Home | Comment & Analysis    Sunday 30 November 2003

Sudan hopes to boost oil production to 500,000 b/d in 2005

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By Muhammad Abu-Hasbu, Al-Hayat

Sudanese Energy Minister Awad Ahmad al-Jaz has said the country hopes to raise its oil production to 500,000 barrels per day in 2005. Al-Jaz disclosed this in an interview with Muhammad Abu-Hasbu of Al-Hayat.

The following is the text of the interview published on London- based newspaper Al-Hayat on 25 November; all subheadings inserted editorially

[Abu-Hasbu] What is Sudan’s oil production volume at present and the local consumption volume?

[Al-Jaz] Production is at present slightly less than 300,000 barrels a day. But it will rise to 320,000 early next year. Our local consumption ranges between 80,000 and 90,000 barrels a day. The rest is of course for export.

[Abu-Hasbu] Will the increase come from existing fields or from the expansion in the drilling?

[Al-Jaz] The increased production will basically come from the Hajlij-al-Wahdah field. But the coming years will see a large increase in other diverse fields from which no oil was extracted in the past. A 730-km long pipeline extending from Al-Fulah area in western Sudan will be completed next year and will end in Al-Jayli refinery in Khartoum’s suburbs. This pipeline will carry in its first stage 12,000 barrels and will rise to 40,000 barrels. Its maximum capacity is 100,000 barrels a day so that it can absorb any future discoveries. We also expect the completion by the end of next year of another pipeline that runs from "Block 3 and Block 7" in the White Nile and Upper Nile fields and ends in Bashayir Port on the Red Sea. This pipeline will greatly help increase exports.

[Abu-Hasbu] How much are you expecting Sudan’s production to be by the beginning of 2005?

[Al-Jaz] More than 500,000 barrels a day.

OPEC

[Abu-Hasbu] Have you thought about joining OPEC?

[Al-Jaz] Sudan is now an observer member in OPEC. The organization invited us to occupy this position before two years. Turning into full member is a decision that the state will take when it wants. I do not believe there is any problem in having Sudan become a full member. Being accepted as an observer member means that the intention to move to full membership does exist.

Canada’s Talisman

[Abu-Hasbu] Why did the Canadian Talisman Company leave Sudan?

[Al-Jaz] This question should be addressed to it. According to them, their investments in Sudan were the largest and most profitable. The company, "which was considered one of the largest pillars of an oil consortium in Sudan", was very eager to remain in the country and not leave it. But as its director said, it came under strong pressures to leave Sudan.

[Abu-Hasbu] Pressures from their government?

[Al-Jaz] No, not from its their government, but apparently from their neighbours (a clear reference to the United States which imposed an embargo on Sudan). On the contrary, the Canadian government was very happy with Talisman’s success and proud of its achievements and performance in Sudan though it is a private company and not a government one and wished it would expand its investments. In fact, Talisman had applied to drill for oil in other areas of the country before it left Sudan. But it faced at the same time the political pressures I have referred to. Being a public shareholding company and listed on the shares market, the shareholders probably felt the heat of the political pressure and became worried about their profits. The company therefore left Sudan in sorrow because it left behind a sizeable profitable investment. Its officials stressed on several occasions that the oil areas in Sudan were safe from the civil war. Talisman had also bought out the Canadian State Oil Company shares because it was a small company whose financial resources did not enable it to catch up with the increased oil investments in Sudan.

Oil exploration

[Abu-Hasbu] Is there exploration in areas other than those on the border between north and south?

[Al-Jaz] Yes. Work has now started in what we call "Block 9", which lies in Khartoum’s suburbs. It includes part of Khartoum Province itself but also parts of the adjacent Al-Jazirah Province as well as areas in Blue Nile and the Nile River. We granted the drilling concession in these areas last August and the concerned company has in fact started to carry out the preliminary surveys.

[Abu-Hasbu] Which company?

[Al-Jaz] This is a Pakistani company called Zafer. It was the one that got the concession in that field.

[Abu-Hasbu] Is it operating alone or as part of a consortium?

[Al-Jaz] It is operating with the Sudanese Sudapet Company, which is in another consortium operating in the oil sector in the Sudan. The new exploration areas include the "Square 8" that covers the Sinnar Province in central Sudan and part of the Blue Nile Province. A consortium that consists of the Malaysian Petronas Company, Sudapet Company, Al-Taqniyah Group, and a group of other Sudanese companies are carrying out the exploration in that field. There is also a third field called "Block C" south of Darfur in western Sudan. A Swiss company whose name I do not recall at present is exploring it together with Al-Taqniyah Group, the Hajlij Company, and Sudapet. This consortium obtained the concession in this field only one month ago. It is recalled that Sudan is expecting to produce natural gas from the Sannar fields because one of the wells there clearly indicated the presence of natural gas in it. We also discovered gas in the Al-Fulah area fields. We are however expecting the main gas production to come from the Sinnar field in central Sudan and also from the Red Sea fields in eastern Sudan though these have not been licensed yet.

[Abu-Hasbu] What is the quantity of reserves or discovered stocks?

[Al-Jaz] It is early to answer this question because you cannot determine the stocks in a particular field until all the explorations have been completed. Our current production in Sudan is a small part of the first licensed field. The surveys and explorations are continuing and it is therefore difficult for us to determine the overall oil reserves in the country. But according to the preliminary indications, Sudan is likely to be one of the countries with large oil and gas reserves. The type of Sudanese oil is regarded as of high quality because it does not have other elements, such as sulphur. This is a gift from God and not our work. Because of its high quality, we usually sell our oil at a higher price than that of the British Brent crude, which is known as the benchmark.

[Abu-Hasbu] What is the reason for your belief that Sudan is likely to have abundant oil?

[Al-Jaz] The reason is the high rate of success in the drilling operations. What usually happens is that you make the preliminary geological surveys so as to determine the sites where you wish to explore. You then start to dig wells to determine the size of the oil lake underground. The rate of success is determined by the number of wells from which oil gushes compared to the overall number of wells that are dug. In Sudan’s recent diggings in all the concession areas I have referred to, this rate is between "80 and 85 per cent", which is a high rate. The oil companies operating with us even consider it a very high rate compared to what happens in the oil industry in general. All these are scientific indications that Sudan has very large oil reserves.

Distribution of oil wealth

[Abu-Hasbu] Will the oil be split between the north and south during the peace negotiations that are to he held on 30 November?

[Al-Jaz] All the oil revenues go to the public treasury and then are divided among the various provinces according to each province’s needs and in the presence of the finance ministers in every province. In fact, not all the oil now produced in Sudan is in the southern provinces. The share out is almost equal, 50 per cent each for the north and the south or probably 40 per cent and 60 per cent. The south spent from the central treasury for many decades without paying a single cent into it. Why is it demanding now that the oil revenues are allocated to it? If we accept this principle of splitting it in this way, will they demand a share of any oil that might be produced in the northern provinces in future? What about the southerners who are living in the north, being as they are a great number? Will they spend the money of the north or the south?

[Abu-Hasbu] But "IGAD" announced that it would propose splitting the oil into 50 per cent for each side instead of the 80 per cent that Garang is demanding or the 90 per cent that Khartoum is demanding?

[Al-Jaz] This logic will cause us major complications. For example, the central provinces, the site for the largest agricultural projects in Sudan, have historically fed all Sudan without its population asking for their wealth to be exclusively theirs. Sudan also produces many minerals, including gold, in the eastern provinces and the people there did not ask to allocate the revenues from the minerals to them. We are talking either about a single country or more than one country. If it is supposedly a single country, then there is no need to have two currencies, two central banks, and two oil budgets, one for the north and the other for the south. This does not mean that we do not recognize the need to allocate some funds for the southern council in order to rebuild what was destroyed during the war and activate development in the south. But to have every person sit at the table and ask for the share he wants is not right because the more you give him the more he asks for.

[Abu-Hasbu] In which areas are you expecting major discoveries other than the present production areas?

[Al-Jaz] From the oil signs in the areas that have not been licensed yet, there are three fields in the Red Sea area in the east of the country, where the French Total and US Chevron Companies operated before they left the country. One of them is Ashford Field that has been producing oil for a long time. But the explorations in these fields stopped a long time ago and no new licenses were granted. There is also a field in the northern area of Sudan that has not been granted a license yet. The same applies to a field close to the western border, the Kordufan area, and the Al-Qadarif area [central and southeastern Sudan respectively]. It is recalled that a large number of companies have applied for concessions in these fields. On our part, we are waiting for the final date set for submitting the applications before we start examining them so as to choose the best offers.

It is difficult to say which of the areas will be most productive because the oil reserves of any field can be determined only after completion of the exploration and digging operations in that field. But the preliminary diggings in "Square 8" around the city of Sannar and the White Nile where the Malaysian Petronas Company is operating indicate that there are major oil discoveries.

"Exciting" oil projects

[Abu-Hasbu] What are the new exciting projects?

[Al-Jaz] There is of course the new oil pipeline whose opening we will be celebrating soon. It runs from Al-Fulah are in western Sudan to the Khartoum refinery. We also hope to complete the expansion of the Khartoum refinery by the middle of next year so as to increase its capacity from 50,000 to 100,000 barrels a day. We are also expanding the Port Sudan refinery from 25,000 barrels at present to 100,000 barrels a day. The expansion of the two refineries will lead to a big increase in the export of refined derivatives such as petrol and gasoline. We consider this an important leap in the Sudanese oil industry and a strong support for the export of crude oil. In this context, we are at present negotiating with a company to build a new pipeline to carry the refined derivatives from the Khartoum refinery to the Red Sea. We will open next year a new port that we are calling "Al-Khayr Port" and it will be located between Port Sudan Port and the Port Sudan refinery. It will be used for the export of refined derivatives such as petrol and gasoline. This will be the culmination of the expansion in the export of refined oil. Because the doubling of the Khartoum refinery’s capacity from 50,000 to 100,000 barrels will create a surplus of refined derivatives, we were compelled to build a pipeline in addition to the old one that carried the derivatives from Port Sudan to Khartoum during the years of import. But we reversed the old pipeline’s direction after Sudan started to export oil so as to use it to export oil instead of importing it.

[Abu-Hasbu] You said a Swiss company is exploring in western Sudan. Are there other Western companies operating in Sudan’s oil sector?

[Al-Jaz] Yes. There is the Austrian O and V and the Swiss Lompid Companies. They have been operating for some time in "Block 5A and 5B in an areas south of Bentiu in southern Sudan. There are also German and Italian companies that have applied for exploration but we have not yet granted them. Some German, Italian, and French companies are however working with us in other oil activities while British companies are building pumping stations and electricity plants. The British firms include Rolls Royce and Alan Diesel companies. There are therefore several European companies operating in Sudan in the various oil sectors. Exploration and extraction are limited to the Austrian and Swiss companies I have mentioned.

[Abu-Hasbu] Is there surplus production capacity that you are keeping as a strategic reserve?

[Al-Jaz] Our oilfields’ production at present exceeds the pipeline’s capacity, which is 280,000 barrels a day. It can however carry a maximum of 500,000 barrels. But to reach this level, we need to build additional pumping stations and enlarge what is called the assembly area. We therefore need to improve the pipeline as our production increases and this is what we are actually doing.

BBC Monitoring Middle East



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