Page 5 - AfrOil Week 49

AfrOil COMMENTARY AfrOil

Until recently, officials in Khartoum had few other hand, Sudan’s oil assets may not be overly
options beyond allowing Chinese companies to attractive right now, given that the coronavirus
continue dominating the oil and gas industry. (COVID-19) pandemic is still having a bearish
For one thing, they could not attract many other effect on world crude prices and energy demand.
investors because the US government’s decision Moreover, its existing oil resource base is
to include Sudan on its State Sponsors of Terror- less impressive than that of neighbouring South
ism List (SSTL) in 1993 led to the imposition of Sudan, which ended up with 73% of all proven
sanctions that remained in place for more than reserves upon partition in 2011. It is currently
two decades. extracting around 60,000 barrels per day of
For another, they were under obligation to crude and hopes to boost yields to 80,000 bpd
Beijing, since the Chinese government had pro- next year, while South Sudan plans to raise out-
vided Sudan with billions of dollars worth of put from the current level of 165,000-185,000
loans and aid. The country’s portfolio of Chinese bpd to 300,000 bpd within the next few years.
debt has swelled inexorably in recent years, even
after Beijing agreed to extend the repayment Changing approaches
term of some credits by five years in 2012 and Nevertheless, Khartoum is pinning its hopes
then wrote off $160mn worth of obligations in on new prospects in its western and southern
2018. As a result, Khartoum has been directing regions, as well as the offshore zone.
fully 95% of all oil revenues earned by Sudapet, Hamed Suleiman Hamed, the undersecre-
the national oil company (NOC), to Beijing so tary of the Sudanese Ministry of Energy and
that it can make payments on its loans. Mining, claimed earlier this month that the
country’s undeveloped oil reserves amounted
New horizons to around 6bn barrels. He also told Sputnik that
Earlier this year, new possibilities began to Sudan’s natural gas reserves were substantial,
emerge. The US government offered to remove saying: “[We] have a very large reserve of gas that PetroChina may
Sudan from SSTL, on the condition that it has not been tapped until this day.”
granted formal diplomatic recognition to Israel. At the same time, Khartoum also appears to opt to wait and
Sudan’s transitional regime has accepted the be taking a different approach toward Beijing. It see whether the
offer, but discussions of the deal have recently has announced that it will not renew PetroChi-
stalled in the US Senate, owing to disputes over na’s contract for Block 6, located in the Muglad US can finalise its
the issue of whether US victims of certain ter- Basin in West Kordofan, when that contract
rorist acts will have the right to sue Khartoum expires at the end of 2020. This move may help deal with Sudan
for compensation. Sudapet reduce its costs, but it may also convince
If the parties can reach agreement, though, the Chinese company to negotiate a new deal
US policy would no longer be a barrier to inter- that is more favourable to the Sudanese side,
national oil companies (IOCs) considering according to an analysis published by the South
investment in Sudan. In turn, new investors China Morning Post at the weekend.
might disrupt the long-standing patterns that Even so, PetroChina may not be ready to
have allowed China to remain the top source of renegotiate the deal just yet. It may instead opt
funding for oil projects. to wait and see whether the US can finalise the
But it might take time for this disruptive deal that would see Sudan removed from SSTL
process to play out. For multiple reasons, IOCs and whether IOCs rush to enter the country at
may be cautious about Sudan and unwilling to this stage of the political transition and under
make big investments in the near term. On the current market conditions. If the deal between
one hand, the country is something of a risky Washington and Khartoum remains in limbo
prospect, as its political system is still in tran- or if IOCs hesitate on Sudan, Chinese investors
sition and its economy is in poor shape. On the may try to drive a harder bargain. ™

Egyptian LNG plant set for restart

The Zohr field has generated a gas surplus that can be exported via the long-idle Damietta facility

ITALY’S Eni has reached deals with Spain’s Union Fenosa Gas (UFG), a 50:50 joint venture
Naturgy and its Egyptian partners that pave the between Eni and Naturgy.
way for the restart of Egypt’s shuttered Damietta Under the agreements, UFG’s interest will be
LNG plant. divided between Eni and Egyptian Natural Gas
Damietta LNG is capable of exporting 5mn Holding (EGAS), leaving Eni with a 50% stake in
tonnes per year (tpy) of LNG but has been Damietta LNG and EGAS with 40%. Egyptian
idle since 2012 because of a legal dispute. Its General Petroleum Corp. (EGPC) controls the
owner is SEGAS, which is 80%-controlled by remaining 10%.

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