South Sudan’s Oil and Power is an opportunity for peace through economic development and compromise in the era of Billions At Play
By Nj Ayuk, Executive Chairman, African Energy Chamber and CEO, Centurion Law Group
Juba, October 28th, 2019: I truly believe that investment and economic development are the keys for peace and stability in Sub-Saharan Africa. I have said it again and again. I wrote dozens of articles and even a book partially dedicated to that particular belief. So, it is with great joy that I see that same belief being followed and put into practice in one of Sub-Saharan Africa’s nations most impoverished and most affected by conflict in recent years, South Sudan. The world’s youngest nation has been in dire straits, to say the least, for quite some time.
Since the landmark peace deal signed by President Salva Kiir in September 2018, the ceasefire has held, and that has opened the doors to set up the country’s structure again. To be sure, South Sudan’s (and Sudan’s) main source of revenue comes from oil. During the conflict, oil production was halted and infrastructure damaged or destroyed. Further, the only export pipeline out of South Sudan, where most oil fields are located, goes through Khartoum, in Sudan.
Now, if this set up has been a source of tension and conflict in the past, understanding its various aspects is also the beginning of finding solutions for stability. As the former South Sudanese Minister of Petroleum, Ezekiel Lol Gatkuoth, said in April 2019, “the lifeline and the backbone of the economies of South Sudan and Sudan must continue to stand strong. The economies and the people of Sudan and South Sudan share a common destiny. The flow of oil is vital for the people of both nations and shall remain uninterrupted”.
This is no small truth. Cooperation, rather than individualism is the only thing that will keep these two nations from conflict and allow them to take advantage of their resources to build lasting peace and promote economic development.
Now, there is a lot more to be taken from what has been happening in South Sudan than just a lesson in diplomacy. The South Sudanese leadership is conscious that oil is their only door, at the moment, for economic stability.
But further, they understand that expanding their oil production is the way towards a brighter future and that, for that to happen, they must lure investors with an attractive business environment and investment security.
So first, the Ministry of Petroleum started by supporting the operating companies in the country and pushing them to increase oil production and reopen oil fields that had been shut down during the civil conflict. A target of returning to a pre-war daily production of 350 thousand barrels of oil per day was set for 2020. Ambitious as it may be, it has set the government’s tone regarding its oil industry – “We want investment now!”.
It’s working! Slowly but surely, old oil fields have been brought online and the national daily production rate, although far from its ultimate goal, standing today at 180 thousand barrels per day, is consistently increasing, step by step.
Then, there is the issue of creating an enabling and well developed legal framework. In order to attract foreign investment, the South Sudanese government has decided to review and improve the laws overseeing the oil industry and has sought outside expertise to help. Local content and empowering women must be key to this process.
Again, it is working. In 2017, Pan African E&P company Oranto Petroleum was the first to sign a production sharing agreement in South Sudan since, well, since the country was formed. The company is now operating block B3. To be sure, Oranto is no small actor in Africa’s main oil plays, and its entry in South Sudan marked a sign of change in this young nation’s renewed oil industry. We would have to wait two years until another exploration and production sharing agreement (EPSA) was to be signed in the South Sudanese plays. In May 2019, the South African state-owned Strategic Fuel Fund (SFF) signed the second EPSA in South Sudan’s young history for the license of block B2.
And now, that will all come together when the South Sudanese Minister of Petroleum Hon. Awow Daniel Chuang, a technocrat and results oriented Minister, announces South Sudan’s 2020 oil and gas licensing round at two strategic conferences this October: Africa Oil & Power 2019 in Cape Town, South Africa, on October 9-11 and South Sudan Oil & Power (SSOP) 2019 in Juba on October 29-30. This is a historic landmark for South Sudan and a fantastic opportunity for investors to tap into this incredibly proliferous and underexplored oil region (it is estimated that at least 70% of South Sudanese oil is still to be found).
The Ministry of Petroleum is also searching for companies that will work on gathering geological and seismic data on the country’s basins so it can be better prepared to captivate the interest of Canadian, American, Russian, Asian and European exploration and production companies in exploring the country. The event will open a new era for South Sudanese oil and is bound to have a dramatic impact on the country’s economic and social future. The government is also seeking partners to develop environmental assessments on the current and prospect oil fields in the country, as social concerns over environmental damages have also taken central stage in the cabinet’s plan for the industry. Besides all that, one of the main debate topics in the upcoming SSOP is the role of women in the energy sector, another topic that I press upon repeatedly especially in my recent bestselling book Billions at Play.
Finally, the cherry on the top of the cake, the end of August 2019 saw the announcement of the biggest oil discovery in South Sudan in years. Over 300 million barrels of recoverable oil were found in the Adar oilfield, in block 3, operated by the Dar Petroleum Operating Company consortium, which is led by the China National Petroleum Corporation (CNPC). Further reserves could be on the way as other wells are currently under evaluation in the same area. Oil should start flowing from this field within 12 months.
This is to say that, South Sudan came out of a devastating war and turned itself around, took advantage of its natural resources and created the conditions to attract foreign investment, built international partnerships with neighbours and fellow African nations and developed a legal and business framework that would enable growth, while seeking peace through economic development and compromise, never undervaluing social, regional and ethnic concerns.
What else can I say, if the youngest and one of the most impoverished nations in the world can do it, so can the rest of Africa. The time is now.
NJ Ayuk is the CEO of Centurion Law Group and the Executive Chairman of the African Energy Chamber. His experience negotiating oil and gas deals has given him an expert’s grasp of Africa’s energy landscape. He is the author of bestselling book, “Billions at Play: The Future of African Energy and Doing Deals.”