Sudan’s Coming Referendum and Oil
Three months and one week remain until the people of Southern Sudan have the opportunity to vote for independence. Apprehension is growing that an oil war is in the making. But such fears should be tempered. War between northern and southern armies over the country’s oil-rich border region is unlikely. Instead, a messy mix of intraparty struggles in the South and local armed resistance in oil-bearing regions pose serious threats.
Oil had previously fuelled an over two-decade civil war between the North and South, leaving two million dead until the Comprehensive Peace Agreement was signed in 2005. Since peace was established, the North’s ruling National Congress Party and its southern counterpart, the Sudan People’s Liberation Movement have no interest in disrupting their yearly windfalls of oil revenue by returning to war. Even with southern separation almost assured, when it comes to oil, the North and South will be attached to one another for years to come.
It would be an act of economic suicide for either side to make a move to capture oil fields by force. Over 80% of Sudan’s oil production and reserves lie beneath landlocked southern soil. But the only means of exporting the crude oil, extracted from the ground by a trio of Asian national oil companies from China, India and Malaysia, is through a set of pipelines heading northeast to the Red Sea. Until the South develops its own pipeline, which would take years, it is in quite the bind. If it wants to continue to profit from essentially its only source of revenue, and it has handsomely at over $9 billion over the past five years, it will have to continue sharing oil revenues with the North. At the same time, the North’s dependency on oil, measuring in at 60% of its annual revenues, will certainly have to take a sizeable cut to please southern leaders.
Tensions have previously driven the NCP and SPLM to blows over oil. In May 2008, hundreds of civilians were killed and thousands displaced in the aftermath of a violent confrontation between northern and southern armed forces in the oil region of Abyei. Yet inevitably the NCP and SPLM managed to iron out their differences, and the oil revenues continue to flow. The Permanent Court of Arbitration ruling in July 2009 essentially stripped the Abyei of its oil-rich status, placing the key oil field of Heglig outside of the region. But the decision did not lead to armed conflict as many expected. Two years earlier in 2007, the NCP and SPLM settled a dispute that saw French oil major Total retain its rights to a massive oil block in Southern Sudan. More recently, the North has agreed to resume payment of the southern oil share in foreign currency after the South cried foul in receiving Sudanese pounds from Khartoum’s central bank, undermining its ability to purchase imported goods. But while the NCP and SPLM have continuously found a way to share the spoils, the influx of new oil wealth has caused other problems.
Southern Sudan is on a path to continue the sins of a long line of endowed yet unscrupulous African oil producers. Government salaries have made up the fair share of consecutive budgets while major towns in the South continue to lack heath, education and infrastructure investment. Southern finance ministers come and go over corruption scandals, providing political ammunition for those who would like to see the SPLM fall apart. More alarmingly, there is discontent from within.
Oil may prove to be a highly divisive factor in power struggles in an independent Southern Sudan. The forces of high-ranking SPLM members, Unity State Governor Taban Deng and General Paulino Matip, clashed last October in Bentiu. Matip has close ties with a US oil outfit, Jarch Capital, which according to its Chairman Phil Heilberg is hoping to capitalize on ‘sovereignty changes’ in Sudan. Jarch’s claim to oil concessions stand in opposition to those of other companies signed up with the southern government. The former rebels may face their own rebellion soon enough in an independent Southern Sudan.
A Niger Delta scenario of entrenched conflict between local armed groups and government security forces is brewing in Sudan’s oil regions. Four Chinese oil workers were killed in 2008 during a botched rescue attempt by Sudanese authorities after the workers were kidnapped near the oil town of Heglig. Local populations have seen little benefit come out of oil. Rather their impoverished situation has been worsened by the environmental degradation brought on by negligent oil companies operating under an utter lack of regulation. The cost-cutting discharge of contaminated water from oil reservoirs has lead to the death of livestock and serious illness among local populations.
If the northern and southern governments wish to continue to profit from oil after the referendum, they must end their bickering over oil revenues and start to tackle the negative consequences of oil development at the local level. The SPLM must get its house in order and put an end to any dealings its members might have with oil companies looking to make a quick buck. Both parties must also start to take the well-being of local populations in oil-bearing regions seriously. Ignoring the needs of those who live closest to their main source of income is simple common sense. Northern and southern armies will unlikely square off over oil heading towards the referendum. But ensuring a wider stability will only encourage future investment and growth in Sudan’s oil sector.
Luke A. Patey is a Project Researcher at the Danish Institute for International Studies.
Luke A. Patey has to take the population density of the oil fields into consideration, when concluding with a focus on the conditions of the local population of the main oil fields in Sudan. The population density in the areas of the major producing oil fields in Sudan is very low (nomads) and cannot be compared to the situation in The Niger Delta.
The low population density of the oil fields makes the local population much more prone to central govermental policy decisions bypassing its needs if it is strategically feasible. And historically, the needs of marginal smaller groups of Sudanese citizens have been bypassed repeatedly. Just look at the ongoing situation concerning the Merowe Dam in the far North. There is no reason to think that a possible Southern Government would do otherwise.
There is no doubt that a possible Southern State should clean up differences concerning oil development business strategy, and that could create some tensions between Southern politicians within the SPLM.
But to claim that an armed conflict between the North and the South is not feasible at least in the short term, because of interdepency of the oil revenue for the coming at least a five years seems far fetched. As time runs out before the Southern referendum, the tone among NCP politicians in the capital, Khartoum, becomes more and more aggressive and desperate.
I disagree, I don’t think it is “far-fetched” to point out that both governments depend on there being no war for their economies to continue. This was not the case before oil was discovered and one of the major reasons why they were able to come to an agreement in 2005. You’re right, the tone from both the capital and the South has become more aggressive and provocative. There is a lot at risk and both sides have a difficult history which has fostered an environment of great distrust. Additionally, the media is quick to jump on any comment as a call for war or the tipping point for two regions on the brink. But I don’t agree that it is “far-fetched” to think that oil could be the glue that holds the peace agreement together after the referendum. Given their current debt, neither economy could survive if oil production came to a halt.
Dear Ahmed Sadiq,
A possible independent South would not be a threat to the oil revenue of the North in the short term…but in the middle to long term. The South would be dreaming of an oil pipeline through Kenya from day one of a possible independence. And it would be possible for an independent South to have such a pipeline financed by loans in the West. The Northern politicians are very well aware of that fact.
One desperate option would be for the North to conquer the major producing oil fields in the South close to the border in a military attack.
Another option would be a regime change in the North which could create a completely new political situation with new options opening up. Even a coup d’etat with a silent acceptance of Omar ElBeshir.
No matter what, the Omar ElBeshir government is looking at some very dark clouds closing in on Sudan and especially on the North.
Hmmm, first you mention that it’s far fetched to think that in the short-term there will not likely be war over oil. Then you say, “a possible independent South would not be a threat to the oil revenue of the North in the short term.” So this would mean you are in agreement with Luke Patey? Or perhaps this comes down to the definition of short-term and long-term?
It took decades for Sudan to complete the oil-pipeline to the north and it was exceptionally expensive given that it was built in the midst of conflict. If Southern Sudan decides to build a pipeline to Mombassa, Kenya, as some have proposed, it would be about 1/5 longer than the pipeline to the North and would have to travel through two countries and through equally volatile regions. Furthermore, assuming that SS would be at war with NS during this process, and would be battling a powerful Air force over oil fields on the border with significant reserves, the likelihood of the country turning a profit after all is said and done would be slim given that Sudan’s projected oil-life is thought to be between 10-25 more years. Why do you think NS has been building its Air Force so rapidly over the last few years? It would be a piece of cake to physically prevent the South from building a southern pipeline.
So I agree with Luke, neither side is going to risk losing all of their oil revenue by going to war. Sure, the rhetoric and threats are building, and they probably will build more, but this is because each party is set to lose something and they have to fight for every scrap they can get. But they won’t throw it all away by going back to war.
I am sure the buccaneers have thought of that, a pipeline through Kenya, the development of Lamu Sea Port in Kenya.
You keep repeating the notion of “DESPAIR”, I see no reason why the North will despair and go into these wild fantasies of a new war?
For your information it might be the South which would be more in need, the Hague arbitration has given the Heglig Oil Fields to the North, it can this continue exporting oil.
The South instead may need sometime to export,at least until the Kenya pipeline is ready,what if the North deny it usage of the pipleine through Port-Sudan.
All these aside Sir, war, which seems to be your preference, is the last option any reasonable, sensible human-being, would would think of,but you seem oblivious to this, you indeed seem ready to sacrifice people in the interest of oil simply because they are nomads, but if there is war,the whole industry will come to a standstill, and the South will not be a stable please for investments in such expensive infra-structure, but as I am sure you know that is part of Phil Heilberg’s gamble in Africa.
I sincerely hope that both parties in the North and the South read deep into your writings and the pronouncements of people like you and Phil Heilberg.
It was refreshing to read Luke A. Pateyâ€™s essay with its positive suggestions. It helps us to remember that regardless of the outcome of the Referendum, it is possible for the people of North Sudan and South Sudan to live in peace and share the oil resources in a way that will improve the quality of life for all people in Sudan. With that in mind, our energies should be directed towards fashioning ways in which this can be done.
What Luke says is that the North and the South both have an interest in peace because of the interdependency of the oil production in the South. What I am saying is that this is only valid for the shorter term. In the long term the option for the South to build a pipeline though Kenya is probably the most attractive in order to get out of the dependency of North. And this long term perspective puts a lot of pressure on the North: why not act now while it is possible, at least as one option out of several? I am sure that many Northern politicians think along these lines.
My personal feelings concerning a possible future divided Sudan is sadness. I think that this dual state scenario will weaken both the North and the South politically in the the long term. But it seems as if division is the only option on the table at the moment.
I have given no recommendations as to a Northern attack the Southern oil fields or coup d’etat in the North. I simply described some options for the Northerners in this very difficult situation. Not even predictions…options. I am sure there are more.
If the the dual state scenario will weaken both the North and the South, then why not think of reasonable options for both, why not tell both it is not in their interest ,rather than giving one the option of conquer the major producing oil fields of the other? Or telling one,new state to take the already posted offer of a pipeline through Kenya with all its attendant expenditure, estimated at about 2 to 3 billion dollars by some companies, simply to get out of the “dependency on the North”, why not give them the option of a peaceful settlement and the rights of transit that are applied all over the world, these issues are governed by international laws and norms. The nuances in your logic are quite telling.
It is not a cloud ,it is a deadly storm, that would affect the whole Sudan, and my fear is that the South seems to think that it is far from the path of the storm.
Unfortunately, it is not something I have invented. There has been contact between the GOSS and Kenya concerning a possible pipeline all the way to a a new deep water harbour at Lamu which should serve Ethiopia as well. And, furthermore, Uganda will soon become an oil producing nation connecting a pipeline from Kenya’s existing one from Mombasa all the way to Kampala. This project is close to being at the implementation stage. There are suggestions connecting the Southern oil fields to this “grid”. But everything is at the investigative stage. This last scenario would cut the construction time of a possible Southern pipeline considerably. I have noticed that a Southern oil minister claims, that a pipeline through Kenya not is economic feasible. But this statement has been questioned by others.
It is not a question of “if” a possible independent South will construct a pipeline through Kenya, it is a question of “when” it will happen. And then we are back to square one. Admittedly, a Southern connection through Uganda and Kenya (roads, railways, pipeline etc.) will take time to develop. No doubt that Southern politicians are dreaming of multiple infrastructural options in order to maximize the economy of a possible independent South.
I have a couple belated comments to make on the discussion.
The first relates to local populations in oil bearing regions. Regardless of population density, local armed groups have been a constant thorn in the side of the oil sector. Theft and vandalism of oil company equipment is common, and there have been repeated kidnappings, with some leading to the deaths of oil company staff. All these incidents are connected to the lack of attention provided to the social and environmental needs of local populations. If they are neglected during the upcoming referendum, particularly in the Three Areas, this basis of instability could degenerate further.
I think it is important that Vagn brought local populations into the debate. We know relatively little about the relationship between local populations and the oil sector. The European Coalition on Oil in Sudan has done several reports on the subject since the signing of the CPA. The Sudanese researcher Leben Moro has also written on it. But difficulty of access to these areas and the companies involved hinders learning more. Using the little information we do have, I wanted to point out in my posting that in the rush to develop possible scenarios for how the North and South may share or may come to blows over oil, weâ€™re missing other critical sources of future insecurity.
Second, letâ€™s consider again the economic rationale behind sharing the oil post-referendum. Now hardliners banging the war drums over oil may win the day, but I think both northern and southern political elites have five good years of billions of dollars in oil revenues as proof of the benefits of compromise. For those of you who think the greedy North will move to capture all the oil for its own, think about how much theyâ€™ve been sharing lately. In 2004, the Khartoum government shared 8% of central revenues with southern Sudan, oil producing states, and northern state governments. In 2008, this increased to 47%, mostly in oil revenue to GOSS. While questions of transparency in the payment process remain, Khartoum has been sharing the oil wealth for quite some time. Why stop now? Especially when many analysts would say their potential military opponent in the South is even more formidable than during the North-South civil war.
But why should the South share the oil?
This brings me to my third point on the southern pipeline. Following the planned referendum I believe weâ€™re in for a strong dose of pipeline politics in Sudan for years to come. But this will be more related to how the North and South use the existing pipelines heading to Port Sudan than the construction of a southern one to Lamu. The South is in quite the bind. It wants to claim sovereignty over its oil resources but at the moment there is nowhere to transport the oil but through the northern pipeline.
I think weâ€™re too quick to see a southern pipeline as a viable option. Oil pipelines unfortunately donâ€™t grow on trees. There are commercial, political and geographical hurdles to overcome even before the often drawn-out construction process begins. From what we know, the feasibility studies of the pipeline have not been completed and agreements with Kenya and Uganda have not been set into motion. These are just a few of a host of issues that will delay the construction of a southern pipeline. This is not to say that such a feat is impossible. Rather, I want to underline that a lot of things have to go very right for the pipeline to be in place in the short-term. Even more concerning for the South, by the time the long-term arrives, there might not be much oil left to pipe to Lamu.
The last point concerns the longevity of oil in Sudan. Oil ministers in Sudan like to keep a bright picture of the sector alive, itâ€™s their job after all. But exploration activity and production figures tell another story. The oil fields of Blocks 1, 2 and 4 are declining fast. They went from 271,000 barrels per day in September 2006 to around 175,000 in June 2009. Blocks 3 and 7 in Upper Nile State have compensated for this loss but they wonâ€™t do so forever. Hopes rest on the French oil major Totalâ€™s Block B farther south. But political instability and physical insecurity has left the company standing still on exploration. Letâ€™s not forget it is the oil business. Everything could change drastically with one big strike. But there have been signs of a waning oil sector in Sudan since 2005. The oil boom is either on pause or simply finished. The long-term option of a southern pipeline may not see the light of day if more crude isnâ€™t discovered.
Please see my latest article on oil in Sudan for more: â€˜Crude days ahead? Oil and the Resource Curse in Sudanâ€™, African Affairs, Volume 109, Number 437, October 2010.
Thanks Luke. To me the most important information you gave in your last entry was the limitations to growth in the Sudanese oil sector. If the situation actually is one of stagnant or even reclining oil production, your first entry has much more weight because the prospects of a Southern pipeline being out of question. And that leaves, as you mentioned, only the politics of the Northern pipeline between the North and the South and therefore little prospects of war.
But if there still is plenty of of oil in Sudan (and the South) for the long term, a Southern pipeline could be a possibility. I saw recent estimates mentioning app. 6 billion barrels confirmed barrels.
Concerning the population density in the oil field related areas: I visited Chevron oil fields three times beteen 1979-83 and was transported around in the area by vehicle. I visited Bentiu, Rub Kona and the Heglig oil fields just at the time when they found the first oil. The area is immense and was very thinly populated. I flew over the oil fields several times from 2004-06 and saw the same vast “empty” quarter. After the war, the bases had swollen, like Rub Kona, but outside almost no traditional settlements. And it is understandable, considering that 22 years of civil war were between my visits. I would dare to say, that many former nomadic (or semi-nomadic) herders have left their old trade in order to try settle in the larger cities or urban settlements of the South. A few of them returned to their old life styles after the peace in 2005. This phenomena of an accelerated draft towards urban settlements during the civil war and its aftermath I observed in Wau, the capital of Western Bahr ElGhazal, where I worked five years ago. The basis for the traditional life style, cattle, had more or less vanished during the war.
Date 14th October 2010
Forum for Sudanese Political Parties in Australia
Debates on whether Sudan will remain united or separated
Proposing Genuine Permanent Solution of Sudan Conflicts
On 30th October 2010
Place: St. John Church Paisley Street in Footscary â€“known as Akonâ€™s Hall
Time: 12pm to 5 pm
To: the entire Sudanese Community and all Sudanese political partiesâ€™ representatives in Victoria
RE: Sudanese Political Forum (a voice that is to be respected and honoured)
The SUDANESE EMANCIPATION UNITED MOVEMENT (SEUM) AUSTRALIA, invite all Sudanese Political Parties Representatives and none Sudanese to come along to participate and debate on â€œpolitical future of Sudanâ€.
Three speakers will represent areas of concern for the Sudan conflicts as the conflicts impact strongly on communities of the South, east, north and west regions of Sudan. And there is possibility for Sudan to go back for war.
Topics for the dayâ€™s discussions:
3. Possible solutions for Sudan conflicts.
DR. Idris Abal Mola Mohammed
Vice President Sudanese Emancipation United Movement (SEUM)