Sudan and Total: Mutual Benefits
By Alsir Sidahmed*
June 10, 2007 — The expected and yet to be officially announced deal between Sudan government and a consortium led by the French oil conglomerate Total provides a good example of mutual benefits between the two sides.
The deal, which will come on the heel of the US unilateral sanctions provides Sudan with the best possible reaction to those sanctions politically and economically. After all, Total is the fourth oil company in the industry and has operations and presence in 130 countries around the world.
Equally, Total will be benefiting too.
First it will have the chance finally to tap the field that it deserted more than two decades ago and some of its officials were wondering publicly whether they will ever going to see oil flowing out from Sudan.
More important this development fits well Total’s strategy that calls for a steady growth in its oil and gas output from Africa in the range of 5 percent annually between 2006-2010 so as to remain competitive and boost its current African output of 719,000 barrels per day to compete, if not surpass Exxon/Mobil, which pumps 780,000 bpd out of Africa.
That strategy was based to a large extent on its operations in both Nigeria and Angola, but both are members of OPEC and subject to production curtailment. In fact Total’s original plan was to achieve an annual growth of 7 percent, but following Nigeria’s decision to cut its production in line with OPEC resolution, the growth target was lowered to 5 percent.
Sudan, being a non-OPEC producer, provides a chance to escalate with its production. Moreover, its industry is governed by the production-sharing agreements, whereby companies can charge their expenses against cost oil. This makes a lot of difference given the rising cost of the industry in general. Renting a rig, for example, that used to cost $150,000 a day few years ago, now tripled to $450,000.
For Sudan, teaming up with Total is more beneficial too. It brings with it a record of defying US unilateral sanctions. It concluded agreements with both Iran and Iraq despite American threats to enlist companies that invest in projects in Iran in excess of $40 million.
The point to remember is that in the case it made it very clear that it will only start work when UN sanctions on Iraq are lifted, ie there is a room to defy unilateral US sanction, but not the UN ones.
In addition, Total has a record and ability to work in troublesome areas. Its gas project in Burma has drawn a lot of criticism as it provides the governing military junta with $400 million annually. Moreover, Total is being accused by human rights groups of using slavery, forced labor of women and children to build the pipeline that takes gas supplies from Yadana field in Burma to Thailand. Criticism has resulted in court cases against Total that still pending settlement. As Total chairman Thierry Desmarest put it,” every company has its hot spot: Shell has Nigeria; Exxon has Indonesia; for us, it is Burma.”
* Alsir Sidahmed, a free lance journalist, media consultant and trainer. He could be reached at [email protected]