According to EIA Sudan has proven oil reserves totaling 563 million barrels. So far Sudanese oil exploration has been limited to the central and south-central regions. 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 and gas reserves are vast. The downstream oil industry in Sudan is an important sector in the country’s economy as Sudan has three refineries and imports both refined product and crude oil. The completion of a new refinery has made Sudan largely self sufficient and able to export refined as well as crude products. Sudan still needs to import jet fuel however.

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 Authority, a state owned entity.

Although Sudan has been producer of oil and gas for a number of years it is considered to be vastly under-explored. The country’s oil reserves are estimated at between 600 million and 1.2 billion barrels with recoverable reserves estimated at greater than 800 million barrels. The country is also rich in natural gas with reserves estimated at 3 trillion cubic feet (tcf). Production of oil in 1998 is estimated at approximately 600,000 metric tons (12,000 bpd). Figures for September 1999 are estimated at 7.2 million metric tons or 146,000 bpd.

Exploration activity began at the end of the 1950s in the coastal waters of the Red Sea and Sudanese continental shelf. 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 began to return. In December 1996 the Greater Nile Petroleum Operating Company (GNPOC) was formed comprising the China National Petroleum Corporation, Petronas, Sudapet and Araxis which provided a much needed injection of capital, especially into developing the Unity and Heglig fields. In November 1997 the United States imposed sanctions against Sudan on the basis that profits from oil were being used to fuel the civil war. The pressure of sanctions has kept American firms out of Sudan, although Canadian company Talisman Energy is still operating in the Sudan. Talisman Energy has also purchased Araxis’ share in GNPOC. Current players in Sudan include GNPOC, Lundin Oil (IPC Sudan Ltd), Petronas, Sudapet, Gulf Petroleum Corporation (GPC), China National Petroleum Corporation (CNPC), National Iranian Gas Company, OMV, Royal Dutch / Shell, and Talisman Energy. TotalFinaElf are reportedly looking to return to their concession in the Bor Basin and are listed as being the most likely partners to Petronas in their permit for Block 5B.

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. In August 1999, the first shipment of crude oil was exported from Sudan to Singapore. The new Red Sea terminal is located in the port of Bashair about 25 kilometres south of Port sudan. Port Bashair terminal has a storage capacity of 2 million barrels with the potential to increase to 3.2 million barrels with the use of reserve reservoirs. The terminal at Bashair is supplied via a 1,500 kilometre pipeline from the Heglig oilfield which was opened in May 1999. Traders Trafigura have been appointed the official marketers of Sudan’s Nile Blend. By the beginning of 2000, 15 million barrels of oil had been shipped from Sudan.

Distribution and marketing of fuels products is carried out by Agip, ExxonMobil, 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.

Consumption of petroleum products

Petroleum products account for almost all of commercial energy consumption. The transport and industrial sector are the main consumers of gasoline, residual fuels and gasoil. In 1997, according to the United States Department of Energy, consumption in the Sudan was of the order of 1.3 million metric tons. The breakdown of consumption per product is provided below.

Product Consumption 1997 (metric tons)
Gasoline 237,112
Jet fuel 30,840
Kerosene 59,025
Distillate 294,988
Residual 501,968
LPGs 25,802
Unspecified 179,517
TOTAL 1,329,251

Sanctions and Civil War
Sudan still suffers from serious barriers to economic progress, though, chiefly an underdeveloped infrastructure and a long-running conflict with rebel movements in the south of the country, which is primarily Christian and animist. Government spending on the conflict has meant that resources available for development are very limited.

The United States imposed economic sanctions against Sudan in November 1997, due to the Sudanese government’s sponsorship of international terrorism and poor human rights record. The sanctions prohibit trade between the United States and Sudan, as well as investment by United States businesses in Sudan. In February 2000, the US government extended its sanctions to include Sudapet (the national oil company) and the Greater Nile Petroleum Operating Company (GNPOC). This was a contentious move in that Canadian international Talisman Energy is a 25% shareholder in GNPOC. Despite their interests in the Sudan, however, no US sanctions were placed against Talisman Energy. Because of pressure, Talisman stated in December 1999 that it would sell its assets in Sudan, should this be most beneficial for its shareholders. It stated, however, that the assets were not for sale at that time or in the near future. In October 1999, Canada announced the formation of a fact-finding mission to investigate the operations of Canadian oil companies in Sudan.

In April 2004, as part of a strategy to encourage the Sudanese peace process, the U.S. did not impose additional sanctions under the 2002 Sudan Peace Act.

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