2 December 2018

Sudan: Oil Boom - A Second Chance?

Though it is an ordinary meeting, but the upcoming gathering of OPEC and non-OPEC allies in Vienna on Thursday carries a significant political and economic weight that may have implications even for Sudan.

The oil market has been going through a tumultuous period moving from cutting production by 1.8 million barrels per day (bpd) that was enforced early last year, then in June and fearing skyrocketing prices the main producers led by Saudi Arabia and Russia opened their taps for more oil supplies. Now and in less than six months, prices are on the decline to the extent that they lost some 30 percent of their value since October. Thanks to the record pumping by the three main producers: Saudi Arabia, Russia and the United States, who is now on the top as an oil producer pumping all time high 11.7 million bpd.

Saudi Arabia is pushing for another formal production cut to be shouldered by both OPEC and non-OPEC producers, but is facing clear opposition from US President Donald Trump, who wants more lower prices and even Russia, which has been central in carrying out the previous cuts seems to be open to lower oil prices.

However, the Saudi decision may not be based entirely on market realities. Rather, political considerations are expected to play a role. After all Trump has been the solid supporter of Saudi Crown Prince Mohamed bin Salman following the murder of Jamal Khashoggi. Equally Russian President Vladimir Putin may opt to go along with Saudi-led production cut program for his political calculations to shore up his relationship with Riyadh.

Regardless of the outcome of the OPEC meeting, prices are expected to stay soft next year given the record volume of supplies entering the market, the waning economic conditions worldwide and the looming trade war between Washington and Beijing.

And next year Sudan hopes to put some blocks for bidding in the third quarter of that year and make a remarkable progress in its 200,000 bpd Port Sudan refinery. Sudan hydrocarbon resources remain mainly untapped even during the oil bonanza before the separation of South Sudan in 2011 that took with it the bulk of the country's oil reserves and production.

However, there are three factors that are going to impact the oil sector in Sudan: the recovery of oil prices to encourage potential investors to venture into Sudan; that a deal is secured with the United States to remove Sudan from the list of states sponsoring terrorism (LSST) and making use of lessons gained during the previous oil boom in Sudan.

These are big ifs especially the last two since Sudan managed to join the club of oil exporters at one of the market's downturns in the 1990s. It has been quarter a century since Washington added Sudan to LSST, but it is the first time since a specific track and a road map has been crafted to lead to the removal.

In fact the points that are of direct interest to Washington like fighting terrorism or severing relations with North Korea are already happening. Remains are issues related to the domestic scene like human rights and freedom issues that remain difficult for the regime to make the needed headway. And in a nutshell these are waiting a political will to make a difference.

The most important issue is how to make use of lessons learnt during the previous oil boom. The significant volume of hard currency earned by the government was not utilized well to build a more sustainable economic base led by agriculture, nor even putting due effort to tap oil reserves in the northern part of the country. It is this poor planning and misled priorities that has led to the current economic shock under which the country still reels.

Unless such messy past is faced heads on a new oil boom will be yet another squandered opportunity and simply adds to the chaos engulfing the country, if it ever manages to make a take-off. Sudan does not only have natural and mineral resources that are waiting to be tapped, but more important it is having a second chance to do in a better way what it failed to do properly in the past. Will it succeed this time?


Military, Opposition Resume Talks

Sudan's ruling military council restarted talks late on Sunday with an alliance of protest and opposition groups,… Read more »

See What Everyone is Watching

Copyright © 2018 SudaNow. 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.