With the stage set for the creation of Africa’s newest state, the successful implementation of South Sudan’s energy policy will be crucial to peace in the region
Garang Diing Akuong has arguably the most important job in South Sudan. He is the man responsible for developing a new legal framework to govern the energy, power and mining sectors, following the South’s secession from the North planned for 9 July.
For this [energy] policy we need the participation of a lot of partners … all stakeholders
He is also a key participant in ongoing negotiations with the Khartoum government on the resolution of a series of issues that are critical to the economic future of both North and South Sudan, and to establishing a functioning relationship between the two governments in the aftermath of separation.
|South Sudan referendum result|
|Number of voters||Percentage|
|Total number of voters||3,837,406|
|Source: Government of Southern Sudan|
Akuong is the energy and mining minister in the government of Southern Sudan, which was established as a semi-autonomous body by the Comprehensive Peace Agreement (CPA) signed with Khartoum in 2005. For the past six years, the awarding of oil and gas contracts has been the responsibility of the National Petroleum Commission, a body composed of government representatives from both North and South. Prior to 2005, they were signed with Khartoum.
Energy legislation in Sudan
Most of the hydrocarbon resources are located in the South, which has an estimated 75 per cent of Sudan’s known oil and gas reserves and a similar proportion of current production. Under the CPA, revenues from oil production are shared between the North and South. Assuming the South becomes a new nation in July, it will take control of its own resources.
Right now we can’t go for a quota, because we still need to train the South Sudanese
“Southern participation in the oil industry at the moment is minimal,” says Akuong. “The ministry of energy in Juba is not involved in the management of the sector, and the South is getting no money from the foreign companies – just from the oil produced by the government. But in the event of separation, the South will own the oil that is discovered and exploited in the South and the North will own the oil that is discovered and exploited in the North.”
Akuong says his government is poised to enter a period of consultation on the formulation of a new energy policy. “For this policy we need the participation of a lot of partners – of parliament, the executive, the oil firms … All the stakeholders need to participate,” he says.
It is also drafting an oil law to create the legal framework for the future management of the sector. “The oil law has to go to the legal affairs ministry for approval, then to the council of ministers,” he says. “Then it will go to parliament, where it will be passed in April or May.”
Akuong is also responsible for similar bills that will create a legislative framework for the power sector and for the exploration and development of metals and minerals, which is believed to be highly prospective in Sudan.
Both bills are expected to be passed by July. Once these frameworks are in place, Juba will have a basis on which to award new contracts to international companies.
“We plan to carry out a geological survey of all of southern Sudan so we can award more oil blocks and contracts for minerals, such as gold and iron,” says Akuong. “We will either do the survey ourselves, or give licences for private companies to do it.”
Sudan contract reviews
Studies have also been carried out for several hydroelectric power plants, the first of which is due to be tendered this year.
In the minerals sector, Juba will be starting out from scratch, as no exploration leases have been signed to date. In the oil and gas sector, the Southern government plans to review the terms of all contracts signed for acreage within its borders.
“The South will honour all contracts signed before and after the CPA,” says Akuong. “But the CPA stipulates that the South has a right to look into these agreements to see if there are clauses that harm its interests. If there are, they have to be corrected.”
One of the priorities is to ensure the contracts are fair to local communities and that the impact on the natural environment is minimised.
“There has been a lot of damage done in the states of Unity and Upper Nile,” says Akuong. “Oil has been spilled in rivers and farmland and forests have been damaged. A lot of havoc has been created by the militias and security forces and no damages have been given to those whose lives and properties have been affected. A lot of people have been displaced or killed. We want the oil industry to be friendly to the people of the area.
“People have not benefited from oil. They are very poor – they are without schools, roads, health centres. It is not acceptable to the government of the South.”
The Southern government intends to seek compensation for those who have been affected by oil exploration. “We will talk to the Sudan government and the companies about what should be done about this destruction,” says Akuong.
“We are already talking to the Northern government, and the Norwegian government is doing an environmental audit to see what damage has been done. The audit will identify liability for damages. It will point to somebody – either the companies or the government of the North – and who should pay for this damage. We will pursue the damages in the courts, either in Sudan or elsewhere.”
Job creation in Sudan
The terms of all current oil and gas contracts will be reviewed to ensure that they benefit the people of South Sudan.
“The contracts are not financially fair for the people of South Sudan,” says Akuong. “Most of the contracts for the producing fields were signed before the war stopped, so the South was in a weak position.”
One critical element is the creation of jobs. “There are positions [on oil projects] that can be held by local people,” says Akuong. “We cannot allow the Southern Sudanese people to not be employed. The only case where [an oil company] can have a non-South Sudanese person in a position is where they can’t find anyone.”
However, the government will stop short of introducing quotas for the employment of local people. “Right now we can’t go for a quota because we still need to train the South Sudanese,” says Akuong. “Even those in South Sudan with qualifications haven’t been able to get experience because the existing contracts always favoured the employment of Northerners.”
The new contracts will build capacity within the South Sudanese workforce, as well as contributing to the development of physical infrastructure.
“We expect new oil contracts to include training for South Sudanese, development projects for local people, and infrastructure,” says Akuong. “Even on oil fields you need water, roads, schools and hospitals.”
Those contracts that do not include such terms will be revised. “It is the right of South Sudanese to say that the existing contracts don’t include these rights. It wouldn’t cost a lot compared to the profits from oil,” says Akuong.
The minister also plans to review the size of the blocks awarded to date for oil exploration.
“One of the things we are looking at as part of the oil policy we are developing is the licensing aspect and the size of the blocks to be awarded,” he says. “There is no question of dividing contracts that have already been awarded. But in the future we will not give such large blocks to a single company. We will formulate recommendations on the relinquishing of acreage [when contracts are renewed], and on what size blocks should be awarded.”
The largest of the blocks awarded in South Sudan is the 118,000-square-kilometre Block B, on which France’s Total is the operator. Since the withdrawal of US oil company Marathon in 2006, due to sanctions imposed on the country by Washington, a 20 per cent share in the block has been without an owner.
Qatar Petroleum and the UAE’s Mubadala Development Company are both understood to have expressed an interest in acquiring the stake, but nothing has been decided as yet. “There is still 20 per cent hanging that hasn’t been sold yet,” says Akuong. “We haven’t received any serious applications yet. The consortium is still incomplete. We are working on it.”
The government may even open up the stake to competitive bidding. “It will either be by bilateral agreement or a tender process,” says Akuong. “A tender is likely because we want to be transparent and we want to get the best offer. We want to start the process very quickly.”
While South Sudan is keen to encourage international oil firms to invest, it also plans to increase the role of Nilepet, the commercial arm of the energy ministry in the oil and gas sector. “We are going to empower it to take a share in blocks in the South,” says Akuong. “At the moment it has a 10 per cent stake in Block B and Block E; in the blocks that are in production it has nothing. In the future, we’d like to increase Nilepet’s stake in new blocks, but it will only take a minority share because we want to encourage private investment.”
The successful implementation of the South’s energy policy will rely on establishing good relations with the North. The two governments have little time to iron out their differences before the South’s formal independence on 9 July. The status of the oil-producing border region of Abyei remains unresolved, after plans to hold a referendum alongside the secession vote were abandoned. “Originally it was part of the South,” says Akuong. “We think it should be brought back to the South.”
Revenue sharing for Sudan oil fields
How revenues will be shared from other oil fields that straddle the North-South border also needs to be agreed. “It depends on the border demarcation,” says Akuong. “If this is accepted by both sides, the fields can be commonly exploited in the interests of both North and South. We don’t envisage it being a problem.”
Most urgently, a deal must be reached to enable the evacuation of the South’s oil via the pipeline network in the North, and the use of the country’s only refinery, which is in Khartoum, for the treatment of Southern crude.
“The North and South need to cooperate in the management, exporting and marketing of oil in Sudan,” says Akuong.
In the future, the South says it may build new pipelines to enable it to export oil via Kenya. “There might be political instability in the North at any time, so we need to have a safer route,” says Akuong. “We also have proven reserves a long way from the infrastructure, for example Block B is closer to East Africa than it is to Port Sudan.”
For the time being, the South will continue to be reliant on the North’s infrastructure and this will require good relations with the North. “We think Southern oil will be exported through the North for a long time” says Akuong.
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