Newborn country faces inevitable problems

14. September, 2013 News 1 comment
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South Sudanese independence dream became real in 2011. All the new countries must face a lot of matters and conflicting interests with their ‘parent’ countries. Especially, if they believe in other religions and differ in race. The situation is even more complicated, if huge money are on the table, money from the oil production and transportation.

The very beginning

Republic of Sudan became independent from British – Egyptian rule in 1956. Since that time the country has been torn by internal conflicts. Along with the Conflict in Darfur (western part of Sudan) which has caused over 200 000 deceases, Sudan has struggled with southern part of the country. The first war started in 1955 and ended in 1972. The second one caused about 2 000 000 casualties from 1983 to 2005, but it ended in a 6 years autonomy followed by an independence referendum in South Sudan. The new country was born on 9th July 2011. It was a natural and inevitable end of the 1956’s action. Two countries vary a lot. Whereas Sudan is in 97% Islamic, South Sudanese society is in 61% Christian and 33% believe in traditional religions. The country consists of many tribal groups and uses more languages than Sudan. Since the independence, South Sudan has been facing many problems, internal and also with its northern neighbor.

Black gold on the border = problem

The border between South Sudan and Sudan is still undefined, both countries use the border from 1956. It crosses exactly two the biggest oil – rich basins: Muglad and Melut. According to BP’s 2013 Statistical Review: South Sudan has 3.5 billion barrels of oil reserves, while Sudan inherited only 1.5 billion barrels of oil in the ground. Both countries also have natural gas reserves linked with oil, but they flare or re-inject it. In 2010, Sudan flared about 11.8 billion cubic feet of natural gas. What makes the situation between these two countries more complicated? South Sudan don’t have its own transportation and processing facilities and is fully dependent on Sudan. South Sudanese oil has just one direction of transportation – through two pipelines to Port Sudan, city at the Red Sea side. Furthermore, according to data from 2011, oil represented 78% of Sudan’s export earnings (now it declined to 32% !) and even 98% of total government revenues for South Sudan. Now it’s clear, why both countries haven’t taken even a one step back in their negotiations!

Unacceptable offer

After the 9th July 2011, Sudan proposed a transit fee of $32 – 36/barrel. They claimed that the price must make up their loss in the oil reserves. For South Sudan that was unacceptable. They offered less than $1 for each barrel of transported oil. The matter was unresolved. In January 2012 South Sudan accused its neighbor of stealing South Sudanese oil. The Northern government representative confirmed this accusations: “Since early December we’ve started taking part of our share after the southern government refused to agree on a deal for a transit fee“. Sudan stole 650 000 bbl of oil, worth $65 million, according to South Sudanese side. Both countries were negotiating in Addis Ababa, Ethiopia under the African Union flag. They couldn’t find a satisfying solution for the both sides, so South Sudan stopped its oil production.

Long awaited turn

After 15 months of shutdown, South Sudan restarted oil production in April 2013. It was a result of the agreement from March 2013 in which both countries accepted $26/bbl for the transport from Heglig to Port Sudan and $24.1/bbl for Petrodar pipeline transport stakes. South Sudan was also obliged to pay $3.028 billion to compensate the Sudanese loss. They agreed to pull back their troops from the border to create a demilitarized zone. It looked that everything was going to be fine, but in May and June Sudanese President Omar al – Bashir threatened South Sudan to stop the oil flow through his pipelines, because of the support of South to the rebellions in Sudan. The situation needed some time to talk and a few visits of the President of South Sudan – Salva Kiir. Fortunately, both presidents buried the hatchet.

Recent news and the future

South Sudan has restarted production from more oil fields recently. Two another fields are scheduled to start in November and December, producing additional 30 000 bbl/day. Daily production by the end of 2013 will be 250 000 bbl/day. In August President Kiir signed also a petroleum bill which makes the South Sudan more attractive to invest. Since the restart of the production in April 2013, South Sudan has earned $1 billion from oil sales. Facing such problems with its neighbor, South Sudan signed memorandum of understanding with Kenya, Ethiopia and Djibouti, for building two new pipelines to Kenyan Port of Lamu and Port of Djibouti through Ethiopia.

Both countries have some serious internal troubles. Sudan faces military conflicts, while its neighbor from south must focus on a civilization improvement – now 135.3/1000 infants die, some areas has just one doctor for 500 000 citizens. In 2011 more than 80% couldn’t read and write. Money from oil production and trade are indispensable for the development of both countries. After months of impasse, they finally speak the same language, seeing biggest issues ahead, but I advise you to keep your eye on this region – I’m sure that from time to time there will be some tensions between the newborn South Sudan and its northern neighbor Sudan.

Sources:

1. EIA report about South Sudan and Sudan

2. bbc.co.uk/news

3. aljazeera.com

4. arabnews.com

Photos: eia.gov, usaid.gov

 

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Jan Wypijewski

Deputy Editor-in-Chief of YoungPetro, in pursuit of his B.Sc. degree in Oil&Gas Engineering at AGH University of Science and Technology in Krakow.

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