South Africa and Sudan, Friday, signed an agreement that could see Pretoria invest up to $1 billion in South Sudan’s oil industry. State-owned companies, South Africa’s Central Energy Fund and South Sudan’s Nile Petroleum Corporation will negotiate details of the deal expected to include the construction of a refinery in Sudan.
South Sudan has the third-largest oil reserves in Sub-Saharan Africa but it currently produces around 155,000 barrels per day, much lower than its output at the start of the latest civil war in the country when the main oil firms in the country — China National Petroleum Company (CNPC), Malaysia’s state-run oil and gas firm Petronas and India’s ONGC Videsh — produced about 245,000 bpd. However, South Sudan does not have a refinery and therefore sends crude to Sudan for processing and export via pipeline. At a time, Sudan was charging $34 per barrel for South Sudan to transport oil through pipeline to the oil terminal at Port Sudan. The new deal with South Africa paves the way for increased revenue for South Sudan which funds 98 percent of its budget with oil proceeds.
Apart from constructing a refinery, South Sudan’s oil minister Ezekiel Lol Gatkuoth said the investment from South Africa will also go into building pipelines, as well as train workers and engineers. The deal also covers exploration. According to the International Monetary Fund (IMF), oil reserves will likely halve by 2020 if no new finds are made.
“The whole project, the block exploration together with the refinery, the pipelines, we are looking an investment of more than one billion US dollars,” said South Africa’s energy minister Jeff Radebe.
According to him, the refinery when complete will have a capacity of 60,000 barrels of oil per day.