Oil Deal Signed between South Africa And South Sudan

Oil Deal Signed between South Africa And South Sudan

South Africa has signed an agreement to explore oil in South Sudan, which holds the third-largest oil reserves in sub-Saharan Africa, as part of $1billion potential investment that the petroleum minister in the war-torn east African country hopes will gradually help to increase production.

A six- year exploration and production sharing agreement was signed on 6th May, for an untapped block in Jonglei state, just south of the current oil producing areas, as conveyed by oil minister Ezikiel Lol Gatkuoth from Juba.South Africa's state-owned Strategic Fuel Fund (SFF) owns and operate the lucrative Block B2 in South Sudan. 

Nilepet, the national oil company of South Sudan, also holds a stake in this block, which is located in Muglad Basin in the central part of the country.

South Africa has pledged to pay out a minimum of $50 million on exploration and is keen in building a pipeline and refinery that could see its total investment in South Sudan a high of $1 billion, as mentioned by Mr. Gatkuoth.

South Sudan is looking forward to reinstate the daily oil production to 3,50,000 barrels after a civil war and a disagreement with Sudan to the north disrupted oil operations and caused output to halve since 2012. South Sudan won independence from Sudan in 2011 but stays dependent on two 1,000-mile Sudanese pipelines to export the crude via the Red Sea.

The oil block is part of a bigger area explored by France's Total in the 1980s that was divided into three new licences in 2012. South Sudan has sub-Saharan Africa's third-largest crude reserves, according to the US Energy Information Administration, but only a third of the country has been explored.

South Sudan is keen to woo foreign investors to its energy industry, which contributes over 95% of its income.

Block B 

Block B was split in to three (B1, B2 and B3) in 2012 and they have seen much interest from foreign partners since the entry of Nigeria's Oranto Petroleum to Block B3 in 2017.

South Sudan put B1/B2 blocks up for grabs last year after long-running talks with French oil major Total and Tullow Oil collapsed in July 2018.

Total had previously estimated the blocks could hold some 800 million barrels of oil in place. But Gatkuoth believes they hold a potential 1.5 billion barrels of recoverable oil.

Gatkuoth told S&P Global Platts earlier this year that China's state-owned China National Petroleum Corp. and its subsidiaries have approached the country in the bidding for Block B.

China dominates South Sudan's oil industry, with state-run CNPC operating the country's Dar Petroleum Operating Company (DPOC) and Greater Petroleum Operating Company (GPOC) consortia, which are producing all of the country's oil.