Sudan has experienced two civil wars since gaining independence in 1956. The second civil war ended with the help of international observers and led to the Comprehensive Peace Agreement (CPA) between the Sudanese government and the rebel factions in the southern region in 2005. The CPA established guidelines for oil revenue sharing and a timeframe to hold a referendum for independence of the South. The southern region overwhelmingly voted for secession, and in July 2011, South Sudan became an independent nation-state separate from Sudan, with Juba and Khartoum as their respective capitals.
The unified Sudan began producing oil in 1999, and as a result, the country tripled its per capita income within a decade. However, the secession of South Sudan significantly affected Sudan’s economy because it lost 75% of its oil reserve fields to South Sudan. Sudan and South Sudan’s oil sectors play a vital role in their economies and are closely linked; most of their producing assets are near or extend across their shared border. Since the split, Sudan and South Sudan’s oil production has declined because of continued domestic political instability and conflict between the two countries.
Disruptions in oil production, disputes over oil revenue sharing, and lower oil prices have had a negative effect on both economies. In January 2012, South Sudan announced that it would shut its oil production over a dispute about oil transit fees. The dispute later turned violent, as the South Sudanese army—the Sudan People’s Liberation Army (SPLA)—and Sudanese opposition forces took control of the oil field for more than a week and destroyed critical infrastructure, which temporarily reduced Sudan’s oil production by more than 50%. The conflict was resolved in November 2012 with support from the international community, and both governments reached an agreement on oil transit fees and on compensation for lost production.
The cooperation agreements and implementation matrix, which states the timeframe to carry out the obligations stipulated in the cooperation agreements, paved the way for restarting oil production in April 2013. According to a Business Monitor Intelligence (BMI) Research report, South Sudan currently pays Sudan U.S. $24.50/barrel, which consists of a U.S. $9.50/barrel transit fee and a U.S. $15/barrel fee to cover the cost of debt repayment shared between the two countries. The drop of oil prices in 2014, however, significantly lowered export revenues. Because South Sudan’s Dar blend trades at a significant discount to Brent, a drop in the price of Brent could significantly affect South Sudan’s fiscal position.
Armed conflict in both countries has persisted in the post-referendum period because unresolved issues on domestic and interstate relations still linger. Both countries still contest some areas around the demarcated border the CPA established. Disputes over the Abyei area and the Heglig oil field between South Kordofan state in Sudan and the Unity State in South Sudan have been particularly contentious because these areas have strategic importance for the oil sector and have agricultural resources that both countries rely on, adding another layer of complexity to the disputes.
In Sudan, two main entities oversee activities in Sudan’s petroleum sector. The Ministry of Petroleum (MOP) administers and manages the Sudanese oil sector. Sudapet, the national oil company, holds minority stakes in each of the international consortia operating in the oil-producing blocks.
In South Sudan, the administrative structure largely mirrors Sudan’s. The Ministry of Petroleum and Mining is responsible for managing South Sudan’s petroleum sector. The National Petroleum and Gas Corporation (NPGC) is the main policymaking and supervisory body, and it reports directly to the president and national legislative assembly. It participates in all segments of the hydrocarbon sector and approves petroleum agreements on the government’s behalf. The Nile Petroleum Corporation (Nilepet) is South Sudan’s national oil company, and its activities mirror much of the responsibilities of its Sudanese counterpart. Nilepet oversees operations in the petroleum sector, and because of its limited technical expertise and financial resources, it holds minority stakes in production-sharing contracts with foreign oil companies. South Sudan’s Transitional Constitution, the 2012 Petroleum Act, and the 2013 Petroleum Revenue Management Act define the regulatory framework governing the hydrocarbon sector.
Most crude oil in Sudan and South Sudan is produced in the Muglad and Melut basins. South Sudan’s secession in 2011 substantially reduced Sudan’s oil production capabilities because most of the oil fields are located in South Sudan. Sudan and South Sudan produce three crude oil blends: Dar, Nile, and Fula. The Dar blend (25.0° API gravity, 0.11% sulfur) is a heavy paraffinic type of crude oil that has a high acid content and must be heated during transport to avoid congealing in ship tanks. The Dar blend is produced at Blocks 3 and 7 in the Melut Basin, which is controlled by South Sudan. The Nile blend (33.9° API gravity, 0.06% sulfur) is produced in the Muglad Basin at Blocks 1, 2, 4, and 5A; it is a medium, low-sulfur waxy crude oil and is a more attractive blend to refiners because of its high fuel and gasoil yields. The Fula blend is a highly acidic crude oil that is produced in the Muglad Basin at Block 6 and is processed for domestic use.
In South Sudan, the ongoing civil war and political instability have undermined its ability to increase output to peak production capacity. Low investor confidence and the poor security situation pose serious obstacles to the government’s ability to boost crude oil production, and they may need to rely on privately negotiated deals with smaller companies such as Nigeria-based Oranto, which secured a 90% stake in Block B3.
Damaged infrastructure and shut-in fields stemming from conflict have lowered overall production levels, and efforts to repair infrastructure or restart production have been delayed. In 2018, combined production from both countries fell to less than half of the peak production levels of 2010; the unified Sudan produced about 486,000 b/d. Neither country will likely be able to substantially increase production without significantly improving the security situation or increasing foreign investment.
Sudan brought two small oil fields in Blocks 6 and 17 online at the end of 2012, and the country is exploring offshore production in the Red Sea Basin. However, progress in developing the Red Sea Basin area has been slow. In addition, Sudan’s oil fields are reaching maturity and so nearing depletion. Sudan is trying to mitigate declining output by using enhanced oil recovery (EOR) techniques, but EIA expects the decline to continue.
|Sudan||Block 2a, 2b||Block 2a, 2b||Nile||GNPOC|
|Block 4||Diffra, Neem||Nile||GNPOC|
|Block 6||Fula, Hadida||Fula||PEOC|
|Block 25||Rawat Central, Wateesh||Unknown||Sudapet|
|South Sudan||Block 1, 2, 4||Unity, Toma, Munga, Heglig, Bamboo, Diffra, Neem||Nile||GPOC40|
|Block 3, 7||Palogue, Adar-Yale||Dar||DPOC|
|Block 5A||Mala, Thar Jath||Nile||SPOC|
|Source: Company websites and presentations, RYSTAD Energy, Africa Oil & Power|
Sudan has two main export pipelines that travel north across the country to the Bashayer Marine Terminal, located about 15 miles south of Port Sudan. Most of Sudan’s storage facilities for crude oil and refined products are also located at the Bashayer Marine Terminal. The Bashayer Marine Terminal has a storage facility with a capacity of 2.5 million b/d and an export/import facility with a handling capacity of 1.2 million b/d. The Greater Nile Petroleum Operating Company (GNPOC) operates the terminal. South Sudan currently does not have any significant storage capacity. South Sudan exports all of its crude oil via pipeline through Sudan.
The Petrodar (PDOC) pipeline transports crude oil from Palogue and Adar Yale oil fields (Blocks 3E and 7E) in the Melut Basin to the Bashayer Marine Terminal in Port Sudan. The pipeline has several heating units to facilitate the movement of the Dar blend crude oil along the pipeline.
The GNPOC pipeline transports Nile blend crude oil from the Heglig oil fields (Blocks 2 and 4) in Sudan and the Thar Jath and Mala oil fields (Block 1 and 5A) in South Sudan to the Bashayer Marine Terminal in Port Sudan for export and to two refineries in El-Obeid and Khartoum for refining and distribution to the domestic market. In September 2014, ownership of the pipeline and facilities was fully transferred to a local Sudanese pipeline operator, Petrolines for Crude Oil Ltd. (PETCO).
|Operator||Start of pipeline||Destination||Crude oil blend type||Approx. length (miles)||Design capacity (thousand b/d)|
|Main crude oil pipelines|
|DPOC||Block 3 and 7||Bashayer Terminal 2, Port Sudan||Dar||850||500|
|GNPOC||Heglig facilities||Bashayer Terminal 1, Port Sudan||Nile||1000||450|
|SPOC||Block 5A||Connects to Heglig facilities||Nile||60||200|
|CNPC||Block 6||Khartoum Refinery||Fula||450||200|
|Proposed crude oil pipelines|
|--||South Sudan||Lamu (Kenya)||--||--||450|
|--||South Sudan||Djibouti via Ethiopia||--||--||--|
|Source: Company websites and presentations, Middle East Economic Survey|
South Sudan has no domestic refining capacity so it must rely on imported petroleum products to meet domestic demand. The South Sudanese government has sought to accelerate the development of two refineries in Bentiu and Tangrial; however, the poor security environment has impeded the development of downstream infrastructure.
Sudan has two oil refineries and three topping plants (smaller, less complex refineries). However, the only active refineries are the Khartoum (al-Jaili) refinery and the El-Obeid topping plant. The al-Jaili refinery, located approximately 45 miles north of Khartoum, is the country’s largest, with a capacity of 100,000 b/d. The other full-conversion refinery is the Port Sudan refinery (21,700 b/d), and the three topping plants are El-Obeid (10,000 b/d), Shajirah (10,000 b/d), and Abu Gabra (2,000 b/d).
The al-Jaili refinery initially came online in 2000 with a capacity of 50,000 b/d and was a 50/50 joint venture between the Ministry of Energy and Mining (MEM) and the China National Petroleum Corporation (CNPC). Al-Jaili was later expanded in 2006, increasing total capacity to 100,000 b/d and creating two production lines that can refine both Nile and Fula blend crude oils. The expansion was notable for using the world’s first delayed-coking unit, a unit required to process Fula crude oil because of its high acid and calcium content.
|Country||Refinery||Capacity (thousand b/d)||Status||Operator|
|Port Sudan||21.7||Not operating||Sudapet|
|Abu Gabra||2||Not operating||Sudapet|
|Planned Refineries||Operator and/or builder|
|South Sudan||Unity State (Bentiu)||5||Under construction||Safinat (Russia)/Nilepet|
|Upper Nile (Tangrial)||10||Suspended||Government of South Sudan|
|South Sudan||Akon||50||--||Akon Refinery Company|
|Source: BMI Research, African Development Bank Note: Contruction at the Bentiu refinery in South Sudan initially was to build facilities with a capacity to process 3,000 b/d. Plans for expansion to increase capacity to 5,000 b/d have been discussed, but no progress has been made.|
Sudan and South Sudan export the Nile and Dar blends to Asian markets. All crude oil produced in South Sudan is exported via pipeline to Sudan for refining or export because South Sudan has no refining capacity, and Sudan is the only country in the region with the refining infrastructure capable of processing these particular blends. Crude oil is exported from Port Sudan to Asia via the Bab el-Mandeb Strait. Given the lack of alternative transit routes, Bab el-Mandeb is a strategically important chokepoint that if blocked or closed could lead to significant increases in shipping time and costs.
Neither Sudan nor South Sudan produces natural gas for commercial use or domestic consumption. Natural gas in Sudan is mostly flared or re-injected into associated oil fields.
Domestic consumption of petroleum products grew rapidly with increased industrialization, car ownership, and access to electricity in the 2000s; however, the persistent instability in both states has dampened consumption. Lower production levels during the past few years have led to an increase of imported petroleum products to meet shortfalls in domestic demand, which had been traditionally met by domestically refined crude oil.
Sudan has two interconnected grids, the Blue Nile and Western grids, which cover a small portion of the country. An additional 14 centers receive service from thermal generators and local distribution networks. The Sudanese government is attempting to diversify its power generation mix by focusing on developing conventional thermal plants to meet domestic energy demand. However, the proposed projects are still in their early stages and rely heavily on Saudi financing. Without diversifying its power generation mix, Sudan must rely heavily on hydropower to meet domestic demand, and it will be especially vulnerable to weather patterns such as a severe or sustained drought.
South Sudan has one of the lowest electrification rates in the world. Those connected to the power network experience frequent blackouts or forced load shedding, making citizens rely on standby generators to meet energy needs.
Hydroelectricity is generated from seven dams: Roseires, Sinnar, Jebel Aulia, Khashm el-Girba, Merowe, Rumela, and Burdana. The Rumela and Burdana dams, located on the Upper Atbara and Setit rivers in eastern Sudan, were brought online in 2017 and are the most recent additions in hydropower generation. According to BMI Research, the two dams added 320 megawatts (MW) and 15 MW to total generation capacity, respectively.