Second Chance
26 August, 2018
South Sudanese Oil Minister Ezekiel Gatkuoth
In few days oil from rehabilitated fields in South Sudan will start to flow through the Palogue and Heglig central processing facilities (CPF) and through the two eastern and western pipelines to the world markets. The restart of production from the Toma South and El Toor is the first stage of bringing fields from blocks 1, 2 and 4 that are expected to be pumping at full capacity by year end according to the South Sudanese Oil Minister Ezekiel Gatkuoth.
The timing is very critical to the two countries, where in both the economy is in a free fall as exemplified by the continuous depreciation of their national currencies. And that is why whatever amount of hard currency that is to be generated will be a real thrill as happened to Khartoum, when it collected $2.2 million that represents its share from the first oil cargo sold back in 1999.
In addition to fees levied by Sudan against using its CPFs, its pipelines and the technical expertise it deployed, there are two more important and connected issues: the first relates to the introduction of a positive atmosphere that may have an impact on the stalled Sudan oil industry. With the two countries putting their hands together to manage what was originally a one operation for one oil industry, the potential becomes more lucrative for foreign companies to put an effort and engagement more than the lip service they used to deliver since the 2011 separation. Aside from the flurry of activities and statements from foreign companies that have yet to deliver, it was more interesting to hear statement from the Sudanese ambassador to Beijing Ahmed Shawir declaring that talks are underway to ink new oil deals with Chinese oil companies. If that move is to materialize, it will represent the best opportunity to settle Chinese companies to Sudan and enable these firms to deploy their expertise and knowledge of Sudan oil fields for a better performance and tangible results.
The second issue is the restored trust between Khartoum and Juba and the possibility of deploying this newly found trust for the benefit of the two countries. In fact except for mere ten years out of more than six decades on relations between the two parts of what was then one Sudan or later two independent countries, lack of trust was the dominant factor in the bilateral relations between the two countries. The brief span of trust and tranquility referred to goes back to the promising years that followed the 1972 Addis Accord that put an end to the 16-year first civil war and opened the door for Sudan to realize its potential politically through its venture into unity through diversity and economically through its efforts to tap the country’s natural resources with the hope of making it the bread basket of the Arab world. And both are wrapped into the new role played by Khartoum as facilitator and guarantor of the latest peace deal between warring factions in South Sudan. It remains to be seen whether Juba will reciprocate and push its past comrades in SPLA-N to settle their dispute with Khartoum. An offer was made previously, but was immediately rejected by Khartoum, who then regarded Juba as a party to the conflict, not a mediator.
Sudan has a unique experience of going through oil boom and bust and a good possibility of reviving its oil industry. In some estimates Sudan coffers earned between $30 billion to $35 billion during the oil decade bonanza, but in classic case of the Dutch disease Sudan squandered that opportunity with no rational spending priorities instead of investing in renewable production sectors like agriculture, where the country has a competitive edge.
If the lesson is learnt, it wouldn’t be a lost opportunity. Moreover, and out of sheer inability the government is ceding more to the private sector as with the contractual agriculture where the private sector is stepping in to cover for lost role used to be played by government in terms of providing finance, fertilizers and extension.
The hope rests on the possibility that with the ease of economic crisis, the government moves from crises management as is happening now to a more settled way to look deeply into the economic crisis that is having a dire political consequences for the whole country.
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