South Sudan struggling to ramp up oil production after war
JUBA, South Sudan — Oil-rich South Sudan is struggling to increase production of crude several months after the end of its civil war and the political upheaval in neighboring Sudan is in part to blame.
The signing of a peace deal in September helped open the way to resuming drilling in South Sudan’s key region of Unity state, but output has been more sluggish than expected in the country with Africa’s third-largest oil reserves.
“We had wanted to be farther along but it’s not an easy task,” the oil ministry’s director-general, Awow Daniel Chuang, told The Associated Press. That has hurt recovery from a five-year conflict that killed nearly 400,000 people. Billions of dollars in oil revenue were lost during the war as many oil rigs were shut down or destroyed.
Production in Unity state has increased to 175,000 barrels a day since September but is far from the target of 200,000 barrels. Before the civil war began in late 2013, production across the country had been about 350,000 barrels a day, according to the oil ministry.
Chuang attributed the slow recovery in part to technical challenges, the lack of funds for new machinery and fluctuating oil prices.
The surprise ouster of Sudan’s long-time dictator Omar al-Bashir in April also has complicated recovery. South Sudan and Sudan share an oil pipeline and other resources and earlier this month South Sudan’s oil minister had to travel to Sudan to release materials stranded at Port Sudan, the sole port for South Sudan’s oil exports because workers were busy protesting issues related to the post-Bashir transition.
Despite the obstacles, South Sudan’s government says it should come close to achieving its oil production target by year’s end when it expects all five rigs in Unity state to be operational. Three are now functional.
But industry experts say the reality on the ground has shocked potential investors and is starkly different from what the government is conveying, Shawn Duthie, senior analyst with Africa Risk Consulting, told the AP.
“Our in-country sources have said that oil production has not really increased in the north and that infrastructure in some parts of Unity state were almost non-existent,” Duthie said.
The International Monetary Fund, which visited South Sudan earlier this year, cited an increased daily oil production of about 20 percent. That contrasts the government’s numbers, which reflect twice that amount.
South Sudan’s oil ministry said it needs approximately $1.5 billion over the next five years to invest in updated equipment to extract more oil and map unexplored areas. Many of the country’s oil fields are old, which means they are producing more water than oil, the ministry said.
The government is reaching out to foreign investors. South Africa this month signed a $1 billion deal for oil exploration and production expected to begin this year.
South Sudan’s oil sector continues to face scrutiny by the international community as a “major driver” of violence and human suffering, according to a report by the United Nations Commission on Human Rights in South Sudan in February.
The sector is also accused by human rights groups, the UN Security Council and others of lacking transparency.
Earlier this month President Salva Kiir confirmed plans to allot 30,000 barrels of oil per day to fund a road construction project signed with China’s state-owned Shandong Hi-Speed Group. Instead of putting the oil money into South Sudan’s Central Bank, as stipulated by last year’s peace deal, the money is being deposited into a “special fund” in China to make the transfers easier, Information Minister Michael Makuei told the AP.
The deal is sounding “loud alarm bells” due to its lack of transparency and accountability, said Nelly Busingye, regional coordinator for east and southern Africa for Publish What You Pay, a global campaign for an open and accountable extractive industry.
“This is all the more alarming because in recent years oil revenue has been used to procure weapons, fund militias and line the pockets of those in power,” said Brian Adeba, deputy director of policy at the Enough Project, a Washington-based advocacy group.
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