Sudan seeks to attract western oil groups as US relations thaw

Sudan is launching a bid to entice US and European companies back to its struggling oil industry as once hostile relations between the former pariah state and western governments thaw, according to the country’s oil minister.

“We are open, without any discrimination at all,” said Azhari Abdalla, minister of petroleum and minerals, in an interview in the capital Khartoum. “Whoever wants to come we will receive them with open minds, with open arms and with policies that will facilitate their investments.” 

Activity in Sudan’s oil sector ground to a near halt in the past seven years after the secession of the southern half of the country reduced Sudan’s proven reserves by about 3.5bn barrels, or about 75 per cent.

The loss of the south — a profound economic and political shock for Sudan’s leaders — compounded the effects of a long-running American embargo on trade with the government, which had deterred new energy exploration.

Now, as relations between Sudan and the US improve, the ministry of petroleum plans to tender 30 to 35 new oil blocks in the second half of next year to revive exploration activity in the country, Mr Azhari told the Financial Times.

For most of Sudan’s 20-year history of oil production it has been under a US sanctions program that stopped American companies^[1] from trading with the country and made it complicated for any foreign businesses to deal with it. The US introduced the embargo in 1997 for Sudan’s “continued support” of international terrorism and the country shipped its first oil in 1999.

The US finally lifted^[2] the sanctions in October 2017 following a period of improved co-operation between Washington and Khartoum on counter-terrorism and other human rights and humanitarian issues. 

Though the Sudanese government has not received expressions of renewed interest from any western oil majors since the embargo ended, at least one American oil services company, Baker Hughes, a subsidiary of General Electric, has already started operations in the country, Mr Azhari said. 

A spokesperson for Baker Hughes said the company is exploring opportunities in Sudan, in full compliance with US laws. 

Before South Sudan gained independence in 2011, Sudan produced about half a million barrels a day that were transported via a Chinese-built, 1,000-mile pipeline from oilfields in the south and centre of the county to a terminal on its Red Sea coast in the north. 

The south’s secession, after a twenty-year civil war, cut Sudan’s production by three quarters. That output has since dwindled further to about 75,000 barrels a day because of technical issues and problems extracting oil from fields that straddle the border with South Sudan, where fighting has continued.

Meanwhile, new exploration in the country has been limited. Even for the Asian oil companies operating in Sudan, such as Petronas of Malaysia and China’s CNPC, the block on access to American dollars for the past 20 years complicated all foreign currency transactions and made it challenging to fund operations. 

“The US embargo compounded the tough economic situation that Sudan has been facing since South Sudan seceded,” said Mr Azhari. “The oil and the resources are there but the extraction has been very difficult.”

The minister, who was appointed in May, started his career with Chevron in Sudan in the 1970s, when the US oil major was conducting exploration in the country. It pulled out in 1992.

With the sanctions gone, there is no longer any legal prohibition of trade with Sudan but many foreign banks remain anxious about dealing with the country while it is still listed by the US government as a state sponsor of terrorism alongside Iran, Syria and North Korea. 

Sudan has been on the list since 1993 and though there is scant evidence that Sudan has actively supported terrorism since the 1990s, relations between Sudan and big western businesses are unlikely to fully normalise until the ruling is lifted. To that end a new round of US-Sudanese talks is under way, according to US state department officials. 

Though there is no fixed timeline in place, the ministry of petroleum is hopeful the terror-label will be lifted next year, triggering a flow of foreign investment back into the country. “With everything that is happening, I think Sudan is ready for another [oil] boom” Mr Azhari said. 

References

1. ^{^} stopped American companies (www.bing.com)
2. ^{^} lifted (www.bing.com)