Oil and Southern Sudanese after Independence

BY: Urbano Tipo: SUDAN

JULY 15/2011, SSN; Some political analysts say that the oil reserves
in Southern Sudan will dry up by 2020. If that is true, then we have
already used one-third of the quantity of the reserves. The proceeds
of the output have been misused by the privileged few Oil Sheiks of
the South who managed to put their hands from the very beginning in
2005.

Technically, one doesn’t have to agree with the statement made on BBC
that South Oil fields will get dry by 2020 because there are three
separate basins in which oil reserves have been discovered; namely,
Melut, Bentiu and Bor basins respectively. Only two basins Melut and
Bentiu are operational. Melut and Bor basins are separated by an
anticlinal axis in which there can be no oil migration between them.
As of present no indications that these productive oil fields are
getting exhausted soon.

Discovery of oil in South have flash new understanding by geosciences
about the tectonics and continental drift of the African Rift Valley.
There could be more basins with oil not yet discovered.

Just for the benefit of the doubt, let us assume that the analysis
mentioned above is true that our oil will dry up by 2020. What will be
the way forward? What precautions should be taken to make the maximum
use of remaining oil proceeds in order to develop the Independent
South Sudan adequately? How will we avoid these proceeds not to get
into the hands/pockets of these few South Oil Sheiks?

Oil companies generally do not have good reputation worldwide because
of corruption. They come in to make profit. They do not participate in
the development in the county they operate in. They destroy the
environment without putting remedial measure to restore it. They have
loose money use to bribe top government officials to keep blind eye of
bad practices they are committing like not paying required taxes.

The South as an independent state is now left to devise better system
and good practices on how to use the remaining oil proceeds for
development of the south. We have no experience in oil business which
remains as a handicap for the south.

Oil contracts are usually not revisable or amendable once signed. The
current oil companies operating in the south did signed contracts with
North Sudan government. Therefore the South is not obliged to honor
these contracts. The South and Oil Companies should come up with
contracts that are elaborate and detailed to include environmental
protection and respects human rights. The rights of the communities in
oil producing areas are violated since they always evicted and without
compensations.

Addis Ababa talks seem to have concentrated on pipe line issues rather
than reviewing of contracts with operating companies in South Sudan.

If the important aspect is taking oil to market destinations through
pipe line, lets us review the following feasible options;

1.       Current pipe line to Port Sudan: This pipe line was
constructed when Sudan was still one country. The reason was probably
based on gravity follow with minimum pumping stations. The gradient
between oil producing areas in the interior and Port Sudan is about
300 meters above sea level. The pipe line is cost effective. Here
depends on who owns the pipe line, the Government of Sudan or Oil
Companies. Since this pipe line is already operating, then South Sudan
can reach an agreement with North Sudan to continue exporting oil
through to Port Sudan.

2.       Construction of pipe to Djibouti: This pipe line has to climb
the ridges and mountains of Ethiopia then slopes to the coast to
Djibouti. Although some politicians think it is a shorter route than
Port Sudan, the engineering aspect can also be challenging. Given the
fact that the oil fields might dry by 2020, then route may not be
feasible and cost effective.

3.       Construction of pipe line to Mombasa in Kenya: It will be a
nightmare to construct a pipe line from oil producing areas in South
Sudan across Kenya to the port of Mombasa. It is the least option to
consider. It is not cost effective neither will anyone give financial
assistance for the construction of this pipe line.

The first option seems to be most viable solution to export oil to
outside markets, but with caution. Base on the public speech by SPLM
Secretary-General that it could cost 41 US cents per barrel to reach
the markets is not correct. Given the fact he has no mathematic
background, he just grabbed the cents and nothing else.

To prove that he is wrong and the person who told him lied let’s pose
the following questions; what is the cost to transport one barrel of
crude oil per one kilo-meter. What is the distance from a producing
area, for instance, Hegillege in Bentiu to Bashari terminal in Port
Sudan? Of course the distances from Bentiu and Paliog in Melut are
different. Who will meet the operation cost of the pipe lines? What is
the grade of our crude oil? The price of crude oil depends on the
grade in the international markets. Will the crude oil be sold in Port
Sudan or will be transported to the customers at their destinations
like Hong Kong, Rotterdam or China?

The price quoted by Mr. Secretary-General might not have put in
consideration the overhead cost. It will be a surprise later the net
profit the South get will just minimal to our expectation. The
Secretary-General will have to put these questions into consideration
when he is authorized to negotiate oil agreements next time on behave
of South Sudanese.

The next contracts should be environmental friendly and respect of
human rights of South Sudanese. Previous contracts violated these
codes, for instance, Chinese were permitted to shoot and kill natives
they find within the vicinity of oil fields in Unity State. The
communities in Melut are now suffering from pollution disasters.

South Sudan is an oil producing region, but, do have a single refinery
to meet its domestic needs. When the boundaries were closed recently,
not allowing fuel to get into the South, price of fuel sky-rocketed in
the South. This should be a lesson learned to think towards
constructing a refinery.

If the South were to establish refineries, this will create employment
opportunities to South Sudanese in many aspects. Some industries will
emerge as a result of by-products of the oil. Possible sites for
construction of refineries are; Melut, Adok, Shambe, Juba and Kopeota
subject to assessment results.

Oil business is quite complicated. The South needS to survey the local
markets and markets in the neighboring states like Ethiopia, Kenya,
Uganda, Congo and Central Africa Republic in order to develop good
market strategy. In additional, there is need to survey sites where
refineries could be located with South.

Oil in the South is for South Sudanese and their next generation. We
know how the past the proceeds from oil sales were used since 2005.
The priority was private pockets to built house in Australia, Kenya
and Uganda. Upkeep of individuals extended families. Pay government
employees salaries which include also ghost employees. Much of the
proceeds were not accounted for. No one will account for July 2011 oil
money.

Who'll be responsible? Since the South in now an independent State,
who will be responsible for marketing of oil from August onward? Who
will control the proceeds, SPLM, Ministry of Finance or Governor of
Central Bank? The reason for posing these questions is find better
ways on how the next oil money can be use for the benefits of all
South Sudanese without exceptions. Certain percent of the oil money
can be invested on stocks on the Wall Street for our next generation.
These of the money can be used to develop the infrastructures in the
country.

Urbano Tipo can be reach at [email protected]

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