South Sudan has recently ordered oil companies to restart production and according to officials, Africa’s youngest country’s oil export could resume within 90 days. This is significant, and would end a nearly nine month shutdown following a dispute with its neighbour Sudan over borders and oil.
Last month in Addis Ababa, South Sudanese President Salva Kiir and his Sudanese counterpart President Omar al Bashir signed an agreement which addressed several issues covering residency, work and travel rights for citizens of both countries, and a demilitarised buffer-zone to reduce tensions along the border. In addition, the agreement included the provision that allows South Sudan to export its oil through the port and pipelines in the north.
The agreement has been agreed by the South Sudan's National Legislative Assembly, and South Sudan's Minister of Petroleum and Mining, Stephen Dhieu Dau, said the nine month shutdown "had served its purpose to protect the sovereignty and patrimony of the nation" and had ensured "once again that the South Sudanese people may exercise the right to enjoy the full benefits of their resources."
Upon declaring independence in 2011, South Sudan inherited three-quarters of Sudan's oil production, but as the country lacks the infrastructure to refine or export its oil, it needs to transport it through pipelines running north to Port Sudan for export. At the beginning of this year, Juba accused Khartoum of stealing nearly all of its oil. Tensions flared as Khartoum justified the confiscation of in lieu of unpaid fees for the use of its facilities.
As a result of the Addis Ababa agreement, South Sudan has agreed to pay US$ 9.10 and US$ 11.00 per barrel for the pipelines operated by Dar Petroleum and the Greater Nile Petroleum Operating Company, respectively.
South Sudan’s oil revenue had accounted for 98% of its yearly budget, and since the shutdown, the government-imposed austerity measures have been necessary. Following the shutdown, the South Sudanese Pound (SSP) fluctuated wildly, falling on the black market from around SSP 3.5 per dollar to around SSP 5.5 in July. The news from Ethiopia has seen the rate rebound slightly.
"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 said.
South Sudan's oil is produced in its Unity and Upper Nile states, along the border with Sudan. A significant 80% of its oil production originates from Dar Petroluem-operated facilities in Upper Nile.
Chen Huanlong, Dar Petroluem's Manager of Exploration and Production, said after the agreement was signed that it could take between four to six months before the fields in the state produce at full capacity. He said they will need to "warm up the pipes" for one month. After that, Huanlong added that they would "approach the production plateau" in three months.
A consortium of Chinese, Malaysian and South Sudanese oil companies, Dar Petroleum has promised to eventually bring production up to 180 000 bpd.
In announcing the resumption, Minister Dhieu Dau said that "we assume that in 90 days part of our oil will be getting its way to the international market. Not 100% but we will be able to produce and export the crude oil of South Sudan within 3 months." The minister also noted that the export schedule depended on "technical preparations."
Edited from various sources by Cecilia Rehn.