Slow starter drills into the big league -Burgeoning interest from overseas accompanies sustains the optimism regarding domestic oil reserves and potential output
In a development expected to bring substantial benefits to its battered economy, Sudan joined the ranks of oil-exporting nations with its first oil shipment in 1998. The national balance of payments has barely looked back. Petroleum imports used to be a major burden on the economy, costing the country an estimated $300 million a year, which wiped out roughly half the value of Sudan's total exports. However, the discovery of oil has abruptly changed Sudan's economic outlook.
"The country has achieved self-sufficiency in oil and is now striving to
export the surplus," says Sudanese energy and mining minister Awad Ahmed al-Jaz. With domestic consumption averag-ing about 30,000 barrels per day (bpd) and output running at around 210,000 bpd, Sudan is currently exporting about 180,000 bpd. Government officials reckon that oil exports could bring in as much as $500 million a year.
Sudan came late to the oil industry. The first oilfield, Hijlij, in the southwest of the country, did not start producing until 1996. Exporting oil from the field involved the construction of a 1,600km pipeline to an oil-export terminal at Port Bashair on the Red Sea coast.
The past few years have seen a notable increase in the interest of foreign oil companies in Sudan's oil and gas potential. Government officials forecast that the output rate could soon be boosted to 450,000 bpd, which would be mainly for export. Others suggest it could take several years to reach this level. One reason for the optimism regarding production rates has been the steep jump in estimates of the country's oil reserves.
The most recent official estimate for proven oil reserves is 1.7 billion barrels but, according to some reports, the reserves might actually total three billion barrels. While this figure hardly puts Sudan in the same league as oil superpower Saudi Arabia, it is much higher than last year's estimate of 1.2 billion barrels. Reserve estimates inevitably remain vague, given the limited knowledge about how much oil actually lies below the ground in the south of the country, where most of the fighting in the civil war has been taking place.
Nevertheless, analysts say that Sudan has good reason to believe that it can depend on a steady inflow of hard currency earnings from oil exports for several years. As well as crude oil, Sudan also exports refined oil products, including petrol - some 40,000 tonnes a month are produced at a refinery that uses oil from the Abu Jebra oil field. Reserves in this field alone are thought to total several hundred million barrels. Since August last year, Sudan has added natural gas to its growing list of hydrocarbon exports.
This could not have happened at a better time: as a clean and environmentally-friendly source of energy, natural gas is becoming the most favoured fossil fuel, making it relatively easy to sell on the world oil markets. Three companies, the Nile company, Aman Gas and Gabaco (formerly Agip), will be involved in exporting gas from the Khartoum Refinery Company, which produces 550 tonnes of gas a day - 120 tonnes of which will be consumed locally.
Sudan's natural gas reserves are estimated at a minimum of three billion cubic feet, a figure that is suspected to be well below the real level of reserves. The country is likely to have sufficient gas to sustain long-term exports. The first consignment, of 2,600 tonnes, left the country's main sea outlet of Port Sudan for the international market in August. It was bought by Trafigura, the official marketer for Sudan's crude oil.
This year the government has stepped up its campaign to encourage foreign investors to develop its oil and gas sector, following the success of several partner-ships between overseas companies and the Sudanese state represented by the Sudanese Petroleum Corporation (SPC).
The government has cast its net wide in seeking foreign partners
"Sudan is now an open country," says SPC director general 
Hassan Mohamed Ali Eltom. "We are pursuing a free mar-ket economy, we are going along with globalisation, and the government rules are very clear that foreign companies can repatriate their profits if they wish." Developing the country's energy resources is intended to play an integral part in boosting the Sudanese economy as a whole. "It was very much a priority in our objectives to really get the energy sector on solid ground to serve the other sectors," Mr Eltom says.
Dr Al-Jaz says: "We are moving very fast on developing the private sector, and we are giving companies a chance." Governmental organisations do not have any special privileges and now have to do business in an economy based on fair competition, he adds. The Sudanese government has cast its net wide in seeking foreign partners in the oil and gas sector, awarding deals to investors as varied as the China National Petroleum Corporation (CNPC), Malaysia's state-owned oil and gas company Petronas, and Talisman Energy of Canada.
In one project, these three firms have joined together in a consortium, the Great Nile Petroleum Operating Company (GNPOC), to develop the Muglad Basin group of oilfields in western Sudan. The CNPC has a 40 per cent interest in the consortium and is the operator of the project, while Petronas has 30 per cent and Talisman 25 per cent. The fourth partner in the consortium is Sudanese state oil firm Sudapet, which has a five per cent interest. This also gives the government the right to take up to 50 per cent of the oil produced by GNPOC.
Current projections are that by the end of the second phase of field development work in 2002, production from the Muglad Basin will reach about 235,000 bpd. The programme will include the development of two as yet untapped fields in the basin: Monga and Bambo. Meanwhile, oil companies are also carrying out exploration and production projects on several promising oil discoveries elsewhere in Sudan. The CNPC was recently awarded a deal to manage a new oilfield south of Khartoum, where its partners include a Middle Eastern investor as well as Sudapet and another Sudanese company. As operator of the field, the CNPC has reportedly taken a 23 per cent equity interest in the project and is said to be planning to boost output to 60,000 bpd.
The CNPC is the biggest single buyer of crude from Sudan and it is involved in the country's downstream sector too. For its part, Petronas has been awarded a 40 per cent interest in a new exploration project
Considerable reserves of gold exist as well as copper, iron and other minerals
in southern Sudan, and Talisman has announced plans to drill three wells on another block where it is the operator. The Canadian company is reported to be drilling on three structures named Zafir, Timor and Shalongo, which are thought to contain up to 50 million barrels of oil each. They are the first wells to be drilled on any of these fields, and some estimates suggest that if drilling proves successful, the Talisman project could add as much as 250 million barrels to Sudan's proven oil reserves. Sudan has also attracted interest from investors in the Gulf. A Russian oil company, Rosneft, is said to be planning to submit a bid for the exploration and development of a promising area along Sudan's Red Sea coast.
Oil has sped quickly to the forefront in the government's drive to increase the comprehensive exploitation of Sudan's mineral riches in partnership with investors from overseas. The country also has considerable reserves of gold, which it has been exporting for the last three years, as well as copper, iron and other minerals. For the moment, efforts to develop the mining sector are concentrated on gold exploration and production, while the other mineral riches await investors. "We have this potential and the government is focusing on developing the resources and opening the doors for investors to come in," says Dr Al-Jaz.
http://www.worldreport-ind.com/sudan/energy.htm
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