Sudan: A Ray of Hope From the Oil Field

2 January 2020

Amid growing frustrations because of the slow pace the government is handling the twin challenges of dismantling the remnants of the deposed Ingaz regime and putting foundations for a new Sudan came a ray of hope in the form of a deal to utilize the associated gas in blocks 4 and 6 in western Sudan.

The deal is significant from a number of angles. It is utilizing the associated gas that used to be flared up in the air. According to the deal that gas will be treated to generate an electricity of 460 megawatt that will really make a difference in the Kordofan and Darfur states, who have been complaining for a long time from lack of development and services. Availability of electricity will make a difference. In addition that flared gas can generate 350 tons of cooking gas; and moreover 3000 tons of liquefied petroleum gas (LPG), when the project is completed in 20 months following the final signature scheduled for next month with the government at an estimated cost of $850 million.

An additional significance of this deal is that it involves a foreign partner at the time foreign companies, namely the Asians, have been leaving the scene of late for variety of reasons. Those Asian companies have played a significant role in enabling Sudan joining the club of oil exporters back in 1999, but because of their mounting debt to the government they started to exit.

A third significant feature of the deal is that it ushers Sudapet, the country's national oil company, in the field of treating associated gas business. The project will be a joint venture between Sudapet, who will have a 51 percent share and its counterpart the Norwegian Monitor Power System (MPS), who will have the remaining 49 percent.

Having a Norwegian partner makes an added value given the fact that Norway has a unique experience in handling its oil industry and is adopting one of the best policies in the world in terms of applying measures that care for environment, future generations and the general organization of the industry. Interesting enough to note Norway is part of the troika in addition to the United States and Britain, who have been keeping a close eye on developments in Sudan for years and was entrusted to give advice on oil issues.

One of the main issues the new project will face is how to maintain the current level of production and how to increase it. Sudan's oil production has been dwindling over the years for many reasons including lack of investments and is estimated currently to be between 65,000 -70,000 barrels per day. The more there is oil output the more associated gas is produced and vice versa.

Moreover, Sudan oil industry has a low rate of recovery estimated to be in the range of 28 percent and there were some attempts to raise that rate interesting enough with the help of the Norwegians, though nothing concrete came out yet. And this could be one of the first tasks for the new joint venture to tackle to ensure that there is enough associated gas produced to continue feeding the new products.

Another aspect is to make use of the Norwegian involvement in the master plan to reorganize the oil and energy sector in general. The oil industry in Sudan has developed into a haphazard way as entities were added to meet certain needs at the time without having a strategic view of the future. Accordingly there was mainly the ministry and the general petroleum corporation in whose name many of the country's oil deals with foreign partners were concluded.

In one of the chaotic steps taken by the Ingaz regime in its last days was to abolish the petroleum corporation without even abolishing the law that governs it and its activities. Though the current government plans to rectify that decision, but that should be looked at as an interim measure to ensure the legality and smooth performance of activities for the oil industry.

More important is to have a long-term, strategic look at the whole oil industry in the country and reorganize it in a way that ensures supervision, ability to perform operations in a professional way and create an environment for the industry to contribute positively for change in the country.

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