South Sudan to Re-start Oil Production As Soon As Possible

President of Sudan Omar Hassan al-Bashir, former South African President Thabo Mbeki and President Silva Kiir of South Sudan at a cooperation agreement celebration in Ethiopia. The two states have pledged to end differences., a photo by Pan-African News Wire File Photos on Flickr.

Oil company: South Sudan to re-start oil production as soon as possible

By Associated Press, Published: September 28

JUBA, South Sudan — The oil company Dar Petroleum said Friday it will begin oil production in South Sudan as soon as possible following a security deal signed with Sudan, though getting back to full production remains several months away.

Dar Petroleum President Sun Xiansheng promised investors and South Sudan’s government that the company will eventually return production to an average of 180,000 barrels per day.

South Sudan in January shut down its oil production after accusing Sudan of stealing its crude.

When South Sudan peacefully broke away from Sudan last year, it inherited the majority of the region’s oil. But South Sudan’s oil must be pumped through pipes owned by Sudan, which said it had taken the south’s oil in lieu of unpaid fees for the use of its export and processing facilities. When tensions increased, the south shut down its industry, costing both sides millions in lost revenue.

The two sides signed agreements Thursday after four days of talks between both countries’ presidents. Those agreements paved the way for a resumption of southern oil production.

Last month, South Sudan Oil Minister Stephen Dhieu Dau said it could take between four and six months before the Upper Nile fields reach full production again. Dar Petroleum’s general manager of exploration and production, Chen Huanlong, said that estimate is correct.

Huanlong said the company will need to “warm up the pipes” for one month. After that, Huanlong said they would “approach the production plateau” in three months. But Huanlong said this would happen only if the government contracts and orders were prepared as soon as possible.

Representatives of the Dar Petroleum consortium were jubilant on Friday, and said their meeting was in part a celebration following the eight-month shutdown.

Several speakers exhorted the gathered workers into chants for the consortium and for South Sudan. Baidzawi Chemat — Dar Petroleum’s general manager of finance and services — said he “felt euphoria” when the deal was signed in Ethiopia.

“Dar Petroleum contributes 80 to 90 percent of government revenue. We are the national builders. We will change the nation,” he said.

According to Baidzawi, if Dar Petroleum can deliver on its promised production target, it will mean around 65 million barrels each year worth around $5 billion for South Sudan.

Dar operates oil facilities in South Sudan’s Upper Nile State, which account for around 80 percent of the country’s oil production. Dar Petroleum is comprised of the Malaysian company Petronas, which owns 40 percent, and the Chinese National Petroleum Corporation, which owns 41 percent. The remaining shares are held by South Sudan’s Nilepet and the China Petroleum and Chemical Corporation.

The Thursday agreement will allow South Sudan to export its oil through the Sudanese pipelines. South Sudan will pay $9.10 per barrel for oil produced in Upper Nile state and $11.00 for oil produced in Unity State.

The oil fields in the state are in a remote region, and Xiansheng says restarting production will not be easy.

“We don’t have spare parts, we don’t have diesel, our cars have broken down,” he said.

South Sudan has not yet given an official order to resume oil production, but officials from the Ministry of Petroleum and Mining said the order is expected soon. The Ministry’s director general of petroleum, Mohamed Lino, said the ministry began preparing for the resumption of production one month ago.