19 October 2012

Sudan: IEA Forecasts Drop in Sudan's Oil Production Through 2017

Photo: UNEP
Oil rig (file photo): The country will only pump oil at about 70 percent of its former capacity.

Khartoum — Sudan is not expected to see any jump in oil production in the next five years despite intensified efforts by Khartoum to expand exploration per figures released this week by the West's energy watchdog.

According to the 'Medium-Term Oil Market Report 2012' issued by the International Energy Agency (IEA), the East African nation will produce 70,000 oil barrels per day (bpd) this year which will jump to 90,000 bpd in 2014 and drop to 60,000 in 2017.

The Paris-based agency cautioned however, that it has "deliberately" exercised caution when making projections for several oil-producing nations which included Sudan and South Sudan saying that "circumstances [there] change every week, affecting our views on both the short and medium-term supply outlook".

"Sudan and South Sudan are expected to rebound to a combined 360 kb/d [thousand barrels per day] by 2015, though still 100 kb/d [thousand barrels per day] less than 2010's sum total, and remain broadly at these levels until 2017," reads the report.

Sudan lost approximately 75% of its oil reserves following South Sudan's secession in mid-2011 which put the country under fiscal duress with the sharp drop in revenue and hard currency inflows that resulted from the breakup.

But the government in Khartoum hoped to offset part of the deficit through charging landlocked South Sudan for transporting its oil through the north's infrastructure. But following disagreements on the fee that should be assessed for the service, South Sudan shut down its oil production earlier this year.

Last month a deal was struck between the two nations to resume oil exports after an understanding was reached through African mediation on the transit fees. But the remittances will still fall well below what is needed to close the budget hole.

Last July, Sudan signed oil exploration and production-sharing deals with Canadian firm Statesman Resources Ltd as well as Chinese, Nigerian, Australian, Brazilian and French companies.

Furthermore, seven blocks were awarded for the first time, while some companies joined previously awarded contracts for two other blocks.

But according to Reuters, analysts are skeptical that Sudan will increase production anytime soon as companies are expected to carry out for years magnetic studies first. Efforts to boost production from existing fields have been hampered by a scarcity of dollars needed to bring in better equipment and technology.

On Tuesday, the veteran Sudanese oil minister Awad Al-Jaz acknowledged that his country will not reach its goal of 180,000 barrels per day this year but will likely hit it in Q1 2013. He said that Sudan is currently producing 120,000 bpd but that it could rise to 150,000 bpd the end of this year.

It is not clear why a discrepancy exists between IEA figures on Sudan's oil production compared to official ones.

"We have our blocks and we are working hard to raise production," al-Jaz told reporters at an industry conference in India according to Reuters.

The minister expressed optimism that more oil discoveries will be made in the coming years.

"We offered last month 9 blocks and had around 72 companies competing for them," Al-Jaz told Reuters.

"We signed with a number of them and some of the blocks already have discoveries of oil and gas," he added, but did not name the companies.

French explorer Maurel & Prom has signed a memorandum of understanding with Sudan for an offshore block, a government official said later. The company will review seismic data on the block and could sign a production sharing contract with Sudan in two months, the Sudanese official said.

This month, the International Monetary Fund (IMF) reclassified Sudan from an oil exporter to an oil importer to reflect the new situation resulting from the independence of South Sudan.

"Sudan....is now classified as a country with nonfuel primary products as the main source of export earnings," the IMF said.

Last April South Sudan's army temporarily occupied the oil field of Heglig, which produced around half of to Sudan's oil output according to government figures. The fighting caused significant damage to the infrastructure in the area and it is unknown whether full capacity oil production has been resumed there.

Copyright © 2012 Sudan Tribune. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.