History of Oil and Gas Industry in Sudan
The beginnings of exploration
Oil exploration in Sudan began in 1959, when Agip, an Italian oil company, was given an exploration concession in the Red Sea area in the northeast of Sudan; no oil was found. After Agip, other Western oil companies like Oceanic Oil Company, Total, Texas Eastern, Union Texas and Chevron moved in to search, but no results were made and most companies relinquished their concessions, according to a joint report by Fatal Transactions and the European Coalition on Oil in Sudan in 2008.
Onshore petroleum activities began in Sudan in 1975 when US oil giant Chevron was granted a large concession in several provinces of south-central Sudan, including in Western Kordofan and Western Upper Nile. In 1979, Chevron struck oil near abu Jabra and then al Sharaf, on the border between Darfur and Kordofan. They soon went on to make major discoveries in Western Upper Nile in what is now Block 1, near Bentiu, and developed the Muglad Basin where they found two huge oil fields, Unity and Heglig, both in the South.
In February 1984, Chevron suspended its operations after three of its expatriate field workers were killed by the Southern rebels of the Anyanya II movement, and following this, suspended oprations in the Bentiu region in December 1985 and by 1988 had dismantled its operations at Unity.
While there was no oil extraction during this period, during the civil war the then President Jafar Nimeiri attempted to redraw the boundary of Upper Nile province so that the oil fields discovered would be within the province of North Kordofan, north of the administrative boundary between northern and southern Sudan which would later turn into the international border with South Sudan. It was also in this period that the first plans for a pipeline were drawn up – this pipeline would head to Port Sudan on the Red Sea in the North. This meant the bulk of the oil infrastructure would be built in the North, and all the exports would flow through this northward route. During the 1980’s, Saudi Arabia provided loans, and oil at well below international prices, to Sudan.
This was to change at the beginning of the 1990’s. Following the 1989 coup, Sudan supported Iraq in the first Gulf War, leading to Saudi Arabia suspending all support, and the expulsion of 200,000 Sudanese migrants from Saudi Arabia.
In June 1992, Sudan's president Bashir announced that Concorp International, a small company which was owned by Sudanese businesmann and senior National Islamic Front party members Mohamed Abdullah Jar el-Nabi, had bought the Chevron concession. Although Chevron had invested nearly a billion dollars, it was sold to Concorp for merely $25 million, a deal which according to the Coalition for International Justice, was not without controversy. In 1992-1993, the Government of Sudan began to create a cordon sanitaire - that is, an area completely devoid of civilian life, stretching for kilometers beyond each oil rig, oil road and piece of equipment around these potentially rich oil fields.
In March 1997, GNPOC began to build a 1540 km oil pipeline from the oilfields to a marine export terminal on the Red Sea. At the beginning of 1998, contracts were signed worth $1 billion with Chinese, Malaysian and European suppliers. In 1999, the pipeline began delivery, and the first 600,000 barrels were loaded onto a Shell tanker. Also in 1997, Lundin, a Swedish company, signed a contract for a concession in Block 5A, and two years later came across the first oil discovery in the field. Lundin's involvement in Sudan was also tinged with controversy after they were accused in a report released by the European Coalition on Oil in Sudan (ECOS) of possible complicity in war crimes and crimes against humanity.
The signing of the Comprehensive Peace Agreement (CPA) in January 2005 improved conditions for oil production and export. But tensions between South Sudan and Sudan soon flared again over a series of unresolved issues, including the border between the two countries, the future of disputed territories and ownership of oil. Since then, peace negotiations have been held in Addis Ababa, Ethiopia under the auspices of the African Union. As of June 2012, these negotiations were still underway. Key issues in the negotiations include South Sudan's use of Sudan's oil infrastructure to export its crude, demarcation of the unstable border between the two countries, and the status of the oil-rich, disputed territory of Abyei.
Oil production post-CPA
Until 2006 Sudan had only one major upstream project (Blocks 1, 2 and 4, operated by the Greater Nile Petroleum Operating Company in the Muglad Basin), one export pipeline (Greater Nile Oil Pipeline - GNOP), and one crude oil blend (high quality Nile Blend). Late 2006, a second pipeline came on stream, a major refinery expansion was realized, a second major upstream project began, producing a second crude oil blend (the low quality Dar blend), in addition to important field developments elsewhere. The country’s crude oil production almost doubled, making it Africa’s fifth producer with more than 434.000 barrels per day (bpd) by late 2006.
In April 2006, oil production began rather belatedly in blocks 3 and 7 in the Melut Basin, located deeper in Southern Sudan. Its first shipment, carried through a new pipeline to the export terminal at Port Sudan, was exported in September 2006, though problems with the quality of the oil led to shipments being sold for lower prices than market value. 2006 also saw the beginning of output from two less significant blocks- Block 6 in the north, and the Thar Jath oilfield in Block 5A began exporting just over 20,000 bpd through the GNPOC pipeline.
Oil production peaked at an average of almost 500,000 barrels per day in 2007, before falling back somewhat in 2008-2009.
Political instability on a local level has also disrupted oil production, for example at Abyei which was the scene of serious fighting in mid-2008. Across the country there has been evidence that some local communities have begun to take action against the operators of fields, for example in 2008 when nine Chinese oil workers were kidnapped in South Kordofan, and some were killed.
Production shutdown 2012
South Sudan shut down its oil production in January 2012 largely as a result of oil pipeline fee disputes with Sudan. Prior to the shutdown oil had been the source of 98 percent of South Sudan's annual revenue, and as of mid-2012 the shutdown was still in effect.
- "Fact sheet 2- A History of Oil in the Sudan" Understanding Sudan Retrieved 29 May 2012.
- "Sudan- Whose oil?" Fatal Transactions and the European Coalition on Oil in Sudan April 2008.
- "Soil and Oil - Dirty business in Sudan" Coalition for International Justice February 2006.
- "Talks under way to end Sudan conflict" Al Jazeera 30 May 2012.
- "Sudan’s delegation on security issues departs for Addis Ababa" Sudan Tribune 4 July 2012.
- "The Sudan Handbook" Rift Valley Institute, Edited by John Ryle, Justin Willis, Suliman Baldo and Jok Madut Jok 2012
- "S. Sudan Oil Shutdown Chokes Economy" Voice of America 30 June 2012.