A peace deal for Sudan brings opportunity for oil prosperity

Jan 11, 2005 01:00 AM

An agreement to end two decades of civil war in Sudan not only brings the opportunity for millions of people to return home and begin new lives, it also gives investors an opening in a needy country with large oil reserves.
Experts predict that oil and gas companies will rush in to expand Sudan's oil production from the 345,000 bpd recorded in June 2004. The country has proven reserves of 635 mm barrels, much of which could not be accessed during the war because of fighting.

Under the peace agreement, oil leases signed by the government during the war will be respected. The largest lease holders include the China National Petroleum Company, Malaysia's Petronas, ONGC Videsh Limited of India and Sudan's Sudapet.
That doesn't mean there aren't still many opportunities. French oil giant TotalFinaElf announced in late December that the company had renewed oil agreements with Sudan that were abandoned in 1985 because of the war. Sudan's energy ministry also announced that oil production will increase to 500,000 bpd.

The United States has enforced sanctions against Sudan for being a state sponsor of terrorism, but in the run-up to the peace agreement, Secretary of State Colin Powell promised that an end to fighting in southern Sudan would speed up the normalization of relations. The US government has also made it easier for major companies to get exemptions from the sanctions.
The southern accord does not apply to the fighting in Darfur, a vast western region where tens of thousands of people have died in an almost two-year-old conflict, pitting rebels against government forces and allied Arab militias, known as the Janjaweed.

US oil companies have recently begun to show interest in Sudan's undeveloped oil fields. Houston-based Marathon Oil recently resumed payments to the government as part of its partnership with TotalFinaElf in Block 5, an area of intense fighting during the war that could have 1 bn barrels in reserves, a US business consultant said.
"Sudan is going to be number one in Africa and the world for investment because it's a large country and the infrastructure is zero," said Tajeldin Awad, director of Spanish firm Emigres' Sudan operation. "People need buildings, power, highways, hospitals -- they need everything."

The government instituted dramatic economic reforms in 1998 and in 2004, registered a 7.5 % growth in gross domestic product. But inflation topped 8 % in 2004 and Sudan's 38 mm people averaged only $ 1,900 a year in income, high by African standards but low compared to most oil producing countries.
In 2003, the country attracted $ 1 bn in foreign direct investment, said Nasser Hashim, an official at the Ministry of Investment, and that number is expected to climb.

But there are many uncertainties and difficulties ahead. Southern Sudan has seen virtually no development since the 1950s, and more than 4 mm southern Sudanese fled their homes during the war.
And the peace accord allows the southern Sudanese to hold a referendum on independence in six years, setting up the possibility of more conflict with the north.

Source: AP
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