Former rebels seek to develop south Sudan’s oil resources

By James Boxell, Rebecca Bream and Andrew England, Financial Times

NAIROBI, Apr 21, 2005 — Costello Garang Ring Lual, minister of international co-operation and development in the former rebel group running southern Sudan, has been busy making plans to develop the region’s oil and mining industries since before the end of the long-running civil war with the north this year.

Southern Sudanese dancing groups take part in peace celebrations in Juba, Sudan, Monday, Jan 10, 2005. (AP).

This might concern the northern government in Khartoum, which claims it is not within his gift to award licences in the south.

But in an interview with the Financial Times, Mr Garang said: “If we recognised [agreements made by] the government in the north, we wouldn’t have been fighting them for more than 20 years.”

He said the former rebels were talking to several international companies but would not rush into deals. “If you see the development of oil industries in the third world, I can’t think of a country that has got rich from its oil,” Mr Garang said.

Instead of striking a deal with one of the world’s biggest listed oil companies, the Sudanese People’s Liberation Movement (SPLM) – soon to form the regional administration under a power-sharing agreement with the Islamic government in Khartoum – has struck a disputed agreement with White Nile, a tiny company listed on London’s Aim market.

Nile Petroleum, the company set up by the SPLM to control its oil fields, has taken a 50 per cent stake in White Nile and awarded the group 60 per cent of a field called Block Ba. Block Ba needs to be developed, but could be in production in three years, according to White Nile, if events go according to the SPLM’s plans.

The UK company’s shares were suspended after they rose dramatically on the announcement of its interest in southern Sudan – a deal the government in Khartoum argues is not valid. It is still unclear whether White Nile’s venture with the SPLM will go ahead.

Mr Garang described the oil majors as arrogant and said working as a partner with smaller companies would give south Sudan the best chance to control development of its mineral wealth.

“We don’t want to be swallowed by huge companies, we want a partner we can talk to,” he said.

Large western companies such as Chevron were active in southern Sudan in the 1970s, but pulled out in the early 1980s when the second phase of the civil war – which claimed 2m lives – started.

Since then Sudanese oil production has been dominated by companies from Asia, including CNPC of China, Petronas of Malaysia and India’s Oil and Natural Gas.

Sudan had 563m barrels of proven reserves at the end of last year and its oil ministry estimates total reserves could be 5bn barrels.

Until recently, the oil majors ignored the SPLM and dealt directly with the central government, although the peace deal had led to a flow of inquiries, Mr Garang said.

White Nile’s founders, mining entrepreneurs Phil Edmonds and Andrew Groves, approached the SPLM more than two years ago when most large companies judged it too dangerous. “They were not afraid to talk to us,” said Mr Garang.

White Nile is still waiting for an operational licence agreement on Block Ba to be signed but faces a counter claim on the block from Total.

Total started to develop the field in the 1970s and re-signed a deal with the Khartoum government at the time of the peace accord. But the SPLM said it had already transferred ownership of any oil assets not yet in production to Nile Petroleum.

Mr Garang said the agreement between Total and the northern government was not legitimate as it went over the heads of leaders in the south. But Khartoum insists the Total exploration deal is binding, and says any new contracts will be awarded by a joint oil commission, which will include government and SPLM representatives and is supposed to be established this year.

Under the peace accords, the belligerents agreed to share southern oil revenue 50-50, honour existing deals and wait for the petroleum commission to be set up before awarding new oil contracts.