South Sudan: Fighting Could Cripple Oil Industry for Decades

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analysis

The second consequence will be for South Sudan's future oil production. Output levels at Unity state oilfields were already in steep decline before the conflict.

From a peak of nearly 288,000 bpd on average in 2004, they fell to below 125,00 bpd by June 2011, one month before South Sudan's independence from Sudan.

A Norwegian study found that the oil recovery rates could be pushed up, and generate billions in new revenue, but the investment in technology was estimated to cost up to $300 million for a single field.

Oil companies will be reluctant to sink sizable new capital investments in such a politically instable environment where security risks have grown. As a result, the current conflict is likely to precipitate the decline of South Sudan's oil production, forecast in 2013 to fall below 100,000 bpd in the next decade.

Rebels may think that by capturing oilfields they can attain a lucrative bargaining chip in negotiations with the government. The more oil areas they control, the weaker the President Kiir becomes without his main source of income.

At the same time, the South Sudan government is currently launching a major offensive to take back oilfields in Unity state. But the goal of the South Sudan government and rebels to control oil areas may backfire and escalate the conflict even further as the two sides exchange blows near their most coveted resource.

If the fighting does not stop soon then the two sides will be responsible for crippling South Sudan's oil industry for years, if not decades to come.

On top of the death and destruction, they will be remembered for burying their country's economic future. The prize is big enough to share, but only if they stop fighting.

Luke Patey is a senior researcher at the Danish Institute for International Studies. His book 'The New Kings of Crude: China, India, and the Global Struggle for Oil in Sudan & South Sudan' will be launched at the RAS on 21st January.

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