South Sudan insecurity, uncertainty of future impede investors
March 17, 2007 (NAIROBI) — The 2005 peace agreement, which ended two decades of civil war in Southern Sudan, not only brings the opportunity for millions of people to return home and begin new lives but also gives investors an opening in a needy country with large oil reserves.
Experts had predicted that oil and gas companies would rush in to expand Sudan’s oil production from more than 350,000 barrels a day recorded in June 2004 to over 400,000 a day.
The country has proven reserves of 635 million barrels, much of which has not been accessible because of the war.
But Southern Sudan government officials said this week that the rush for the vast region’s massive oil wells has been slow in coming since the signing of a peace accord slightly over two years ago.
Optimists say investor interest is there, but the potential oil hunters do not know where to begin.
Pessimists cite the lack of an assurance on the future governance structure and rampant insecurity for the sluggish pace of oil investors.
“There are two ways I would like to look at Sudan, a kind of analogy,” Canadian lawyer Jay Park, a partner of International Energy Group told the recently concluded international investment conference for Southern Sudan.
“You have remnants of buried treasure and you do not know how to find it or how big it would be,” he told participants at the conference which ended in Nairobi on March 15.
Sudanese authorities have been hosting investors to an annual investment conference since the southern area attained semi- autonomy from the formerly Arab-dominated government based in Khartoum, with the signing of the Comprehensive Peace Accord.
Oil industry investors took a wait and see attitude following the signing of the peace accord in Nairobi, which was witnessed by international dignitaries, including 15 African heads of state and former American secretary of state Collin Powell.
“The question investors ask is how do we get in? There is a lack of clarity on where to get the mining license, the fiscal framework and political stability,” says Stewart Williams, a Senior Analyst, Africa Energy Research, Wood Mackenzie.
Sudanese officials insist the concerns expressed by the potential investors are flimsy, insisting that most of Africa’s oil spots were largely developed during turbulent times and cite oil industry investments in Angola, Nigeria and the Central African Republic.
“Why are investors skeptical about Southern Sudan, insecurity or uncertainty of future government? Investors will always continue to invest,” says Dr Festo Kumba, a former university don who is Southern Sudan’s Animal Resources and Fisheries Minister.
He says investors should be willing to take the risks, insisting that “Southern Sudan might not be too stable but there is land for petroleum exploration.”
Investors fear the Southern Sudanese authorities are too busy consolidating power and the office of the presidency is currently galvanizing every available authority.
Jonathan Bearman, Managing Director of Clearwater Research Services Limited, an oil risk information consultancy firm, says South’s fortunes are worsened by the hanging economic sanctions that the United States and the UK are planning against Khartoum.
“We are likely to see some changes once the Darfur issue is resolved,” Bearman says.
The U.S. position in Darfur, he says, is a major threat to potential oil investors who might not sell the commodity once the United Nations tightens the noose around Sudan.
The 2005 landmark peace accord does not apply to the fighting in Darfur, a vast western region where tens of thousands of people have died in a conflict that has lasted almost two years, pitting rebels against government forces and allied Arab militia, known as the Janjaweed.
(Xinhua)