South-Sudan pipeline: Circumventing Susceptibility

BY: Charles Anteros, SOUTH SUDAN
FEB. 17/2012, SSN; As we all know, South Sudan has taken a bold
decision to stop the flow of oil through Sudan in response to Sudan’s
belligerent and unilateral decision to confiscate several oil
shipments that go through the only existing pipeline in the Sudan out
of the landlocked South Sudan, and as ongoing negotiations on a
possible transit fee for South Sudan's oil have been inconclusive.

Consequently, South Sudan has halted oil production while at the same
time it has sought alternative routes, through Kenya, Djibouti and
Ethiopia to construct pipelines to their sea ports.

Reactions have soared from many non-South Sudanese even right after
South Sudan seceded, dispiriting the latter from considering
re-routing its oil.

One prominent pundit on the issue is Luke Patey, who argued that,
”economically, the best scenario for South Sudan's oil is undoubtedly
to stop pipe-dreaming, work out an agreement with Sudan, and continue
to send its oil north.’

For him, as he agrees with other pundits, “Investing in a new
multi-billion dollar southern pipeline is, in the current climate a
financial insanity.”

To convince us therefore, Patey says, the South will incur a colossal
financial burden because of two major concerns. One, the technical and
the other the security risks associated with maintaining the pipe line
between South Sudan and Kenya.

Failing to factor in other paradigms that could have strongly favored
the proposed pipeline, Patey compared the proposed pipeline to the
current existing pipeline that belongs to Sudan as a “pipe-dream
chiefly for two reasons:

The proposed alternative pipeline through Lamu according to him “would
be around 1,800 kilometers ….and the topography of the routes differ
vastly.” “The existing pipeline runs across quite a flat landscape,
requiring only six pumping and heating stations to keep the
highly-acidic crude flowing, the new pipeline would cover diverse
terrain, possibly including the highlands of northern Kenya. This will
require significantly more investment in pumping stations to speed
crude up the inclines and slow it down on the declines.”

As we find out, the speculations surrounding South Sudan’s precarious
clamor for Sudan’s transit route are flawed for a number of reasons.

1). The guesstimate does not match other appraisals. As per the Kenyan
and South Sudanese consultants who undertook the preliminary design,
they had a 1,260 kilometer- long, 48 inch diameter pipeline, conveying
500,000 barrels per day of light (for example Nile Blend) crude oil.

2). By twist of fate, the power requirements for the crude pipeline
project could be tapped from the newly negotiated electricity
inter–connection from the Ethiopian hydro generation plants which was
signed between Kenya and Ethiopia. Besides, the pipeline route through
Kenya would pass through equally empty semi-arid areas without much
right-of-way obstacles, and, yes, security has to be enhanced and
guaranteed.

3). As per the cost associated to these projects, by and large, South
Sudan stands at the best cost effective position than maintaining to
use Sudan’s pipeline, an international standard given. Oil transit
fees costs less than a dollar compared to the $ 36 per barrel. That
means, South Sudan would have saved over $3b dollars yearly in its
revenue.

Moreover, the transit fees required by Sudan, is the total projected
revenue forecast by the Sudan government as per its revenue lost after
the South seceded from Sudan.

Logically therefore, for South Sudan to accept the proposition, it
would be a nincompoop decision.

Oil Remains a Factor for Conflict

After the discovery of oil in Sudan in the 1980s, bad politics,
domination and war intensified in the country, pushing further the
South Sudanese to seek secession. As the South Sudanese aspiration
materialized after 22yrs, the penchant to return to war remains as
both Sudan and South Sudan use South Sudan’s oil as source of revenue
and conflict.

Sudan remains reluctant to a feasible agreement and has further
threatened through its proxy, rebels of South Sudan, to sabotage the
development of other possible routes.

In less than two weeks alone, the Sudan government has again usurped
another 2.5 million barrels of South Sudan’s oil.

Thus, the climate for dialogue has been exasperated further by Sudan’s
reclusive but bamboozling posturing, giving no chance for a potential
economic collaboration and achievement that should ameliorate the
military and political discourse between the two countries seems to be
declining.

Moreover, South Sudan has offered without reservation a handsome $4
billion to cover Sudan loss in revenue as a result of South Sudan’s
secession

Whilst it is clear that pipelines are necessary to fulfill the
operation of oil production in a landlocked country as South Sudan,
the essential concerns such as the location and direction of routes
have now become its major strategic problem.

>From 2007 to 2011, Global Witness reported that the Sudanese
government and the China National Petroleum Corporation, which is the
biggest operator in the region, did not adequately account for
discrepancies in published production figures. Figures given meant,
South Sudan had a shortfall of 600 million dollars a year.

It is worth noting that the explicably complex nature of relationship
between Sudan and South Sudan is itself a liability for South Sudan’s
oil. Right after its independence, Sudan and South Sudan have been at
odds and their political contentions do seem to be relentless.

Unlike Sudan conversely, South Sudan has close ties with Kenya and
Ethiopia and that could significantly play in its favor. Meanwhile,
the three prong approach on pipelines gives South Sudan more leverage
to secure trust of consumer nations that need South Sudan’s oil and
from investors that need stability of oil flow.

Understandably, the reasoning behind Sudan government’s excuse in
remaining obstinate and adamant in negotiating a cogent transit fees
as well as coercing South Sudan to admit to the unreasonable levies,
seems to arise obviously from its heavily indebtedness, the costly
wars in Darfur, Blue-Nile and Nuba-Mountains and Sudan’s reduced
revenues as a result of South Sudan’s secession.

Had the situation been the reverse, with South Sudan heavily dependent
on Sudan’s revenue or resources for that matter, this ordeal could
have been considered futile for South Sudan.

Consequently, even if Sudan prides over a discovery and exploration of
gold, the senseless seizure of 5 million barrels of South Sudan’s oil
gives support to the overwhelming inference that Sudan desperately
seeks money. For Sudan’s actions alone contradict the vanities over
the presence of other resources it now claims to have discovered.

Equally important is for speculators not to concede that South Sudan
and Sudan must come into an agreement on oil sharing deal as if the
two countries were conjoint twins, inseparable and symbiotic.

Assuredly, Sudan is not an indispensable transit and cheapest route.
South Sudan is blessedly surrounded by neighbors who have been hosts
to millions of South Sudanese during the civil war and so is the
synergy between South Sudan and its neighbors to the South, East and
West.

Moreover, besides the oil, some geophysicists believe South Sudan is
virtually sitting on unfathomable and incalculable amount of wealth.
The oil spans virtually into all of South Sudan’s territory.

Sudan’s leverage on the current impasse and other outstanding issues
is therefore attenuated because South Sudan could aggressively tap
into exploring other minerals like gold and diamonds and have them
shipped via other means and routes that do not require pipeline.

If South Sudan therefore requires circumventing its susceptibility, it
must kiss Khartoum a happy Valentine goodbye.

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