Senior ministers and representatives of Africa’s largest oil producing countries met last week in Cape Town, South Africa, to discuss the industry’s prospects, on which low crude oil prices continue to take their toll. A trend that has heavily affected the budgets of many of the continent’s countries, for which oil exports are the main source of income. Among these is South Sudan, which, despite the internal conflict that began some three years ago, aims to boost its domestic production and to develop its refining capacity, by exploiting its position as the leading producing country in East Africa. The goal, announced by Minister of Petroleum Ezekiel Lol Gatkuoth, is to return to the production levels recorded prior to the 2013 civil war, and the sale of refined products to neighboring countries.
A production plan ahead of 2018
"We are planning to build four or five refineries to sell our oil products in Ethiopia, Sudan, Kenya and Uganda", said the Minister, speaking on the sidelines of the conference, without, however, specifying the start date for the project or the costs to be incurred. The plan drawn up by Gatkuoth provides for an increase in oil production from the current 130,000 barrels to 350,000 barrels per day, by mid-2018. "We expect to reach 200,000 barrels per day as early as this year," said the Minister, specifying that, by the end of the year, 30 new wells will be drilled. To carry out the project, the Giuba government aims to attract foreign investments. Among the companies involved at present, are France’s Total and Britain’s Tullow Oil, which, according to reports by Gatkuoth, is expected to resume the development of oil fields B1 and B2, following the failure of the April negotiations caused by "irreconcilable" disagreements on costs and exploration times. The two companies "have written to me announcing that they are ready to resume negotiations in order to reach an agreement", said the Minister. The oil fields are within block B: 120,000 square kilometers rich in untapped oil resources. The block was divided into three licenses (B1, B2 and B3) one year after the independence of the youngest African country in 2011, in an attempt, by the Giuba authorities, to renegotiate industry contracts entered into prior to its secession from Sudan. An operation aimed at terminating the monopoly that Total has over the site, and opening up the exploitation of block B to other foreign companies, including US ExxonMobil. Following the outbreak of civil war in 2013, site development operations have been frozen.
Foreign investments and infrastructure projects
Instability, coupled with the collapse in oil prices, has had devastating consequences on the national economy, causing a 6.1 percent fall in GDP in 2017 alone. To boost return on investment, the Giuba government has strengthened security measures near major oil fields, encouraging the return to the country of the three main companies operating in South Sudan: China’s China National Petroleum, Malaysian Petroliam National and India’s Oil & Natural Gas. Going in the same direction is also the agreement entered into with the Sudanese government for the supply of electricity required to resume production in the states of Ruweng and Northern Liech, bordering Sudan, and the review of the tariff paid by Giuba to Khartoum for the transit of crude oil to Port Sudan, on the Red Sea. According to the new agreement, South Sudan will pay a more flexible tariff than the $15 per barrel currently paid, defined, from time to time, based on oil prices on the international market. The development of the industry could be boosted by the major infrastructure projects planned in the neighboring countries. First and foremost, the project involving the construction of the new oil pipeline that will connect Uganda and Tanzania, linking the city of Hoima, in the west of Uganda, to the port of Tanga, on the coast of Tanzania. A project that is expected to enable Giuba to export its oil, bypassing Sudan. The initiative was officially approved by the presidents of Uganda and Tanzania, Yoweri Museveni and John Magufuli, respectively, on the sidelines of the 17th summit of the Heads of State and Government of the East African Community (EAC), held in Arusha in March 2016. Another project of interest to Giuba is the planned construction of a regional transport network in east Africa, which has, in the last few days, made a further step with the inauguration of the railway that will connect Kenya’s capital, Nairobi, to the port city of Mombasa. The infrastructure is only the first part of a larger project, whose second phase, which will start next month, plans to extend the line from Nairobi to the city of Malaba, at the border with Uganda. From here, the railway line will reach the Rwandan capital of Kigali and will continue north to Giuba. The project has been funded by the Chinese government, for which the development of infrastructure in east Africa is of strategic interest. Beijing, one of the countries most involved in the development of the oil industry in South Sudan, looks upon the region as a natural outlet for the so-called Maritime Silk Road, an initiative launched by the Chinese government in 2013, which aims to increase investments and interregional trade along the historic Silk Road. The plan includes the China-Pakistan economic corridor, which is expected to connect the port of Gwadar, in southwest Pakistan, with the region of Xinjiang, in northwest China. Once completed, the project will provide China with an outlet into the Indian Ocean and a connection to the Gulf of Aden and the Red Sea, as an access route to the Mediterranean. The ambitions of the Giuba government, however, came to light with the difficulties of the national dialogue process, launched in November 2016 by President Salva Kir, in order to engage the opposition in implementing the 2015 peace agreements. Armed clashes intensified last summer, causing the exodus of thousands of civilians to neighboring Uganda, where, in the last year, over 600,000 people arrived. The number of South-Sudanese refugees present in the country therefore exceeded 900,000.