An international rights watchdog group has called for the dissolution of an oil exploration contract between White Nile Ltd. of the UK and the Sudan People’s Liberation Movement (SPLM) amid a jurisdictional dispute that it says threatens peace in Sudan.
The London-based International Crisis Group (ICG) made several recommendations about the developing conflict as Total SA challenged White Nile’s claim to exploration rights on Block Ba in South Sudan (OGJ Online, July 22, 2005).
Total said it hired a UK lawyer to defend its license to Block B, which contains Block Ba, after White Nile announced plans for a seismic survey of the disputed area (OGJ, July 18, 2005, Newsletter). The Sudanese government granted rights to Block B in 1980 to a consortium ofTotal, operator, Marathon Oil Corp., Kuwait Foreign Petroleum Exploration Co., and Sudan’s state-owned Sudapet.
Lasalle said a January 2005 comprehensive peace agreement signed between the government in Khartoum and the SPLM stipulates that all contracts signed before that date remain in force.
“Total’s contract was originally signed in 1980, and since then Total’s rights have been regularly confirmed by the government in Khartoum,” Lasalle said.
ICG report
A July 25 report by ICG said the agreement between White Nile and the SPLM has no legal standing and threatens the January Comprehensive Peace Agreement (CPA) signed by the Sudanese government and the SPLM, now also known as the government of South Sudan.
ICG is an independent, nonprofit, nongovernmental organization that works to prevent deadly conflict in more than 50 countries and territories.
David Mozersky, an ICG senior analyst based in Nairobi, told OGJ that the White Nile deal was the “most blatant problem” facing implementation of the CPA, and that it is symptomatic of larger problems in the country’s oil business.
Sudan has been torn by more than 30 years of civil war between the southern-based SPLM and the northern-based Khartoum regime.
“Early disagreements in the oil sector are symptomatic of CPA implementation obstacles and pose an immediate challenge to the viability of the peace process,” ICG said in its report.
“Full implementation of the wealth-sharing agreement is crucial, in particular management of the oil sector and transfer of southern oil revenues by the central government to the government of South Sudan,” it said.
“Extended delays by Khartoum in disbursing revenue could lead to calls within the SPLM for a return to war.”
The agreement on oil revenues states that 50% of net oil revenue from “oil producing wells in southern Sudan” is to be allocated to the government of South Sudan as of the signing of the CPA.
But ICG said delineation of the border in the oil-producing areas was not addressed during the CPA negotiations.
“Although the north-south borders are defined under the peace accords as those at the time of [Sudanese] independence [from Britain] on 1 January 1956, these are contested, and Khartoum governments have several times attempted to alter them to place oil within the north,” ICG said.
ICG said disagreements between Khartoum and the SPLM over the location of boundaries and oil fields have the potential to delay disbursement of oil revenues indefinitely.
It recommended that the two sides, in conjunction with international experts, set up a boundary commission as soon as possible to resolve the border issue, as well as more technical issues such as creation of a formula “for defining the geographic placement of an oil well.”
New deals
ICG was especially critical of the SPLM for its contract with White Nile, which was announced earlier this year.
ICG said the deal violated the agreement between the SPLM and Khartoum that all new oil contracts after the CPA would be decided consensually by the National Petroleum Commission (NPC), which is to be a joint government-SPLM body.
Citing the framework agreement on wealth-sharing signed by the two sides, ICG said the NPC will be responsible for “the [oil] sector, including the negotiation and approval of all new oil exploration and development contracts.”
ICG said Khartoum reacted with “understandable anger” when it learned of the White Nile deal as it “infringed on a concession area leased by the government to a consortium which has held the rights since 1980.”
ICG said Total froze operations in 1985 due to the civil war but maintained ownership and concession rights since it “paid annual fees to the government to keep its license valid.”
Moreover, ICG noted that Total, on behalf of the concession partners, signed in late December 2004 “a renewed production-sharing agreement with the government, making clear that its return was conditional on peace and an improved security situation.” ✦