Petroleum & Gas in Sudan

ON AUGUST 10, 1999,AFTER COMPLETING THE 930 MILE PIPELINE FROM THE PRODUCTION REGION TO THE RED SEA coast port, Sudan celebrated its maiden oil exports. From the initial production rate of 250,000 barrels a day, by June 2004, 354,000 barrels were being produced daily, leaving the country with 250,000 bpd surplus for export after satisfying domestic demand. Energy Minister Awad al-Jaz said in May 2004 that he
expected crude production to reach 500,000 bpd in 2005. Sudan is not confining its exports to crude; in June 2000, the first export shipment of benzene, amounting to 20,000 tons, left Bashayier Oil Export Seaport on the Red Sea. Sudan has since been exporting over $100 million annually in refined products and, keeping the pace, for the first half of 2004,the value of refined products exports was $65.563 million. Petroleum products now account for over 70% of Sudan’s exports earnings.

Oil exploration continues, with positive geological formations in the north, central, east, and west of the country. Although oil companies had been showing interest in Sudan since Shell set up business in 1928, it was the introduction of production sharing agreements in 1990 that led the country to finally become a petrole-petroleum exporter. A consortium called the Greater Nile Petroleum Operating Company (GNPOC) was organized to develop 15 designated exploration blocks. Under the production sharing agreement, the China National Petroleum Corporation has a 40% share, Malaysia’s Petronas 30%, Oil & Natural Gas, India’s state petroleum conglomerate,
25%, and Sudan National Petroleum Company 5%; after the external partners have recouped their investments, the Sudanese will retain an 80% share. Depending on production and market prices, this switch in majority shares should take 4 to 5 years.

Remarking on the arrangement, Energy and Mining Minister, Dr. Awad Al Jaz, told Sudanow’s Khalil Yusuf “We collected a lot of information from different countries. As you may know, all industries are similar everywhere.
It (joint venture) is a matter of shares. How much you get and how much they take. I guess we made a very good and fair agreement for the benefit of Sudan and also for the benefit of others.”

The first major dividend for Sudan was cessation of imports. Previously, 66% of the country’s foreign exchange earnings, derived principally from agricultural exports, were spent to import domestic fuel stocks. The derived savings have been earmarked for priority areas of development, which include benzene, gas, and petrochemicals, in addition to infrastructure and social services. Reserves in producing fields were, in January 2004, estimated at 563
million barrels, which, at the present production rate, suggest that by the end of the first quarter of 2005, remaining reserves should be about 415 million barrels.

Although the proven reserves are not particularly large, optimism prevails among the stakeholders in GNPOC that more concentrations of commercial quantity reserves will continue to be discovered. In 2005, production at Block 3/7, located in the Malut Basin at the northern tip of South Sudan, is expected to begin at the rate of 170,000bpd.

The Chinese National Petroleum Company (CNPC), which holds a 41% stake in the block, will be the operator.
Aside from Heglig and Unity, where the main production has been going on since 2000, fields in the Muglad basin (part of a massive Crestaceous system extending across central Africa that includes the Doba Basin in Chad
plus oil fields in southern Sudan) produce crude oil with a 33 o to 42o API range, having only 0.5% sulfur content. This crude is highly paraffinic and requires heating to maintain flow in the pipeline. In June 2004, the Indian government approved plans by ONGC for a $194 million, 450-mile petroleum products export pipeline, running
from the Khartoum refinery to Port Sudan. The project is to be completed in 14-16 months.

In April 2003, the Swedish oil company Lundin, the only remaining Western country active in Sudan’s oil production, sold its 40.375% share in Block 5A to Petronas for $142.5 million. Meanwhile, the Asians are piling in and increasing their stakes. In August 2003, India’s ONG, which had acquired Talisman of Canada’s share at the beginning of the year, acquired block 5A and 5B from Austria’s OMV. Also in August 2003, Petronas announced it would take a
stake in block 8, located in the Blue Nile Basin, while Pakistan’s Zafir closed the deal to explore block 9.

In June 2004, Petrodar, a consortium, made up of the China National Petroleum Company (41%), Petronas (40%), Sudapet (8%), Gulf Oil Petroleum (6%), and the Al- Thani Corporation (5%), awarded a $239 million contract to Ranhill International of Malaysia and Petroneeds Services International of Sudan for development work on blocks
3 and 7. The blocks cover an area of 44,700 square miles, and contain the Adar Yeil field, which produces 5,000 bpd. The Al Thani Corporation had, in November 2000, been granted a production agreement by the Sudanese government in the Melut Basin. Also in June 2004, Petrodar contracted two other companies (Nam Fatt of Malaysia and Bentini of Italy) to build pumping stations for Melut. With China the major player in Sudan’s oil industry, the China Petroleum Engineering and Construction Group (CPECC) was chosen to build a $215 million oil terminal to service blocks 3 and 7.

Exploration opportunities are being offered in northwestern and southeastern Sudan, as well as in the Blue Nile Basin and the Red Sea. Sudan’s petroleum officials estimate that only about 15% of the national reserves are located in the central and south central regions where upstream activity is presently concentrated. The immediate downstream vision is to increase refining capacity to 250,000bpd, which would leave 100,000 barrels surplus.