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July 22, 2024 (Juba) – South Sudan is considering a complete closure of oil exports through Sudan, citing a lack of consensus as the country’s financial resources are increasingly scarce and civil servants have not been paid for months.
“People have different views. Some are in favor of stopping oil extraction altogether because it only benefits the rival factions in the Sudanese conflict. Others say let’s continue to manage with the little resources we get from oil extraction, but obviously, now the resources from oil are almost zero. All the money goes to pay debts, leaving nothing for salaries,” a senior official of the South Sudan Oil Company told sudan tribune In an interview on Monday.
The official, who spoke on condition of anonymity, was commenting on maintenance work on a ruptured but unrepaired oil pipeline.
The official said that the current oil exports are still less than 140,000 barrels, which falls short of export obligations, adding that oil-for-roads and oil-for-cash have left the country saddled with millions of dollars in loans that the government is unable to repay.
“That’s why we haven’t paid civil servants’ salaries for nine months, and the oil continues, and in fact less than 140,000 barrels of oil are now exported. When you deduct the operating expenses of the oil companies from it, you will find that there is nothing left. It cannot cover the expenses”, explained the official.
He added: “That’s what it is. It’s hitting a hard wall.”
Oil export revenues account for more than 90 percent of South Sudan’s annual budget, so a complete disruption to oil exports would exacerbate tensions.
The official also noted a lack of consensus among the warring parties on the sharing of oil revenues.
While South Sudanese President Salva Kiir has tried to maintain relations with Sudan’s warring parties, officials in his government have repeatedly argued that such ties are detrimental to the country’s economy.
The leadership of both the Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF) appear to be unaware of the situation South Sudan finds itself in during the conflict.
South Sudan is a landlocked country that relies on Sudan to transport its crude oil to the international market.
After the conflict broke out in mid-April 2023, the leader of the paramilitary RSF, Mohamed Hamdan Daglo, spent several months on the battlefield and then went on a regional tour, but did not travel to South Sudan.
The group believes that South Sudan is on the side of the military and says that South Sudan is a haven for treating the wounded and receiving military leaders evacuated from the battlefield in East Darfur, South Darfur and West Kordofan and taken to Port Sudan.
On the other hand, the military complains that South Sudan allows the group to use its territory to sell property stolen during the conflict and lists it as one of the source countries for the group’s supplies.
South Sudanese officials revealed that the RSF advocated that the oil fees be deposited in an escrow account until the war ends. It portrayed itself as the guarantor of oil infrastructure and demanded payment of security fees that South Sudan has been paying privately, burdening its economy. On the other hand, the military continued to collect transit fees, refused to deal with the RSF, and claimed to be the legitimate authority.
The situation was compounded by supply disruptions caused by a rupture in a pipeline that carries about 60% of oil production from the Melut Basin fields in Upper Nile state to Port Sudan. The rupture was caused by the Sudanese company that operates the pipeline, the Basayel Pipeline Company (BAPCO), being unable to deliver diesel to pumping stations that heat the waxy Dar crude mix to a high enough temperature to prevent it from congealing into a bitumen-like substance.
The pumping station is one of many along the pipeline route that are controlled by the RSF, while BAPCO is controlled by the military leadership.
In February 2024, a pipeline north of the station was found to be blocked, resulting in the suspension of a 600,000 barrel oil shipment scheduled for February 22-23. Technicians managed to flush the pipeline but found another pumping station ruptured. On March 16, Sudan’s Ministry of Energy declared force majeure on the pipeline, saying Sudan could not fulfill its contractual obligations to South Sudan.
Negotiations between the oil companies, the South Sudanese and Sudanese parties to the conflict, the army and the Rapid Support Forces have yielded no progress, and both sides continue to restrict access to the site. Attempts to remotely flush the pipeline with chemicals and pressure have only caused more ruptures and other damage.
Technicians from South Sudan’s Ministry of Petroleum said that the ruptured section of the pipeline needed to be completely replaced because it had not been inspected for a long time.
However, sources with direct knowledge of the situation ruled out the possibility of resuming oil production unless the two warring parties in Sudan’s conflict came under pressure from their oil partners.
There is optimism that even if both sides cooperate, repairs can be made even during war, but this may take time. Spare parts must be sourced externally and delivered to the site, which means it will enter the supply chain. Delays could exacerbate South Sudan’s economy, which is currently under economic pressure, and will not only cause difficulties for a country already plagued by war, corruption and climate-induced flooding, but also cause political unrest.
(English stone)
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