Petronas Operations in South Sudan

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Malaysia's Petronas was as of July 2011 active in all South Sudan oil blocks, and as such is one of the dominant players in the country's oil production sector, along with the China National Petroleum Corporation (CNPC) and India's Oil and Natural Gas Corporation (ONGC).[1]

According to the company's website in January 2012, Petronas is active in South Sudan through its interests in Greater Nile Petroleum Operating Company (GNPOC) (30%), Petrodar Operating Company (40%) and White Nile Petroleum Operating Company (WNPOC) (67.87%), the respective joint operating companies for the three contract areas: Blocks 1, 2 and 4, Blocks 3 and 7, and Block 5A. Petronas’ partners are (CNPC), ONGC, China Petroleum & Chemical Corporation and Tri-Ocean Energy.[2]

History

In the late 1990s, Petronas and ONGC financed the development of the current set of oil fields, according to the US Institute of Peace (USIP), and built the network of pipelines, refineries, and export terminals that enabled the sector to grow. [1]

Petronas entered Sudan's petroleum industry by acquiring a 30% stake in the Greater Nile Petroleum Operating Company (GNPOC), which controls oil blocks 1, 2, and 4 in the border area between South Sudan and Sudan. In 1997, Petronas acquired a 28.5% stake in Block 5A, which increased to 69% when Swedish company Lundin sold its stake to Petronas in 2003. The company acquired a 41% stake in Block 5B in 2001; exploration on this field began in February 2008, though, as of May 2009, none of the three exploratory drills had struck oil.[3]

Conflict of interest with Ascom in Block 5B

In June 2005, the South Sudanese government signed a deal with Moldovan oil firm Ascom Group giving the company rights to Block 5B, which the Khartoum government had awarded to Petronas in 2001. In May 2007, in an effort to halt the growing dispute over the awards to Ascom, President Salva Kiir of South Sudan ordered Petronas to halt exploration on the block, and asked Petronas and its partner in Block 5B, Lundin, to give up a portion of their stakes in the block.[4][5] In January 2008, Petronas got permission from South Sudan’s government to begin oil exploration in Block 5B, after the company agreed to let Ascom Group keep part of the concession, according to the Sudan Tribune.[6] According to the USIP, however, as of July 2011, Block 5B was held by Ascom. The company had undertaken seismic surveys and some drilling but with no success in finding oil, and had ceased active exploration.[1]

Relations with South Sudan

Petronas and the South Sudanese Energy and Mining ministry in March 2011 signed a two-year memorandum of understanding (MoU) aimed at boosting mutual cooperation between the two parties and creating an avenue to exploit existing business opportunities between Malaysia and South Sudan. The agreement also created a platform for Petronas and the South Sudanese ministry to share experiences and expertise in the management of petroleum resources through capability building and other training programs, according to the Sudan Tribune.[6]

In January 2012, Petronas signed a Transition Agreement with the now-independent government of South Sudan for its continued operations in upstream blocks in South Sudan previously awarded by Sudan. The agreement granted Petronas and its partners the right to conduct petroleum operations in Blocks 1, 2 and 4, Blocks 3 and 7, and Block 5A. These were existing contract areas that had been granted through previous Exploration & Production Sharing Agreements (EPSA).[2]

Environmental record

The government of South Sudan has raised concerns about Petronas' exploration wells in Block 5B, which were located in the Sudd swamp, the largest freshwater wetland in the world. As of 2009, little environmental assessment had been carried out.[3] According to Reuters in April 2007, after visiting Petronas operations in other parts of Sudan and seeing their plans for the southern states of Warrap and Jonglei, South Sudanese Vice President Riek Machar said: “I was not happy with what I saw ... The way they handled the water associated with the oil, the use of chemicals used in exploration and the roads constructed blocking the flow of streams without bridges or culverts is a concern."[7]

References

  1. 1.0 1.1 1.2 "Oil and State Building in South Sudan, US Institute of Peace, July 2011.
  2. 2.0 2.1 "PETRONAS SIGNS TRANSITION AGREEMENT WITH SOUTH SUDAN, Petronas website, 13 January 2012.
  3. 3.0 3.1 "Fact Sheet Nine: The Main International Oil Companies Present in Sudan, Understanding Sudan, 2011.
  4. "Moldova’s Ascom probes Petronas Sudan oil block, ECOS, 11 October 2005.
  5. "Petronas and Lundin Asked to Part with Percentage of Sudan, Petroleum Africa, 16 August 2007.
  6. 6.0 6.1 "South Sudan, Malaysia’s Petronas sign oil agreement, Sudan Tribune, 13 March 2011.
  7. "South Sudan sets terms for Petronas expansion, Reuters, 2011.