South Africa and South Sudan have signed an exploration and production sharing agreement (EPSA) to explore oil in Block B2 of the landlocked East-Central African country.
"The deal - which is strategic for South Africa as an energy consumer will see Block B2 operated by state-owned Strategic Fuel Fund (SFF), the Ministry of Petroleum and Nilepet, the national oil company of the Republic of South Sudan," said the Department of Energy on Monday.
Under this agreement, which includes a six-year exploration period, the SFF alongside Nilepet will launch a comprehensive aero gravity survey exploration campaign, seismic acquisition as well as drill wells.
The B2 area includes productive parts of the Muglad Basin and is part of the 120 000 square kilometer Block B which was split into three in 2012.
South Africa's SFF will also invest in capacity building initiatives, training of South Sudanese citizens, social and community development projects and ensuring local content and the empowerment of women.
"The petroleum resources of Block B2 are vast. For South Sudan to reach its target of bringing back production levels of around 350 000 barrels of oil per day and beyond, we need committed new entrants like the SFF," said the South Sudanese Minister of Petroleum Ambassador Ezekiel Lol Gatkuoth.
"South Sudan has great potential, yet our country remains vastly under-explored, and we believe the entry of new players like the SFF will lead to new world-class discoveries very soon given the aggressive exploration program and great petroleum viability of Block B3. This will support South Sudan's economic revival and improve trade with other African countries," said Gatkuoth.
Last year, South Africa's Department of Energy pledged to invest $1 billion into South Sudan's petroleum industry, with the aim of securing affordable energy supplies for South Africa.
The countries are in talks to set up a 60 000 barrel per day refinery to supply oil products to the local market in South Sudan, as well as to secure exports to Ethiopia and other neighbouring countries.
Acting Chief Executive Officer of SFF, Godfrey Moagi, said the SFF is looking forward to making discoveries in Block B2.
"We believe there are highly significant quantities of oil in Block B2. Our work program and acquisition of new seismic will reveal better information on various structures. We look forward to a few wildcats and appraisal wells in the near future. We are thankful to the Government of South Sudan for this opportunity," said Moagi.