Due in part to the completion of a major pipeline in July 1999, Sudanese crude oil production has risen rapidly over the past year and a half. Also, Sudan became an exporter of refined petroleum products in 2000, following the inauguration of the Khartoum Oil Refinery in June.
Note: Information contained in this report is the best available as of November 2000 and can change.
Sudan gained its independence from Egypt and the United Kingdom in 1956. The current government, led by General Omar Hassan Ahmad al-Bashir, came to power in 1989 after overthrowing a transitional coalition government. A new constitution was promulgated on January 1, 1999.
Multi-party presidential and parliamentary elections are scheduled for December 2000.
Sudan is among the world's poorest countries. Its economy is primarily agricultural - a mix of subsistence farming and production of cash crops such as cotton and gum Arabic.
In the past four years, however, Sudan's economic performance has been strong; annual GDP growth has averaged 5.5 percent, while inflation has slowed from 133 percent to 16 percent.
Exports have grown by one-quarter to $780 million, while Sudan's current account deficit has dropped from nearly 8 percent of GDP to 2.4 percent.
Sudan's real GDP growth rate is forecast at 6.5 percent in 2000, while inflation is predicted to reach the 9 percent year-end target set by the government.
In May 2000, the International Monetary Fund (IMF) expressed its satisfaction with Sudan's implementation of a 1999-2001 structural adjustment program.
However, representatives of the IMF advised the Sudanese government to move to full market liberalization in the petroleum product sector as quickly as possible and to adopt full public disclosure of oil revenue data.
In August 2000, the IMF lifted the suspension -- in place since 1993 -- of Sudan's voting rights in the IMF.
Sudan recently has become more engaged in the global economy. In February 2000, Sudan opened its Red Sea Free Trade Zone, designed to encourage foreign direct investment, and in March 2000, Sudan publicly repeated its desire to join the World Trade Organization.
Since the end of 1999, Sudan has signed various trade and investment agreements with Saudi Arabia, Bahrain, Iraq, Kuwait, Ethiopia, and Syria, while simultaneously predicting that Malaysian investment in Sudan, particularly in the oil, gas, and petrochemical industries, would exceed $1 billion by the end of 2000.
Despite its economic progress, Sudan still faces developmental obstacles, including a limited infrastructure and an external debt at the end of 1999 of nearly $24 billion, representing a debt-to-GDP ratio of 218.3 percent.
Furthermore, the government remains embroiled in the long-running conflict with rebel movements in the south of the country, inhabited primarily by non-Muslims.
The conflict has maintained the scarcity of national development resources, despite the increase in government oil revenues. Over the past two decades, the civil war has claimed 1.5 million Sudanese lives.
The United States imposed economic sanctions against Sudan in November 1997, prohibiting trade between the two countries, as well as investment by United States businesses in Sudan.
Secretary of State Madeleine Albright stated that the sanctions were intended to "deprive the regime in Khartoum of the financial and material benefits of U.S. trade and investment, including investment in Sudan's petroleum sector."
In February 2000, the Clinton administration broadened the sanctions to include a prohibition against U.S. citizens and companies conducting business with the Greater Nile Petroleum Operating Company (GNPOC), an international consortium of petroleum companies currently extracting oil from Sudan.
The sanctions, however, do not apply to the foreign individual parent companies of GNPOC, which includes Calgary-based Talisman Energy.
In October 2000, the United States continued its efforts to isolate Sudan by successfully lobbying African nations to deny Sudan a regional seat on the United Nations Security Council.
As of January 2000, Sudan's estimated proven reserves of crude oil stood at 262.1 million barrels.
Current crude oil production totals 210,000 barrels per day (bbl/d) and has been rising steadily since the completion of a vital pipeline in July 1999; production in the last quarter of 1999 stood at 138,300 bbl/d, increasing respectively to 165,000 bbl/d and 200,000 bbl/d in the first and second quarters of 2000.
Petroleum exploration in Sudan began in the early 1960's. The activity was originally concentrated offshore in the Red Sea. The only significant offshore discovery was Chevron's Suakin gas discovery in 1976.
Chevron's exploration in the 1960's and 1970's led to several oil finds in southern Sudan near the towns of Bentiu, Malakal and Muglad.
Chevron abandoned its concessions in Sudan in 1985, due to their location in an area where fighting was taking place between government and rebel forces.
The French firm, Total, also suspended its onshore exploration activities, but retained the rights to its concessions.
The Sudanese government sub-divided Chevron's concessions into smaller exploration blocks, and Canadian independent Arakis Energy (Arakis) acquired the portion of Chevron's concession north of the town of Bentiu in 1993.
Greater Nile Oil Project:
Arakis began development of the Heglig and Unity fields within its concessions, and started production on a small scale (around 2,000 bbl/d) in 1996; this oil was processed and consumed within Sudan.
The remote location of the field, aproximately 930 miles from the Red Sea coast, meant that it would require a very substantial capital investment to transport the oil to a seaport.
To attract the necessary capital and spread the risks, Arakis entered into a consortium in December 1996 with GNPOC, consisting of the China National Petroleum Corporation (CNPC)(40 percent), Petronas of Malaysia (30 percent), Sudanese national firm Sudapet (5 percent), and Arakis (25 percent, and the field operator).
Construction on the pipeline from the fields to an export terminal near Port Sudan began in May 1998 on an accelerated schedule. Originally built to move 150,000 bbl/d, the pipeline has a current capacity of 250,000 bbl/d and can be expanded to 450,000 bbl/d.
Arakis' involvement in Sudan, even after the formation of the GNPOC consortium raised $700 million, remained hindered by a lack of capital. U.S. sanctions against Sudan prevented investment in the project by U.S. corporations and persons, and the high-risk nature of investment in Sudan also had an effect.
In the end, Arakis agreed to be purchased by another Canadian independent, Talisman Energy, for $277 million in Talisman stock, in October 1998. The Talisman acquisition provided an infusion of capital which allowed the project to be completed on schedule in 1999.
In July 1999, the pipeline began filling with crude, and the first cargo of "Nile Blend" departed the export terminal in early September 1999.
The fields in the Muglad area produce crude oil with a 33o to 42o API range, with only 0.5 percent sulfur content. The crude is highly parafinnic, which requires heating to maintain flow in the pipeline.
Recoverable reserves from the Heglig and Unity fields have been estimated at 660 million to 1.2 billion barrels.
The area around these two fields also is suspected to contain oil, but estimates of reserves vary. The Swedish firm, Lundin Oil, reported a discovery in the adjacent Block 5A in May 1999.
Petronas, the Austrian firm OMV, and Sudapet have minority stakes in the block.
Lundin was forced to suspend operations in Block 5A in March 2000, however, due to safety concerns and logistical problems associated with the construction of an access road to the site.
In July 2000, Petronas was awarded a 40 percent share in Block 5B, where exploration is set to begin in the end of 2000 with Petronas as the operator.
In October 2000, Petronas agreed to raise Sudan's oil output by 50,000 bbl/d by mid-2002. The increased production will result from Petronas' development of two untapped oil fields in Monga and Bambo in the Mujlad Basin of western Sudan, plus the construction of three additional oil pumps along the pipeline.
Sudanese officials announced in June 2000, plans to begin oil exploration in northwest Sudan, the Blue Nile Basin in southeastern Sudan, and the Red Sea area in eastern Sudan.
Oil exploration in Sudan previously was limited largely to the central and south-central regions, which, according to Khartoum officials, represent only 15 percent of the national oil reserves.
Sudanese Energy Ministry representatives place estimated total reserves in the country at 3 billion barrels and estimated proven reserves at 700 million barrels.
Government spokesmen said that unnamed Japanese, European and Middle East companies had expressed interest in the new oil concessions.
In March 2000, Canada-based Fosters Resources Ltd. signed an Exploration and Production Sharing Agreement with the government of Sudan to develop, in cooperation with a consortium of Arab and Sudanese companies, the concession covering the majority of the Melut Basin in Central Sudan.
One group, led by Fosters' affiliate, the Melut Petroleum Company, was granted 46 percent of the concession, while the other group, made up of Qatar's Gulf Petroleum Corporation (GPC) and smaller Sudanese companies, also received a 46 percent share.
The remaining 8 percent is controlled by Sudapet. The concession area incorporates Adar Yeil field, where GPC is already producing 5,000 bbl/d.
Fosters was forced to withdraw from the project, however, when its financial backing fell through in May 2000.
Fosters cited pressure from human rights groups concerned about Sudan's human rights record as the reason for its investors' abandonment of the project.
The Sudanese government signed a new production agreement for the concession in November 2000, granting GPC 46 percent, CNPC 23 percent, the Sudanese company Al Than 23 percent, and Sudapet 8 percent.
Development of Sudan's oil resources has been highly controversial. Numerous international human rights organizations have accused the Sudanese government of financing wide-scale human rights abuses with oil revenues, including the mass displacement of civilians living near the oil fields.
The Sudan People's Liberation Army (SPLA), the main southern rebel group, has declared that it considers oil installations a "legitimate military target," as oil development has provided the Sudanese government the financial resources to expand its war effort.
In May 2000, southern rebels sabotaged the oil pipeline for the third time in nine months. As in the previous instances, the damage was reportedly repaired quickly. No disruption of the export loading schedule was necessary.
Following rebel advances in August 2000 to within 10 miles of oil fields, Western intelligence officials reported that tens of thousands of Chinese troops were flown into Sudan to protect Chinese investments in the Sudanese oil industry.
A released Sudanese government document stated that 700,000 Chinese security personnel were available for deployment. In September 2000, rebels claimed to have seized three strategic areas in the oil-rich Unity state in the south of the country.
Broadened U.S. sanctions imposed against GNPOC in February reportedly had little impact on production or distribution of Sudanese oil.
Talisman insisted that the corporate structure of its Sudanese oil venture effectively insulated the company's U.S. activities, thereby protecting U.S. shareholders from the penalties associated with violations of the U.S. sanctions.
Despite the Canadian government's findings in February 2000 that oil revenues were exacerbating the Sudanese civil war, Canadian Foreign Minister Lloyd Axworthy declined to impose sanctions against Talisman or Sudan.
In April 2000, international human rights organizations claimed credit for the disappointing initial public offering (IPO) of shares for PetroChina Company, a subsidiary of CNPC.
The IPO raised $3 million for PetroChina, short of the $7 million previously expected, due in part to the coordinated campaign by international human rights organizations to discourage investment in companies related to the extraction of Sudanese oil.
Previously, in November 1999, CNPC had agreed to create a subsidiary (PetroChina) free of Sudanese investments and to build a firewall between funds raised on the New York Stock Exchange and GNPOC in hopes of blunting international criticism and maximizing the gains from the IPO.
Source : United States Energy Information Administration.
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