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Will China remain central

to Sudan’s oil sector?

The recent improvements in US-Sudanese relations may shift power away
from state-owned Chinese majors, but change is not likely to occur overnight

COMMENTARY IN some ways, Sudan’s oil industry has changed investment in Sudan’s oil sector. State-owned
dramatically over the last decade. majors such as PetroChina and Sinopec did not
Most of the changes are rooted in the estab- exit Sudan after 2011, even though most of the
WHAT: lishment of South Sudan as an independent upstream assets they were operating through
Sudan has declined country. In 2011, several of Sudan’s southern- joint ventures ended up in South Sudan. Instead,
to renew PetroChina’s most provinces were split off to form the new they remained active, continuing to lead projects
contract for Block 6 at the state. Since those provinces contained the largest such as Block 6, where PetroChina is extracting
end of the year. and most productive oilfields, their loss led to a crude from fields in the Muglad Basin in West
significant decline in Sudan’s crude output. Kordofan State.
WHY: Sudan did retain control of the pipelines that Until recently, officials in Khartoum had few
This move occurs against were the only routes to market for South Sudanese options beyond allowing Chinese companies to
a backdrop of rising crude, as well as the refineries that processed South continue dominating the oil and gas industry.
debts and improvement Sudanese crude into fuels for the regional mar- For one thing, they could not attract many other
in relations with the US. ket. But these pipelines and refineries have seen investors because the US government’s decision
throughput drop since 2011, partly because of civil to include Sudan on its State Sponsors of Terror-
WHAT NEXT: war in South Sudan and partly because of disputes ism List (SSTL) in 1993 led to the imposition of
PetroChina may wait to between Khartoum and Juba over transit tariffs. sanctions that remained in place for more than
see how IOCs react to In turn, the fall in South Sudanese shipments two decades.
changes in Sudan before has contributed to the deterioration of the coun- For another, they were under obligation to
trying to negotiate a new try’s oil infrastructure. Petroleum product short- Beijing, since the Chinese government had pro-
deal. ages have become common, especially since the vided Sudan with billions of dollars worth of
toppling of Omar al-Bashir, Sudan’s long-time loans and aid. The country’s portfolio of Chinese
president, in 2019. Earlier this year, the interim debt has swelled inexorably in recent years, even
government blamed a blockage in the pipeline after Beijing agreed to extend the repayment
that pumps oil from South Kordofan State to a term of some credits by five years in 2012 and
refinery in Khartoum for fuel supply disruptions. then wrote off $160mn worth of obligations in
2018. As a result, Khartoum has been directing
China: The biggest player fully 95% of all oil revenues earned by Sudapet,
But one thing has not changed – namely, Chi- the national oil company (NOC), to Beijing so
na’s position as the biggest source of foreign that it can make payments on its loans.

Week 49 10•December•2020 www. NEWSBASE .com P9