Sudan’s potential is starting to attract many oil majors

By Rebecca Bream, Financial Times

LONDON, Apr 2, 2005 — Sudan is not the sort of place where cautious oil majors are happy to operate, but its potential as a significant crude producer means they are starting to look seriously at the war-ravaged African country.

Sudanese President Omar el-Bashir with ex-President Gaafar Nimeiri and Hassan Turabi among others during the inauguration of an oil pipeline on Monday May 31, 1999, in Heglig, central Sudan. (AP) .

Total of France has been in Sudan for 25 years and is currently locked in a dispute with Aim-quoted White Nile over drilling rights to Block B in the breakaway South Sudan region.

White Nile’s activities have alerted many investors to Sudan’s oil wealth, but several larger oil companies have been examining opportunities there for some time.

China is particularly keen to secure oil supplies. China National Petroleum already owns oilfield assets in Sudan and is keen to buy more. Petronas, the Malaysian state-owned oil company, and India’s Oil and Natural Gas Corporation are also investing in Sudan.

Oil companies from Europe and the US are increasingly expanding into riskier countries in order to replenish their reserves. “They are looking at new regions as the historic sources of oil are going into decline,” said one analyst. But he added that Sudan’s history of civil war was certain to put them off. Companies were prepared to put up with risk in countries where oil reserves were confirmed, such as Nigeria, he said, “but Sudan’s reserves are unproven”.

Sudan’s oil industry will need more investment and development before some companies decide to proceed. One important question will be who has the power to award drilling licences in the south of the country, the central government in Khartoum or the government-in-waiting in South Sudan, led by the Sudanese People’s Liberation Movement (SPLM)?

Total has long dealt with the central government, but White Nile argues old agreements concerning the southern oilfields are now defunct and has struck a deal with the SPLM.