The South African government has signed an oil exploration and production agreement with South Sudan, a move intended at pumping money into Juba’s emerging petroleum industry that has almost stalled due to conflict.
The Exploration and Production Sharing Agreement (EPSA) will see South Africa’s state-owned Strategic Fuel Fund (SFF) granted permission to explore oil in Block B2 located in the wide oilfields of the Muglad basin that runs across both Sudan and South Sudan.
The exploration will take about six years. Upon oil discovery, SFF is expected to enter a joint venture with Nilepet, a local petro company, for aerial exploration, seismic tests as well as drill wells.
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, with the aim of securing affordable energy supplies for South Africa.
The aim is to set up a 60,000 barrel per day refinery to supply oil products to the South Sudan local market, and to secure exports to Ethiopia and other neighbouring countries.
At the signing ceremony, South Sudan Petroleum Minister, Ezekiel Lol Gatkuoth, said that the country has an estimated 3.5-billion barrels of oil with only 30% of it being explored, and that it has the third-largest oil reserves in sub-Saharan Africa.
“We expect to discover more oil and help us boost our economy,” he said
South Africa’s Energy Minister Jeff Radebe said the deal would strengthen energy security for South Africa.
At its peak, oil production in South Sudan was at 350 000 barrels a day, however production has been crippled, with oil fields severely damaged by almost six years of war. A peace deal in 2018 helped improve production from around 155 000 barrels per day (bpd) at the end of last year, to 175 000 bpd currently.
The South Sudan government was aiming to produce 200 000 bpd by the end of 2019 but the local Petroleum ministry says it expects the production to rise as officials prepare for a transitional government.