South Sudan in talks with India to revive closed oil blocks

KOLKATA (miningweekly.com) – The government of South Sudan has initiated talks with India to revive oil blocks closed in the wake of a civil war in 2013.

During preliminary discussions between government representatives of the two countries, South Sudan offered compensation to ONGC Videsh, the overseas arm of India’s oil and gas exploration and production major, ONGC, for the period that the blocks were closed.

However, Indian government officials aware of the talks, have said that key aspects relating to the current law and order situation in South Sudan and the security environment of ONGC personnel were yet to be discussed.

At the time that operations were suspended in December 2013, all ONGC personnel were evacuated. Any offer to revive these assets would involve a new security protocol before Indian personnel could be redeployed, the official pointed out.

Despite closing the oil blocks and evacuating Indian employees, neither the Indian government, nor ONGC Videsh have considered the option of relinquishing the equity stake, as South Sudan is considered to be of long-term strategic interest to India’s overseas energy security.

The assets in South Sudan have been closed down “in a methodical way” to allow operations to be resumed at a minimal cost when the security situation in Africa’s newest country improves.

ONGC Videsh holds a 25% equity interest in the Greater Pioneer Operating Company, which produced 37 000 bbl/d, and 25% in Block 5A, which produced 4 600 bbl/d.

The total Indian investment in the oil and gas sector in Sudan was pegged at $2.5-billion at the time when Sudan and South Sudan were partitioned 2011.

While the government of South Sudan has offered compensation to get ONGC Videsh to revive the oil blocks, it is yet to be decided whether such compensation would include part of the irrevocable losses incurred at the time of the shutdown, and the compensation for a loss of production over the last three years, Indian officials have said.

The transition government of South Sudan is keen to return the country’s oil production to at least 500 000 bbl/d, which was the level produced at the time that the country was partitioned.

However, Indian officials have pointed out that any move by ONGC Videsh to resume operations would follow only after a fresh assessment of "ground conditions in and around the oil blocks".

This is imperative against the backdrop of several reports of the civil war in the region leading to acute degradation of the environment from decrepit oil production infrastructure, displacement of communities and continuing dislocation of local area governance, the officials said.

They also did not rule out a fresh socioeconomic-impact study before ONGC Videsh submitted a fresh proposal to revive the production facilities.