South Africa, South Sudan oil deal in the offing

South Africa is seeking to reduce its exposure to the highly volatile oil prices by securing deals in the sector with other countries.

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An oil rig in Cape Town Harbour

South Africa (SA) and South Sudan are negotiating an oil deal that will see South Africa build a US$1billion refinery in Africa’s youngest country, SA Energy Minister Jeff Radebe has revealed.

In a statement to the press, Radebe said the negotiations with South Sudan were not exclusive as South Africa was seeking to reduce its exposure to the highly volatile oil prices by securing deals in the sector with other countries including those in West Africa.

Despite the recent oil discovery by Total, South Africa is currently almost completely reliant on imported crude oil.

“It is gas condensate and light oil. Mainly gas. There are four other prospects on the license that we have to drill; it could be around 1 billion barrels of total resources of gas and condensate,” Total’s CEO Patrick Pouyanne said at the time.

Also Read: South Africa gas discovery top discussion at AEC breakfast event

At the same time, South Sudan, which is home to most oil reserves of the larger Sudan, is yearning to increase its oil production after a devastating civil war that is yet to end.

South Sudan, with an average production of 180,000 bpd, is planning to boost its production to 270,000 bpd and eventually restore the pre-war production level of 350,000 bpd. As of 2016, the country had oil reserves estimated at 3.5 billion barrels.

Reports of a US$1billion refinery deal with South Africa first emerged in 2018, and early this year, Cape Town had already spent almost US$1.4 million on the refinery project.

The war-torn country does not have its own refinery, so it currently sends crude oil by pipeline across the northern border to Sudan for processing and export, and imports refined fuels.

Responding to critics, The Energy Minister dismissed claims of the government going about the deal secretively, saying all was “above board” in the oil and gas negotiations.