The upstream oil industry could be key to the future of the economy of the North East African state of Sudan. Although the country is considered to be vastly under-explored, it has been a producer of oil and gas for a number of years. The country’s oil reserves are currently estimated at 300 million barrels and its gas reserves have been estimated at 86 billion cubic metres or 0.06% of the world’s gas reserves.

The downstream oil industry in Sudan is an important sector in the country’s economy since most of the country’s export earnings are spent on imported oil. Sudan imports both refined product and crude oil. Imported crude oil is processed at the Port Sudan refinery.

The industry is regulated by the Ministry of Energy and Mining. The Ministry of Finance and Planning is also involved in the energy sector. Its representatives are members of the Petroleum Affairs Board which is responsible for final approval of petroleum contracts. However, day to day control of the oil industry is exercised by the Exploration and Production Authroity, a state owned entity.

Upstream

Although Sudan is considered to be vastly under-explored, it has been a producer of oil and gas for a number of years. The country’s oil reserves are currently estimated at 300 million barrels and its gas reserves have been estimated at 86 billion cubic metres or 0.06% of the world’s gas reserves. Exploration activity began in 1960 in the coastal waters of the Red Sea and Sudanese continental shelf. International oil companies that were involved in exploration activities included Agip, Chevron, Union Texas, Total, Sun Oil and Texas Eastern. The most significant discovery to be made was in 1976 by Chevron in the Suakin Basin, 40 kilometres off the coast of Sudan, close to its border with Ethiopia.

Internal political unrest caused many companies to withdraw from Sudan and the deterioration in security conditions on the oil fields caused the oil companies to suspend all operations in 1984. Since the early 1990’s however, foreign oil companies have begun to return to the country and currently 4 foreign companies are engaged in upstream activities. The current licensee of the Suakin field is International Petroleum Corp which began its operations in December 1991. Arakis Energy of Canada started its operations in August 1993. In the later part of 1995, Gulf International and CNPC commenced operations although Total is suspending its activities.

The oil fields discovered in the 1960’s and 1970’s and only partly developed are in the Muglad Rift Basin Complex in southern Sudan. The Heglig field has an estimated yield of 25 000 b/day, Unity has 35 000 b/day, and further east, the Adar field with an estimated 11,000 b/day yield. The main oil areas of the Red Sea coastal zone and the southern part of the country have not been exploited.

In 1992 Chevron sold its concessions to the Sudanese government. Later these concessions were sub-divided by the government into smaller exploration blocks and some of them were sold. Arakis Energy of Canada has signed a Production Sharing Agreement with the Government of Sudan regarding three concessions, two of which are developed areas in the existing Unity and Heglig Oil fields. Production and exports at a rate of 65,000 b/d is scheduled to begin in 1997, with full production of 300,000 b/d aimed for by 2000.

Development of the oilfields depends on the construction of an export pipeline 1500 km in length from Sudan’s oil fields to the Red Sea Coast. A 20 inch diameter pipeline is planned and will initially start pumping 65,000 b/d with a total capacity of 100,000 b/d. By the end of the century, a second pipeline is scheduled to be constructed to cope with the additional oil production from the fields.

The Sudanese crude oil is waxy in character, has an average API degree of 32 and possesses no sulphur. The paraffinic nature of the crude makes it a good feed stock for lubricating oils.

Downstream

Petroleum products account for 96% of commercial energy consumption. Current consumption of petroleum products is in the region of 160,000 tonnes per annum. A World Bank study has forecast an overall 1.2% growth rate in consumption of petroleum products to the year 2000. The transport and industrial sector are the main consumers of gasoline, residual fuels and gasoil.

Distribution and marketing of fuels products is carried out by Agip, Mobil, Nile Petroleum, and Shell. Earlier in 1996 it was announced that the government had begun negotiations with the distributors to end the government monopoly on the importation of petroleum products other than aviation fuel for foreign aircraft. The plan would be for distributors to import products in proportion to their current quotas (15%, 20%, 35% and 30% respectively) and resell to the government on (unfavourable) credit terms.

The distribution infrastructure consists of river, road, pipeline and railway systems, all of which are in need of improvement. There is a product jetty at Port Sudan and 55 storage depots with a total capacity of 285 000 cu.m. A pipeline runs from the refinery at Port Sudan to the major consuming centre of Khartoum. The World Bank sees Sudan as a country with potential to reduce product costs and has made several recommendations for reducing costs and introducing a more efficient refining and marketing environment.

Sudan is dependent on imported petroleum products as its domestic production and refining capacity is not sufficient to cater for its needs. The country has a small refinery at Port Sudan.

Prices of all petroleum products are regulated and are subsidised.

Shaun Bakamoso

Greetings. I'm Shaun Bakamoso, and I'm thrilled to be your guide through the dynamic world of business news in South Africa here at mbendi.co.za. With a passion for staying informed and a keen interest in the ever-evolving landscape of business, I've dedicated myself to providing you with timely, insightful, and comprehensive coverage of the latest developments impacting the South African economy. bakamoso@gmail.com / Instagram