The nationalization of the oil industry in South Sudan..a serious step to boost the economy - Energy

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  • The state plans to nationalize the oil industry to boost revenue
  • Floods reduce oil production to 130 thousand barrels per day
  • Lack of experience and funding made them turn to foreign aid
  • The plan to nationalize the oil industry will take 5 years

South Sudan is facing declining fossil fuel production, persistent flooding, escalating conflicts and unrest, and a policy to secure the oil industry can help address and solve most of these problems.

In this context, Juba revealed, last Friday, May 6, that it had started taking steps to take over the operations of international oil companies in the country, in order to increase its share of revenues, even with the decline in production.

Undersecretary of the Ministry of Oil, Oo Daniel Chuang, stated that the ministry has begun preparing to nationalize the oil industry and stop relying on foreign aid.

Nationalization of the oil industry

The plan, to be implemented over the next five years, reflects the shift of several other African countries to play a vital role in the oil and gas fields.

The oil industry in South Sudan
A worker inside an oil field in South Sudan – Photo via VOA

South Sudan is strengthening the role of the state-owned Nile Oil Company, by acquiring assets once contracts expire, according to Bloomberg.

Undersecretary of the Ministry of Oil, Oo Daniel Chuang, said during the press conference last Friday, May 6, that his country will start nationalizing the oil industry by using its experience for training, but it will continue to benefit from the skills of foreigners for a very short period in areas that do not have sufficient experience. , so that cadres acquire these skills.

Among the operators in the east African country are China’s National Petroleum Corporation, India’s OGNC and Malaysia’s Petronas.

Chuang added, “When we talk about local content, we mean to maximize benefits and increase workers in the oil industry as much as possible, but this does not mean that it will be 100%, we have achieved 90% so far.”

He continued, “To achieve this stage of nationalization, it will not take less than 5 years until we have engineers and quality managers, while information technology may take about 5 years.”

He also explained that the ministry has established a geological data center to be used in training and technical operations, as part of the nationalization of the oil industry, according to the official Chinese news agency “Xinhua”.

Chuang believes that his country will continue to use foreign powers, especially since oil production requires the presence of technology and knowledge, saying, “Even America does not have 100% domestic contributions.”

In his speech, he referred to the government’s purchase of 3 aircraft to be used in geological mapping of the various regions in the country, and to facilitate its operations, a hangar was built at the airport.

low production

Despite these serious steps to nationalize the oil industry, South Sudan is struggling to rebuild its oil-dependent economy, after a devastating civil war and a fragile peace agreement signed two years ago.

The oil industry in South Sudan
Workers take a picture in the oil fields in Unity State – Photo courtesy of VOA

In addition, recent floods have limited oilfield production at 130,000 barrels per day over the past 3 years, compared to 350,000 barrels before the war.

Chuang explained that the risk of flooding will remain if precautionary measures are not taken. So his country began working with Egypt to build dams and streams.

While presenting the 2022/2021 fiscal budget before the National Transitional Legislative Assembly, Minister of Finance and Planning Ajak Achoel Lual stated that the expected decline in oil production is due to the depletion of some oil wells, and the continuing floods, East African reported.

South Sudan received $1.4 billion in total oil revenues, including $1.1 billion in direct transfers, in addition to paying $148 million to Sudan to cover processing costs, transportation and transit fees.

According to the World Bank, South Sudan is the most oil-dependent country in the world, with oil accounting for nearly total exports, and about 70 percent of GDP.

The wealth of South Sudan

South Sudan’s fortunes have long been linked to oil, and the discovery of oil in the late 1970s exacerbated tensions between Juba and Khartoum, as the two sides vie for control of the region’s oil fields.

South Sudan occupies the third place in the oil reserves in the African continent with approximately 3.5 billion barrels, however, about 90% of the oil and gas reserves are untapped.

After several years of separation, South Sudan is struggling to develop the oil industry, especially since the largest oil fields are located in its territory, but it lacks experience and funding; So he became dependent on foreign aid.

The government has resorted to hiring engineers from China and Malaysia to produce and export crude to Sudan, where it processes it and transports it to the global market.

The Minister of Oil in the Government of South Sudan, Pot Kang Chol, believes that his country’s dependence on foreign manpower hinders the full independence of his country.

A study conducted by the Sud Institute in South Sudan, an independent research organization in Juba, revealed that a large number of local workers in oil companies are unqualified for the jobs.

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