Page 5 - AfrOil Week 08 2020

AfrOil COMMENTARY AfrOil
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“Production declines are expected over the next five years without further reserve replacement or production enhancements,” the report said.
The Petroleum Ministry said it was working to improve conditions in the sector. “With the current revitalised peace agreement, the govern- ment, represented by the Ministry of Petroleum, is working with the various investors to acceler- ate the exploration activities,” it explained.
New paths for investors
This process will involve the establishment of new mechanisms and procedures for gaining access to oilfields in South Sudan, it said.
In the past, South Sudan and its national oil company (NOC) Nilepet have negotiated with would-be investors on an individual basis, con- ducting direct talks with firms that were hop- ing to carry out exploration and development projects.
This method did bear some fruit. In 2017, Nigeria’s Oranto Petroleum concluded a six- year exploration agreement for Block B3, with an eye towards signing a production-sharing agreement (PSA) in the event that commer- cially viable reserves were found. Then in 2019, South Africa’s state-owned Strategic Fuel Fund (SFF) signed another six-year exploration deal for Block B2. SFF indicated that it might even- tually invest about $1bn in the development of the block and the construction of a 60,000 bpd refinery in Pagak.
Now, though, the Petroleum Ministry is looking to hold licensing rounds in which potential investors will compete for access to South Sudan’s fields. Juba is due to launch the first such bidding round next month and will offer 14 blocks to foreign companies. It is due to start accepting offers during the East Africa Oil & Gas Summit, which will be held in Nairobi on March 18-19.
To date, South Sudan’s government has not made all details of its plans public. Last autumn, though, Petroleum Minister Awow Daniel Chuang said that the auction would cover Blocks A1 to A6. He also said that Juba was collecting information about these assets and would set up a data room for potential partners.
This data room should be ready soon. The
Petroleum Ministry said in its report that it was close to finishing an environmental audit of its oilfields and would release data once it had wrapped up its comprehensive assessment of the country’s resources. It also reported that prelim- inary estimates showed that South Sudan might hold as much as 940mn barrels of crude oil in recoverable reserves.
Reaching out
In the meantime, Juba appears to be willing to discuss new bilateral deals, as well as competi- tive auctions.
Earlier this month, South Sudan’s Foreign Minister Awut Deng Acuil met with his Russian counterpart Sergei Lavrov to examine opportu- nities for co-operation in the oil industry as well as other sectors of the economy.
After the meeting, South Sudan’s Foreign Ministry indicated that Nilepet was open to the prospect of teaming up with Russian investors on upstream and refining projects. Lavrov con- firmed that the two sides had discussed the mat- ter, saying: “We informed our colleagues about the Russian companies working in the oil and gas, infrastructure, railway and transport sectors that are ready to discuss possible mutually ben- eficial projects with our South Sudanese part- ners. We have agreed to promote direct contacts between our economic operators.”
So far, these talks with Russia do not seem to have yielded any concrete results. That is, no Russian companies have stepped forward to make their interest in specific South Sudanese initiatives public. At the same time, though, it also remains difficult to gauge the level of interest in the upcoming licensing round, as no potential partners have confirmed plans to bid.
Nevertheless, South Sudan’s Petroleum Min- istry has more reason for optimism than it did previously. The establishment of a new coali- tion government that brings Machar and Kiir together gives the country a chance to recover from a civil war that led to around 400,000 deaths and the displacement of several million people.
If that recovery proceeds, Juba may be able to achieve its goal of pushing oil production up to 400,000 bpd by the middle of the decade.™
“ establishment of
a new coalition government gives the country a chance to recover
The
Oilfields in South Sudan (Image: Rights Maps)
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