Related Articles
Forward article link
Share PDF with colleagues

Sudan: Divided inheritance for oil sector

PRESIDENT Omar Bashir won a decisive victory in Sudan's April elections, with 68% of the vote. Salva Kiir retained his job as president of Sudan's semi-autonomous south, with 93% of the South Sudan vote

Widespread criticism of the conduct of the ballot will not prevent Bashir's ruling National Congress Party (NCP) from carrying out its governing duties. But Sudan faces new problems: a referendum in January will determine whether the sub-Saharan African south will secede, effectively splitting the country away from the Arab north to which it remains uncomfortably wed.

The division will have a direct effect on the oil sector, the source of more than 90% of the country's exports. Around 80% of Sudan's 480,000 barrels a day of oil production is sourced from southern areas (see Figure 1). Even northern oilfields are subject to southern ownership claims; most northern oil is extracted from Abyei region, which may revert to the south; other northern oil is extracted from Southern Kordofan, which is claimed by both north and south.

The unequal division of oil revenues has accentuated tensions between north and south Sudan. While Khartoum receives half of its revenues from oil extracted from the south, the south receives no revenues at all from northern oil production.

Furthermore, Bashir's NCP controls the energy ministry and has been frequently accused of manipulating services and sales contracts. A bipartisan body, the National Petroleum Commission, co-chaired by Bashir and vice-president Kiir, is meant to provide strategic direction for the oil industry, but its effectiveness has been hampered by persisting conflict between the two sides.

The South Sudan government has proposed that after securing independence, all deals struck between the central government in Khartoum and foreign oil companies would be reviewed. This, however, could heighten tensions and create the conditions for renewed conflict – because the north controls much of the country's refining and oil-transportation and export infrastructure, South Sudan could struggle to exert its authority over its natural resources.

One possible solution to the impasse would allow for an international consortium to pay for Sudan's oil production, with the earnings divided between the north and south in accordance with an internationally agreed formula. The stakes are high. For the land-locked south in particular, which lacks alternative revenue-generating projects, the guarantee of uninterrupted oil exports provides a substantial source of long-term revenue.

Bashir's re-election has confirmed the polarisation of Sudan's political system, and a referendum vote for separation in the south in January next year – considered highly likely – will raise tensions. As one Sudan analyst says, speaking on condition of anonymity: "The real hope is that if secession comes to pass then both sides will need each other so much that they will simply be forced to work out a deal."

Also in this section
India prepares launch of gas hub
20 September 2018
If all goes to plan, by the end of this year India should have established a gas trading hub
Petronas: To float or not to float?
20 September 2018
Petronas’s financial success makes it a target for a government desperate for new revenue streams
Tight could prove right for Bahrain
19 September 2018
The recent discovery of offshore shale oil and gas deposits could be a welcome energy boost for Bahrain—or remain tantalisingly beyond reach