LOS ANGELES, July 10 – The people of South Sudan this week celebrate their first full year of independence from Sudan, their northern neighbor. But there has been little to celebrate, as the fledgling country’s oil remains in the ground.
Oil has been at the center of the struggle between the peoples of Sudan and South Sudan for years. That’s surprising, too, as there’s not really a lot of oil at stake, at least when placed on an international scale of comparison.
According to the BP Statistical Review of World Energy 2012, South Sudan and Sudan have a combined total of 6.7 billion barrels (bbl) of proved reserves, with production of about 453,000 barrels per day (b/d)
Compare those figures with Saudi Arabia’s reserves of some 260 billion bbl of oil and current production of around 10 million b/d, and the Sudanese oil industry shrinks by comparison.
While the Sudanese reserves and production figures may pale in comparison with Saudi Arabia’s, they represent considerable income in an era increasingly conscious of shrinking supplies.
Assuming a price per barrel of $100, production of 453,000 b/d equals $45,300,000 — a sum beyond the wildest dreams of most people in a land of chronic poverty.
With the secession of South Sudan a year ago, most of the oil went south. And therein lies the rub: being a land-locked state, South Sudan currently has no means of exporting its oil aside from the pipeline and export infrastructure which lie in Sudan.
For Sudan, the loss of so much oil revenue has not gone unnoticed. Indeed, with the majority of government funding coming from the sale of oil, Khartoum has been hard put to get by on its lesser earnings.
To supplement its income, Khartoum looked to charge transit fees for the South Sudanese oil passing through its pipeline system and export infrastructure. Such fees are not problematic.
Consider the fees Egypt charges for the passage of oil through its SUMED Pipeline system. Consider Myanmar, which plans to earn fees from China for oil and gas passing through pipelines across its country. Consider Turkey, which also earns pipeline transit fees.
Sudan’s demand for fees from South Sudan hardly merits a raised eyebrow. But what does merit attention are the inexcusably high fees being demanded by Khartoum: more than $36.00 per barrel of oil – an amount so high, it would price South Sudan’s oil right out of the market.
If South Sudan absorbed that price, then its oil would effectively be sold for less than two-thirds of its value – a point underlined by South Sudanese officials.
GIVING AWAY OIL
“Khartoum was asking $36 per drum, which is very unusual and is not practicable,” said Anne Itto, Deputy Secretary of South Sudan’s ruling party, the SPLM. “If South Sudan ever accepts to pay such rent, it is like giving away our oil.”
Not surprisingly, South Sudan has opted to shut off the flow of oil to Sudan, preferring to tough out the economic squeeze that would be created by no oil exports whatsoever.
That decision has had an effect far beyond South Sudan or, for that matter, Sudan itself.
“The decrease in the supply of oil as a result of the South’s shutdown has had a global impact,” according to a report by the Conflict Risk Network.
“China and Japan have relied on the Dar and Nile blend crudes from the country, but now have no choice but to procure the oil elsewhere, contributing to the current strains on the world market and increasing oil prices,” CRN said in May.
But the real problems are at home, in South Sudan.
Tim Fischer, the US special envoy for Sudan and South Sudan, described the situation in an interview with the Australian Broadcast Corporation.
“They’re sitting on huge quantities of oil. One alternative is to open the so-called magical southern corridor and get the oil out through other countries to the African coastline and not through Sudan,” Fischer said. “But that’s two to three years before that particular pipeline could be in place.”
According to Fischer, “It was a big call by the new South Sudanese government to lock down production and no longer send oil out but they were faced with a charge on freight of that oil which on reading of the matter seemed to be highway robbery by north Sudan.”
“So, it’s a very complex situation, just not a fair cop for the people of that area that these stalemates just wreck their standard of living and their opportunities,” Fischer said.
Indeed, as United to End Genocide reports, “Even as South Sudan celebrates its first year of independence and the world concerns itself with the prospect of a return to war between Sudan and South Sudan, civilians are being targeted by the government of Sudan.”
So, for newly independent South Sudan, there’s no joy in the pipeline, just yet.
© Glamma Productions Inc. 2012