Sudan joining OPEC: The real issues
By Alsir Sidahmed *
Dec 3, 2006 — Four main issues are facing the oil sector in Sudan, none of them is going to be solved by the much-talked about joining the Organization of Petroleum Exporting Countries (OPEC).
Those issues are: a technical problem in the form of increase in water cuts in blocks 1 and 2 and to some extent block 4, all operated by Greater Nile Petroleum Operating Co. (GNPOC) to the extent that it led to drop in production from these blocks from the peak of 330,000 barrels per day (bpd) early last year to around 254, 000 bpd currently.
Second the twin problems of Petrodar company that operates blocks 3 and 7 in Adar Yale and Melut area. The problem is the failure of the operator to make ready facilities be it tankers at the marine terminal to handle 200,000 bpd being produced. And as a result the company is pumping only 160,000 bpd.
More serious is that Dar blend, which is produced by Petrodar did not meet the technical specifications it was supposed to meet. That ended in the crude being sold well below the $10 a barrel differential compared to the main Nile Blend, when it was priced, a move that results in big losses.
The third problems concerns oil companies operating in the South Sudan, namely White Nile Company Ltd., Ascom and Jarch. None of them has a clear legal base to safeguard the interests of the people of Southern Sudan in the first place. These companies are seen as a political ploy and a way to pressure the National Congress Party (NCP), which has been regarded by many Southerners as unjustifiably snatching the oil ministry.
But to quarrel with NCP is one thing and to allow for a foreign oil companies to operate in an ambiguous legal way is another.
More seriously is the security issue, which constitutes the fourth problem. The bloody clashes of Malakal last week are a reminder. Unfortunately, the oil industry in Sudan was born amid a severe political strife. That strife led the government to arm local militia to help guard oil fields.
Though the Sudan People’s Liberation Army (SPLA) managed to mount a successful attack on Chevron’s camp at Rubkona in 1984, only nine months after it was established, thus forcing Chevron to suspend its operation in Sudan and leave the country eventually, but from August 1999, when first cargo of oil was exported till October 2002, when agreement of cessation of hostilities was signed between the government and SPLM, oil exports did not stop for one single day.
This fact led Walter Kansteiner, then US assistant secretary of state for African affairs, to propose to late Dr. John Garang to work towards a peace deal that will allow the South to share oil wealth, instead of blocking it. And that is how the wealth sharing agreement came to being.
The security arrangements embodied in the Comprehensive Peace Agreements calls on the militia to either join the government army or SPLA, but for those unwilling, for whatever reason, to join SPLA there remain a problem for they can’t simply move to the North and forget about their base in the South.
All these are oil and oil-related issues that are in a way awaiting the operationalization of the National Oil Commission (NPC). Last month First Vice President Salva Kiir announced that most of the stumbling blocks before NPC were sorted out and it will become operational soon.
Part of the problems listed earlier were of technical nature and the other part drop in the political basket, but NPC in the end is a political body co-chaired by the president and his first deputy.
In all these issues joining OPEC is not going to help. Rather it may complicate things.
The organization, which meets Dec. 14, in Abuja, Nigeria, speaks that oil inventories in the industrialized countries are so high that a 100 million barrels have to be shaved out of it, according to OPEC guru, Ali Al-Naimi, the Saudi oil minister.
There is only one way to make that happen: get OPEC to reduce its output more and force consumers to resort to their inventories. For potential members like Sudan that means less revenue from oil, which is accounting for some 80 percent of the federal government income and almost 99 percent of that of government of Southern Sudan.
The real question is not whether to join OPEC or not, but who will bear that cost and why?
Alsir Sidahmed, is a free-lance Sudanese journalist, media consultant and trainer based in Toronto, Canada.