Africa Energy Series: War-torn South Sudan on a Charm Offensive

Local company Trinity Energy, which is active across the downstream spectrum, is also dusting off plans to build a 50,000-bpd capacity refinery. A feasibility study was completed in 2013, but the project stalled because of insecurity from the outbreak of civil war in December 2013. Work is now planned to commence at the end of 2017 on a refinery in the oil-producing area of Paluch, and It is scheduled to be commissioned by 2020.

The South Sudanese company says it is also considering a product pipeline to Ethiopia^[1] so that it can market its output regionally. The East African markets import finished petroleum products to the tune of nearly $12 billion annually, and the market is growing by 8 percent each year. Government says in the downstream industry, a more secure environment will positively impact the economy overall and allow it to build a more efficient system that will reduce fuel shortages.

South Sudan’s government is not only pinning its hopes on oil, but also encourages companies to explore and fully assess the country’s gas resources. One of the companies is the Nigeria-based Niger Delta E&P, which entered the country in 2015 through a joint venture with national oil company Nilepet. Nilepet has a 51% stake in the joint venture and Niger Delta has a 49% stake. The company, which has experience in gas monetization, says it is interested in gas opportunities in the east African country. Niger Delta says it finds hope in the fact that no one knows the full capacity of South Sudan’s gas resources. It is stated that the mandate of the joint venture is to monetize and commercialize the gas resources of the country.

Juba also seeks help from another African country, Equatorial Guinea, and hopes it will lend experience to the country’s upstream industry on how to make better use of gas resources. Juba’s laws prohibit gas flaring, and the wastage of national endowment will not be tolerated in the future. The Ministry of Petroleum says it will promote any new means of capturing gas and using it; it plans to get gas-to-power initiatives going urgently. Since South Sudan has a massive power deficit, Niger Delta is already looking at what the government wants, and plans to capture the flared gas and provide power from it.

The company says a feasibility study has already been conducted, and it is now moving to the implementation phase. It is also believed that the pilot power project will operate out of the same power plant that already exists at the Dar Petroleum Operating Company production facility. For now, the company plans to produce just one megawatt to prove that it can be done using available infrastructure.

Another key player in South Sudan’s oil and gas industry is the Alpha Commercial Bank- a joint venture national bank with local and international shareholders. Since current political and security climate makes financing energy ventures more expensive, the bank is critical in the development of the oil and gas sector. One duty of the bank is providing financial services to the state-owned oil company Nilepet.

Victoria Otieno, Alpha Commercial Bank’s managing director, says projects in the oil and gas sector require millions or billions of dollars in financing. For those projects, the bank looks at private equity firms and other private funds that are interested in a project, and approach them for lending. For larger upstream projects, the bank looks for private equity partners. Alpha Commercial Bank has recently been in talks with private equity firms in the Middle East.

Despite the ongoing conflict, Otieno believes it is the right time for investors who are looking at coming into South Sudan. She believes that there are a lot of opportunities in different sectors; however, the UAP Insurance company says government needs to assure investors that their businesses are secure. The company which covers the general insurance risks for Dar Petroleum Operating Company, Greater Pioneer Operating Company, and Sudd Petroleum Operating Company, says the civil war makes it difficult for insurance partners to support political and terrorism covers, as these are not risks, but realities.

The Veterans Security Services company also has a similar message for government. It states that South Sudan has a huge potential, but everything revolves around security. Additionally, if security can be improved, then the country is likely to attract new investors. Warrior Security Insight company, which offers manned guarding, technical security solutions, and risk management services, says that South Sudan remains open for business; several companies continue to operate in the country despite the conflict.

1. ^{^} Ethiopia (www.africa.com)