sudanese officials. Monitoring of the process by international observers is likely to prove crucial for the process to remain on track.

NPC Could Be A Model For Iraqi Oil Sector, Says Chalabi

The formation of a commission to determine the relationship between the government and regions in Sudan on energy matters could be a model for Iraq, Issam al-Chalabi, a former Iraqi Oil Minister and former President of Iraq National Oil Company, told MEES on 1 November. “A consultative body with representatives from the local governments will be a necessity,” he said. “I believe that once Iraq settles down, there will be an immediate need for a Hydrocarbon Law to pave the way for major developments. It will be a catastrophe if each local government issues its own regulations.”

           

Mr Chalabi went on to say that having the oil industry run by the central government “does not mean that the local governments will be shut out from participation one way or another. Following the adoption of the Iraqi constitution, many Iraqi oil experts have come to realize the complexity of developing the oil industry as per the relevant articles in the new constitution whereby authority was virtually left in the hands of the local governments.” As a result, Mr Chalabi said, many have come out in favor of an oil industry run by the central government, but in consultation with representatives of regional governments – much like the role envisaged for Sudan’s NPC.

In a MEES interview in August, Mr Chalabi described the articles concerning oil in the Iraqi draft constitution, since endorsed by the referendum in October, as vague, adding that they restricted the influence of the central government in running the industry (MEES, 29 August). Articles 109, 110 and 112 of the constitution, Mr Chalabi said in October (MEES, 10 October, Page 29) point to the fact that “oil and gas is the property of all the Iraqi people in all the regions and provinces.” The cooperative relationship between the federal government and the regions is stressed, but article 112 notes that “all that is unwritten in the exclusive powers of the federal authorities is within the authority of the regions,” giving regional authorities considerable leverage in oil issues. And “since there is another article in the draft constitution that gives the laws of the region precedence over federal laws, then we can deduce that it is the regional governments and not the central one that will dictate and govern,” Mr Chalabi said.

Problems of the kind that Sudan’s NPC will have to resolve are already on the horizon in Iraq. Several international oil companies have signed preliminary upstream agreements with the government of the Kurdish province in the north. And Kurdish officials insist that the revenue from any new discoveries there will remain in the region. At the same time, some leading members of the Iraqi Shi'a community have proposed the establishment of an independent province incorporating oil-rich areas of southern Iraq.