South Sudan aspires to bring back production levels to around 350,000 barrels per day while South Africa stands to strengthen its energy security.

The South African government on May 6th signed an oil production agreement with South Sudan, signalling intent to pump money into Juba’s nascent petroleum industry that has almost stalled over conflict, The EastAfrican reported.

The exploration and production sharing agreement (EPSA) will see Pretoria’s state-owned Strategic Fuel Fund (SFF) granted permission to explore oil in an area known as Block B2, which is in the wide oilfields of the Muglad basin that straddles both Sudan and South Sudan.

The exploration is to take about six years and SFF will enter a joint venture with South Sudanese petro company Nilepet for aerial exploration, seismic tests and drill wells when oil is found.

The B2 area includes productive parts of the Muglad Basin and is part of the 120,000 km2 Block B, which was split into three in 2012.

South Africa’s SFF will also invest in capacity building initiatives, training of South Sudanese citizens, social and community development projects and ensuring local content and the empowerment of women, said the South African government news agency.

“The petroleum resources of Block B2 are vast. For South Sudan to reach its target of bringing back production levels of around 350,000 barrels of oil per day and beyond, we need committed new entrants like the SFF,” said the South Sudanese Minister of Petroleum Ambassador Ezekiel Lol Gatkuoth.

“South Sudan has great potential, yet our country remains vastly under-explored, and we believe the entry of new players like the SFF will lead to new world-class discoveries very soon given the aggressive exploration programme and great petroleum viability of Block B3. This will support South Sudan’s economic revival and improve trade with other African countries,” said Gatkuoth.

South Sudan oil
Oil fields and infrastructure in Sudan and South Sudan. CC 2014

In 2018, South Africa’s Department of Energy pledged to invest $1bn into South Sudan’s petroleum industry, with the aim of securing affordable energy supplies for South Africa.

The countries are in talks to set up a 60,000 barrel per day refinery to supply oil products to the local market in South Sudan, as well as to secure exports to Ethiopia and other neighbouring countries.  

South Africa’s Energy Minister Jeff Radebe said the deal would strengthen energy security for South Africa.

According to the deal’s legal advisors Centurion, the arrangement means South Sudan could be involved in exploring more oil fields.

“The potential discoveries can be quickly and cheaply tied into existing infrastructure,” said NJ Ayuk, CEO of Centurion Law Group.

“South Sudan’s ability to attract, retain, and leverage energy investment is key for an inclusive and sustainable economic growth,” said Ayuk, who is also Executive Chairman of continental lobby African Energy Chamber.

Meanwhile, South Sudan’s Minister of Petroleum Gatkuoth has announced the resumption of oil pumping from Al-Nar oil field in Rewang State, according to Sudan News Agency. Initial production is estimated at 5,000 bpd, and will be increased gradually.  

South Sudan’s oil flows were reportedly uninterrupted by the conflict in its northern neighbour, Sudan, in early April, after its President Omar al-Bashir was overthrown by the military, oilprice.com reported. Sudan holds all of the cards to South Sudan’s oil industry, which relies on it completely for moving oil to international markets.

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Find out more in the Africa Research Bulletin:

Egypt – Sudan Red Sea Oil Spat
Economic, Financial and Technical series
Vol. 56, Issue 3 – May 2019

Sudan: New Cabinet to ‘Solve’ Economic Crisis
Economic, Financial and Technical series
Vol. 56, Issue 2 – Apr 2019

Energy Projects
Economic, Financial and Technical series
Vol. 56, Issue 1 – Mar 2019

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