2 April 2018

Sudan: Free Lunch

analysis

It looks like a bombshell. A long story about what could be the last biggest oil discovery is taking place in Sudan in the newly tapped block-25, better known as Al-Rawat, located 137km south west of Kosti in the White Nile state.

The story titled The Best Oil Opportunity of The Year was carried first in Oil Price, a website focusing on oil-related stories, then resurfaced two days later under a different byline. Another platform, Next Big Future.com carried the story for the third time that later was picked by Yahoo.

Curious enough none of the established newswires like Reuters, AFP, AP or publications specialized in covering oil news like the Financial Times, Oil and Gas Journal or Wall Street Journal picked the story - and for a good reason. On the top of the story there were two words that explains everything: Sponsored Article, or a paid advertisement in other words.

It is Stamper Oil and Gas Corp, who was behind this promotional activity with a clear target. The $14.6 million cap company hopes to seal a deal with Sudan that enables it enter as a shareholder in B-25, Al-Rawat and this campaign did not mince words to show its ultimate goal that, "this is a huge opportunity, and investors need to wake up and seize the day, and evaluate this opportunity or risk getting left in the dust", the advertisement reads.

And to encourage potential investors to head the advice, it described Al-Rawat field as an elephant oil discovery. "I have never been more excited as I'm now to be looking for the next elephant oil discovery," said David Greenway, Chief Executive Officer of Stamper.

The main problem with these statements is the fact that Stamper has no relation whatsoever, with Sudan, or its national oil company, Sudapet so far. Sudapet owns the block 100 percent.

However, Sudapet has a memo of understanding (MOU) with State Oil Company, a Vancouver-based enterprise run by Lutfurahman Khan and State on its side has a MOU with Stamper. If that MOU develops into a full deal, then Stamper will own State fully, but remains the biggest issue of getting Sudapet to turn its MOU with State into a binding agreement. Then and only then Stamper will have the chance to tap Al-Rawat potential reserves that are yet to be realized.

Lutfurahman and his State Company have a long history with Sudan oil industry. It was the first foreign company to enter the country after the US Chevron, who discovered oil in Sudan in the 1970s decided to leave and agreed with the government to relinquish its concession.

However, State performance over a three years period showed clearly that it suffers from meager financial and technical resources that will not allow it to make the much needed breakthrough in oil production the pressed government was hoping for.

Eventually the government terminated its deal with State and opted for a consortium of Chinese and Malaysian companies with State retaining a stake. The consortium was called Greater Nile Petroleum Operating Company that managed to pump oil out and exported it in August 1999. State later sold its shares to Talisman, who in turn sold its shares to the Indian firm ONGC.

Block-25, or Al-Rawat came into being after the separation of South Sudan into an independent state in 2011 carrying with it most of known oil reserves and production. Al-Rawat was part of Block 3&7 that was representing the biggest share of oil production then. It took time to settle all lingering issues following the separation. And among them is setting up a new block with its administration that pushed to build on the discoveries leading to having 99 million barrels proven reserve.

However, last year more discoveries added another 66 million barrels. And that led to postponing engineering designs to accommodate the growing output. Accordingly the 2500 barrels per day (bpd) that was planned originally have been raised to pump 7,000 bpd eventually.

Though small, but Al-Rawat production will contribute to the domestically produced crude that represents the best response to the supplies' crises that have engulfed the country of late. Yet domestically produced oil meets only some 40 percent of consumption needs. Raising that percentage and realizing the country's oil potential be it in Al-Rawat or other blocks needs a political will to make the necessary breakthrough through alliances with track record abilities in providing finance and expertise.

Sudan

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