Sudan’s economic future brightens as potentially huge
oil reserves come on line

Sudan has built four refineries in recent years.

When, in 1999, Sudan became an oil exporting country, its fortunes changed dramatically.

Suddenly an African economic disaster looked like it might become a turnaround kid and one of the continent’s poorest countries become one of its richest.

With a GDP per capita of only $330 a year, Sudan is a very long way from that rosy future, but its potential as an oil power is significant.

Nobody seems certain just how much oil the country is sitting on, but indications are that oil is present under much of the one million square miles that make up Africa’s largest country.

President Omar Hassan Al Bashir told us that Sudan might have larger reserves than those of Saudi Arabia, the world’s largest. But Minister of Energy and Mining Awad Al Jazz, who is responsible for the oil sector, was reluctant to make a firm estimate. Apparently exploration is at too early a stage.

However, Al Jazz does say that there is evidence of “huge” reserves and that they are to be found “throughout Sudan.”

Before the civil war broke out in 1984, US oil giant Chevron was the main company exploiting black gold in Sudan. But with fighting raging and the oil fields a prime target of the rebels, for Chevron to remain in the country became too great a risk.

Some Sudanese officials have commented, however, that they believe to this day Chevron has more information about the country’s oil potential than anyone else, and they hope the company will return to Sudan once the US sanctions are lifted.

Subsequent attempts to get the oil industry up and running have been sporadic. However, in the 1990s significant progress was made, with the first wells brought on line, a 1,610 kilometer pipeline (the longest in Africa) built to get the oil to Port Sudan on the Red Sea, and four refineries put up to meet domestic demand for petroleum products.

The main player in the Sudan oil industry today is a consortium made up of the China National Petroleum Company (CNPC), the Malaysian Petronas Company, Talisman of Canada, and Sudapet, the Sudanese Petroleum Company.

CNPC beat out 12 international companies, including Occidental Petroleum of the United States, which was granted a controversial waver of the trade sanctions by the State Department to be able to bid on the prime concession in Hijlij field, in the country’s southwest, where three wells are now pumping out 200,000 barrels per day and other exploratory wells show promise of much more oil under the ground.

Sudan consumes 60,000 bpd domestically, leaving 140,000 bpd for export.

At current international prices of around $25 a barrel, this generates some $1.2 billion a year in gross export income. Before becoming an exporter of oil, Sudan was spending $300 million a year on imports, which represented a big slice of its precious foreign currency.

Of course, only part of the income goes to the government coffers after the split with the oil companies, but it is nevertheless a great boost to the economy.

The pipeline is currently handling all the exported crude, and it has the capacity for triple the amount, around 450,000 to 500,000 bpd.

Al Jazz says that his ministry is taking care to advance integrated development in the oil sector, supplementing infrastructure projects with schools and hospitals to serve workers in the field.

Perhaps the most encouraging sign of future oil wealth is that oil was found in the last four concessions offered for exploration. Companies from China, Russia, India, Japan, France and Malaysia are all looking for oil in Sudan.

And Sudan is apparently rich in other mineral resources too.

Minister of Energy and Mining Awad Al Jazz

Gold has been found in significant quantities in several parts of the country and, unlike in South Africa, is fairly close to the surface. A French company is currently leading the gold mining efforts, and last year Sudan exported 60 tons of the precious metal. This made gold the main mineral export after oil.

Chinese, Russian, Malaysian, German, Australian, South African and Arab companies are all interested in the gold sector, with several concessions now being developed.

Sudan also has commercial deposits of copper, chromium, gypsum, iron, platinum and tin, says Al Jazz, who says his country is, “very rich in minerals.”

One of the major problems for the oil and other extraction industries, as for all other developments in Sudan, is the dearth of infrastructure. Roads, railroads, power stations and electricity distribution networks are scarce indeed, with those in place usually in bad condition and in need of major repairs or replacement.

Al Jazz is also responsible for electricity generation, and says that one of Sudan’s main priorities is to harness the power of the Nile, which studies have shown can be dammed to generate some 7,000 MW of power, the current level of national demand, only a fraction of which is produced today. There are three dam-building projects currently in the works.

Of course, as the economy expands and private and industrial consumption increase, there will be a growing demand for power. Some 5,000 MW are needed immediately to cover the present shortfall, according to Al Jazz.

This is an area in which Sudan hopes American companies will show an interest, once the sanctions are lifted.

Will the newfound oil wealth spoil Sudan?

Not if the Ministry of Finance, which handles the revenues, has its way.

According to Elfatih Ali Siddiq, director of the ministry, Sudan has studied the example of other countries which came into major oil wealth, such as Nigeria, and has devised a policy to avoid the mistakes they made.

Of the total state oil revenue, 60 percent is earmarked for infrastructure development, including roads and railroads, power plants and irrigation schemes. Improving the infrastructure is expected to encourage more foreign investment.

The balance is earmarked for two areas. First, it is used for grants to Sudan’s 26 states for their use in education, health and water supply investments. Second, it goes to paying down Sudan’s huge $24 billion foreign debt.