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Southern Sudan approves plans for 50,000-b/d refinery

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Oct. 7 -- Even as it faces fresh conflict with its northern rival, the government of Southern Sudan approved plans to build a $2 billion refinery, according to a senior official of the semi-autonomous state.

Energy Minister John Luk said the southern government plans to build the 50,000-b/d refinery in Akon, Warap state, to serve all seven states west of the Nile.

Luk said construction will take 36 months, and the refinery will process crude from the fields of Unity state. An Italian company is working on details of the facility, which will be open to tender soon.

Southern Sudan's state-owned Nilepet Corp. is to form a joint venture with the winner of the bid. The government plans another refinery for the Dar Blend oil fields in the Upper Nile region, Luk said.

The energy minister’s statements coincided with reports the northern Sudanese government offered to help Uganda as it begins oil production in the Albertine rift stretching from Southern Sudan through the Lake Albert Valley to southwest Uganda.

"The Sudanese government is ready to cooperate with Uganda in developing its oil sector, including establishing a refinery," said Ali Hussein Award, Sudan's ambassador to Uganda. He said Khartoum also is ready to resolve outstanding border disputes with Uganda.

Meanwhile, fresh controversy over oil-revenue sharing between the northern and southern Sudanese governments erupted with publication of a report by Global Witness, an international nongovernmental organization, that shows a discrepancy between figures of the northern Sudanese government and those of Chinese National Petroleum Corp., operator.

According to the Global Witness study, the Khartoum-based northern government underreported production in certain block by as much as one quarter less than the amounts given in annual reports of CNPC, which operates the blocks.

According to the report, the southern government received $2.9 billion in oil revenues in 2009. The alleged discrepancies are of the order of 9-26%, so any money owed to the southern government by the Khartoum government could be large.

Key findings by Global Witness include: 

• The volume of oil the Khartoum government reported produced in Blocks 1, 2, and 4 in 2007 was 9% less than stated in CNPC’s annual report.

• The volume Khartoum reported produced in Blocks 3 and 7 in 2007 was 14% less than CNPC listed.

• The volume Khartoum and other sources reported produced in Blocks 1, 2, 4, and 6 in 2005 was 26% less than CNPC’s figures.

• Khartoum’s and CNPC’s numbers were about the same only for the one oil block located entirely in the north and not subject to revenue-sharing.

• Oil prices published by the finance ministry in Khartoum and those published in the oil industry press for sales in the same months do not match.

“The problem is that the southern government cannot verify that the oil figures published by the Khartoum government are correct,” said the report titled “Fuelling Mistrust: The need for transparency in Sudan's oil industry.”

In 2005, a peace agreement ended Africa’s longest-running civil war—the 22-year conflict between north and south Sudan. Under the agreement, revenues from southern oil wells are to be shared between the northern and southern governments.

Due to the current discrepancy over oil accounting, however, Global Witness said “a return to conflict looks all too likely” as armies are already massing on along the border.

During the civil war, 1.5 million people were killed and four out of every five people in the south had to flee their homes at some point, according to Global Witness.

Contact Eric Watkins at hippalus@yahoo.com.


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