In 1982 roughly four-fifths of the nation's energy requirement for industry, modern agriculture, transportation, government services, and households (in addition to wood fuel, charcoal, and the like) was provided by imported petroleum and petroleum products. Approximately 10 percent of these imports were used to generate electricity. Foreign exchange costs for oil imports rose dramatically after 1973 and by 1988 amounted to almost 46 percent of earnings from merchandise exports. Dependence on external sources might lessen when the security situation permits Sudan's domestic petroleum resources to be exploited.

The search for oil began in 1959 in the Red Sea littoral and continued intermittently into the 1970s. In 1982 several oil companies were prospecting large concessions offshore and on land from the Tawkar area near the Ethiopian border to the northern part of the Red Sea Hills. No significant discoveries were reported. In 1974 Chevron, a subsidiary of Standard Oil Company of California, began exploration of a 516,000-square-kilometer concession (later reduced to 280,000 square kilometers by voluntary relinquishment) in southern and southwestern Sudan. Drilling began in 1977, and the first commercial flow was obtained in July 1979 at Abu Jabirah in southern Kurdufan Province. In 1980 major finds were made at the company's Unity Field near Bentiu in Aali an Nil Province, where further drilling by early 1981 had brought in forty-nine wells having a combined flow of more than 12,000 barrels a day. The company has estimated this field's reserves at from 80 to 100 million barrels, but exploration farther south placed the reserves at more than 250 million barrels. Other oil companies--including some from the United States, Canada, and France--have also obtained concessions, and by 1982 almost one-third of Sudan had been assigned for exploration. Oil exploration and production have been hampered, however, by the almost total lack of infrastructure and by the civil war in the south of the country. Chevron had found small aircraft and helicopters essential for transport, the latter for moving portable rigs and equipment and for general use during the rainy season when all roads and locally constructed air strips were washed out.

The domestic processing of crude petroleum began in late 1964 when the Port Sudan oil refinery went into operation. The refinery, which was financed, built, and managed by the British Petroleum and Royal Dutch Shell companies--from July 1976 as a joint equal shareholding project with the government--had a capacity of about 21,440 barrels per day. Its capacity was well in excess of Sudan's needs at the time it was built, and refined products were exported. Local demand had quintupled by 1990, well beyond the plant's capacity. As a result, more than one-third of the gas oil (used in diesel motors and for heating) and well over two-fifths of the kerosene required for domestic use had to be imported. A substantial quantity of other products refined by the plant in excess of Sudan's own needs were exported.

The domestic petroleum discoveries led to intensive discussion within the government concerning the establishment of a new refinery. Southern Sudan pressed for construction near the oilfields in the south, but it was decided finally to locate the refinery at Kusti on the White Nile about 315 kilometers south of Khartoum. In August 1981, the White Nile Petroleum Company (WNPC) was set up by the central government as a subsidiary of the Sudanese National Oil Company to handle the undertaking. The government held a two-fifths share in WNPC, Chevron Overseas Petroleum Corporation another two-fifths, and the International Finance Corporation the remaining one-fifth. Plans called for a 550-kilometer pipeline to be built from the oilfields to the new refinery. By early 1982, however, the estimated costs of the refinery and pipeline had risen to at least the equivalent of US$1 billion as against an earlier project allotment of about one-third that figure.

The Kusti refinery was predicated on production for domestic consumption. Its estimated capacity (in early 1982) of between 15,000 and 25,000 barrels a day would meet only part of Sudan's overall requirements, however, and the quality of the petroleum would restrict economic production to certain products, so the Port Sudan refinery would have to continue operating. In view of the greatly increased cost estimates of the new plant, the World Bank in 1982 undertook a study of an alternative plan that might be more attractive to foreign capital. Under this plan, the proposed pipeline would run to Port Sudan, and an extension to the existing refinery would make it possible to export surplus refined products and even earn foreign-exchange credits. Contracts were let for the construction of the pipeline, but the government canceled them in September 1986. Further seismic studies were undertaken in the swamps (As Sudd) of Aali an Nil, but all of Chevron's exploration and development activities came to an abrupt end in February 1984 when guerrillas from the southern Sudanese insurgent group known as Anya Nya II attacked the main forward Chevron base across the Bahr al Ghazal River from Bentiu, killing four Chevron employees. Chevron immediately terminated its development program and, despite repeated demands by successive Sudanese governments, has refused to return to work its concession until the safety of its personnel can be guaranteed by a settlement of the Sudanese civil war. Total, the French oil company, shut down its operations several months later.

The Nimeiri government pressured foreign oil companies to resume exploration and drilling and hoped to encourage them to do so in part by forming the National Oil Company of Sudan (NOCS) in a joint venture with Saudi Arabian entrepreneur Adnan Khashoggi. After Nimeiri was overthrown, the new government dissolved NOCS but continued to press companies to renew work. As a result, Chevron stated in late 1987 that it would begin a sixty-day, twowell drilling program in southern Kurdufan in 1988, but postponed this because of the spread of civil war. Several other foreign companies indicated an interest in petroleum exploration in 1988, following the completion of a three-year World Bank study of Sudan's hydrocarbon potential. The minister of energy and mining had announced in May 1987 that Sudan's confirmed oil reserves totaled 2 billion barrels, with an estimated 500 million barrels recoverable.

Oil News Update

Estimated Production for 2007

Omar Hassan al-Bashir told parliament the rise would come through new fields coming on stream. He did not elaborate.

Sudan's finance minister had said average oil production for 2007 will run at 520,000 barrels per day (bpd) as new fields that were delayed last year are now fully on stream.

Actual average oil production for 2006 was only 365,000 bpd, well below the 500,000 bpd estimated at the beginning of the year.

The 2007 budget is assuming that higher quality Nile Blend crude will be priced at $50 a barrel, whereas the 190,000 - 200,000 bpd of new blend is assumed to earn $30 a barrel, he said.

Sudan, which has said it is considering joining oil cartel OPEC, has attracted Chinese, Indian and Malaysian investment in its budding oil industry as U.S. sanctions and civil wars have deterred Western companies.

Oil was one of the main reasons for a bitter north-south civil war in Africa's largest country which ended in January 2005 with a peace deal forming an autonomous south Sudan administration and a new coalition government in Khartoum.

Under the deal the southern government is due around 50 percent of revenue from oil in the south, where Sudan's largest fields lie.

White Nile to begin oil drilling in South Sudan April 2007

March 30, 2007 (LONDON) - White Nile, the controversial British oil explorer headed by ex-England cricketer Phil Edmonds, saw its volatile shares rise 3p to 128p today after an upbeat update saying that it would begin oil drilling operations next month.

It its press statement (see below), the company said it has identified numerous drill targets at its flagship 67,000 sq km Block Ba in southern Sudan, and prioritized four drilling locations for development, with a drill rig on site and due to spud its first well in April.

The explorer, which has been involved in a war of words with French oil major Total over the rights to White Nile's 67,000 sq km exploration block in southern Sudan, today reported a widening of losses to GBP700,000 in the six months to the end of December.

"With little proven data on the potential size of its reserves, the shares have been the subject of a two-way pull between industry backers like the RAB Capital hedge fund and bear raider Simon Cawkwell." commented the Evening Standard today.

Sudan sells crude for May loading to PetroChina, Sojitz

March 26, 2007 (SINGAPORE) - Sudan Petroleum Corp., the country's state-owned oil company, sold as much as 2.6 million barrels of Nile Blend crude oil for loading in May to China National United Oil Corp. and Japan's Sojitz Corp., said traders who submitted bids to buy cargoes.

Sudan Petroleum, or Sudapet, sold 1 million barrels of the crude to China National, or Chinaoil, and 1 million barrels to Sojitz, said the traders who asked not to be identified.

Sudapet sold an additional 600,000 barrels of Nile Blend to Arcadia Petroleum Ltd., the traders said.

All three companies paid a discount of around $2.25 a barrel to the price of Indonesia's Minas crude oil, the traders said.

The crude oil will be loaded from Bashayer Marine Terminal, south of Port Sudan.

Nile Blend crude is produced by the Greater Nile Petroleum Operating Co., in which both Sudan Petroleum and Petroliam Nasional Bhd., Malaysia's state oil company, hold stakes. (Bloomberg)

Sudan April Nile Blend oil output down at 275,000bpd

March 23, 2007 (SINGAPORE) - Sudan's Nile Blend crude will flow at a daily rate of close to 275,000 barrels next month, a lifting schedule seen on Friday showed.

The April output is slightly lower than the 300,000-320,000 barrels per day (bpd) at which the field was producing in the past few years and may herald depleting rates as the field ages.

The Greater Nile Petroleum Operating Co. (GNPOC), which operates the field, expects to exports 6.060 million barrels (202,000 bpd), while 2.100 million barrels (70,000 bpd) will head to two refineries in Sudan.

Heavy sweet Nile Blend crude is exported to Asia, with Japan and China the two largest buyers of the direct-burning grade.

Sudan estimates average oil production for 2007 at 520,000 bpd as new fields are now fully on stream after last year's delay, the finance minister said earlier this month.

Al-Zubeir Ahmed al-Hassan said the actual average oil production for 2006 was at 365,000 bpd.

GNPOC is a consortium of state-owned China National Petroleum Corp. (CNPC) with a 40 percent stake, Malaysia's state-owned Petronas (30 percent) and India's Oil and Natural Gas Corp. Ltd. (25 percent). Five percent belongs to Sudanese state-owned Sudapet.

Sudan to up Dar Blend crude exports 60 pct by June

March 13, 2007 (SINGAPORE) - Sudan is expecting to boost its Dar Blend crude exports by 60 percent within three months when a pipeline to carry the crude to a new dedicated terminal is completed, shipping and trading sources said.

About 5 million barrels of Dar Blend crude is exported from the terminal monthly, and operators of the crude oil field plan to start shipping at least 8 million barrels by May or June, Sudan-based port sources said.

"They are moving about 5 shipments in 1 million barrel lots monthly, they want to move 8 shipments a month from the terminal, but should only be able to do this sometime in May or at the latest June," a port source said.

The planned eight shipments per month suggest that output of Dar Blend could reach 260,000 barrels per day (bpd), well above the initial 140,000-200,000 bpd peak target discussed when the field was developed.

The consortium of operators with a stake in the field had originally planned to start shipments from the new terminal earlier, but because of ongoing pipeline work the plan was pushed back.

"The new terminal is ready, but the separate pipeline which is to be used for Dar Blend crude is still being laid, that has been taking time, it's been a complicated operation," the source said.

Earlier this month, Sudan's finance minister, Al-Zubeir Ahmed al-Hassan, told Reuters that the country estimated total oil output for 2007 would average 520,000 bpd.

Full output from the Dar Blend oil field has been delayed due to a series of logistic and infrastructure problems.

The Dar Blend field is operated by Petrodar, a consortium comprising China National Petroleum Corp. (CNPC) with a 41 percent stake, Malaysia's Petronas with 40 percent, and state oil firm Sudapet with 8 percent.

China Petroleum & Chemical Corp. (Sinopec) holds 6 percent of Petrodar, while Al Thani Corp., a private company incorporated in the United Arab Emirates, owns 5 percent.

European trader Vitol was selected in 2005 to market up to 3.6 million barrels a month of Dar Blend crude.

Sudan is planning to export as much higher-quality Nile Blend crude as it can, while processing maximum volumes of the high-acidity Dar Blend and exporting oil products.

Sudan and Petronas have signed a contract worth about $1 billion to build a 100,000-bpd refinery in the coastal city of Port Sudan.

Total seeks south Sudan participation in oil exploration

March 12, 2007 (PARIS) - French oil company Total SA (TOT) is prepared to offer to the government of Southern Sudan (GoSS) a stake in its disputed exploration permit in an attempt to end the current stalemate with its rival the UK company White Nile ( WNK.LN), and start exploring activities.

"We will go to Sudan soon to submit new proposals to Southern Sudan government. We intend to give the GoSS an equivalent share of the national petroleum company (Sudapet) in the capital of the consortium" said Nicolas Brunet, the chairman of Total's Sudan operations, in a meeting with Sudanese English language press in Paris last week.

Total's partners in Block B project are the Marathon Oil Corp. (MRO) and Kuwait Petroleum Corp. (KPT.YY). Total has operating rights for the block with a 32.5 percent stake, Marathon Petroleum Sudan Ltd owning 32.5 percent, Kuwaiti Kufpec Sudan Ltd 25 percent and state-owned Sudapet 10 percent.

The proposal aims to secure Southern Sudan a share in order to avoid any opposition from its officials who could raise objections to the national partner's share. GoSS can therefore be represented through Nilepet, their own petroleum company.

But the chairman of the White Nile oil company, the former England cricketer Phil Edmonds told The Times on Saturday March 10, that Total approach was "neocolonial" and typical of Big Oil's way of dealing with smaller nations. "White Nile is not just our company, but the government of South Sudan's company." Edmonds added.

French company officials said that Total has the means and experience to explore oil and share the profit with the people of southern Sudan. Those officials told Sudanese journalists that Total will invest much of money to achieve this project. While a small start-up with limited financial capacities would surely face difficulties to assume such huge investment. They further said that the ultimate goal of Edmonds is to speculate with the future of southern Sudan and make money; because White Nile has no capacity to bring prosperity to the south.

The French oil giant explained to Sudanese journalists how they carry out their work in the host countries. According to their ethics Charter, the oil firm will participate in economic, social and educational development in close collaboration with the local communities. Also, Total strives to benefit local employment and contractors.

Several videos about total involvement in different countries in Africa, Asia and Latin America were displayed to illustrate the spirit of the company.

Regarding Total's involvement in the protection of the environment and particularly huge quantities of water extracted from oil wells. Total officials demonstrated how they plan to re-inject the water back to avoid pollution and other hazards that could be provoked.

The question of water is one of the important challenges facing the Chinese GNPOC operating in Upper Nile. The poor treatment of production water is probably the most crucial environmental problem in Upper Nile now and is of great concern to the local population. GNPOC has opted for a bio-remediation solution, which could be acceptable, but has a limited capacity of 180,000 barrels per day, while excess water production for GNPOC is already around 650,000.

WHITE NILE ATTITUDE IS DILATORY

On the current dispute with the U.K. company White Nile Ltd. over the concession, Total's legal advisor told Sudanese journalists that the British firm still refuses to disclose all contractual documentation (Concession agreement, Lock-in Agreement draft JV Agreement etc..). He further said that despite the confirmation by the Court of Appeal of the decision of the High Court on January 31, 2007, The White Nile lodged a permission of appeal to House of Lords on February28.

Reliable sources in Southern Sudan told the Sudan Tribune that the White Nile has no contract with the GoSS but with the SPLM Civil authority at that time. "This is why few people in southern Sudan know the details of this enigmatic contract." the source said. "Many officials in the GoSS are wondering why they make a pet on this small start-up because this issue makes a very bad reputation for southern Sudan and would discourage foreign investors" he further added.

According to an article published in June 2006 by the Wall Street Journal, U.S. government officials are concerned that the White Nile deal could set a bad precedent for Southern Sudan. They allege that the British company disbursed "bonus payments" to government officials to secure the concession. But the chairman of the White Nile former England cricketer Phil Edmonds denies the allegations.

The French company set foot in Sudan in 1980 when it was awarded a permit to explore the vast Block B. Total shot 1,600 kilometers of seismic survey but had to leave the country in 1984 because of the outbreak of violence between the north and the Sudanese People's Liberation Army of the south.

Total exercised clauses in the contract equivalent to force majeure to call for a "stoppage period." Year after year, the French company paid a small fee to the Khartoum government to perpetuate its rights on Block B. Total said its decision to suspend work at that time because it chose not to side with any part in the conflict.

However, in early 2004, when peace was in sight, together with its partners in Block B, Total signed an addendum to the original contract in December 2004 to bring it in line with modern-day economics.

Oil bonanza strains Sudan social fabric

March 11, 2007 (KHARTOUM) - Sudan's economic liberalisation is spurring huge foreign investment and spectacular growth, but observers warn uneven social redistribution could only add to the restive country's woes.

An old yellow taxi sits parked outside the new Libyan-funded Al-Fatih five star hotel in the capital Khartoum, Sudan Friday, Dec. 13, 2006 (AP)

Over the past two years, futuristic hotels, malls and swanky cafes have mushroomed across the heart of Khartoum, a low-rise city of brick buildings and sandy alleyways that had changed little since British rule.

"I saw a guy in a suit driving a Humvee the other day," says Paul Kwok, a young Sudanese who ekes out a living driving a rickshaw. "Where did he get the money to buy such a car?"

"I bet you it's with oil from my country," says the 23-year-old, a native of southern Sudan and one of the millions of displaced people who have been regurgitated by the bustling city centre into squalid peripheral camps.

The Sudanese government forecasts a whopping 13 percent growth rate in 2007, as economic indicators continue their exponential rise on the back of a booming oil industry established mainly in the south.

The latest symbol of Sudan's new wealth is "Kadhafi's Egg", the nickname given by locals to a Libyan-funded hotel sprouting out of the Nile river bank in the shape of a bulging oval structure of concrete and steel.

It was preceded by the Rotana hotel, which gave Khartoum its first five-star facilities and was inaugurated last month by Sudan's president, Omar al-Beshir.

While Africa's largest country is being bled by civil unrest and a dire humanitarian crisis, its erstwhile sleepy capital is bristling with enterprise and undergoing unprecedented changes.

Khartoum has become an unlikely Eldorado for many foreigners seeking a quick buck - multinational luxury car dealers and migrant workers from neighbouring African countries alike.

"I have worked in Saudi Arabia and Lebanon, but the money's never been as good as this," says Fuad Abdel Moneim, a construction engineer employed on a one-year contract north of Khartoum.

"This country is unbelievable right now, everything needs to be done and anyone can just come and pick up a contract."

Despite US sanctions, foreign direct investment soared to around 2.3 billion dollars last year in Sudan, one of the African continent's prime hunting grounds for Asia's energy-hungry economies.

But as Khartoum sees the emergence of a new elite cashing in on a liberalised economy, the majority of the country's population is reaping nothing but higher prices.

In some neighbourhoods, the presence of thousands of oil industry workers and United Nations staff has sent rents skyrocketing to levels almost comparable with Paris or London.

Basic services are also becoming a luxury.

"The state has deserted us. Even the electricity is privatised now, if you don't put money in the counter, the power is cut off ... What is making some very rich is choking the rest," says Amina, a young part-time university lecturer earning 300 dollars a month.

Observers argue that many of the conflicts in Sudan - whether raging in Darfur, smouldering in the East or brewing in the north - are fueled by economic marginalisation and the struggle for resources.

"Seen at the macro-economic level, there is undeniable growth. But the story these numbers don't tell is the social cost of liberalisation for most Sudanese," says Barbara Casciarri, an anthropologist who heads the French research centre CEDEJ in Khartoum.

"If you scratch underneath the usual religious-ethnic label of the conflict, what you have in Darfur is the competition for access to resources," she argues.

Mohammed Kabaj, a veteran economist, also says the repeated failure to give the country's various regions equal education, health and development opportunities has been the main cause of instability.

"In 1997, no less than 96 percent of the population of Darfur lived under the poverty line. I went there and told the government that war was coming to Darfur. It's the same story in the East," he says.

"In Sudan, three quarters of the population still lives off the land and the real locomotive of development is agriculture," Kabaj adds.

"The regime is currently thinking of modernising its military, but when the time of repayment comes, if oil prices go down, it will be a catastrophe. Let's modernise society first and then we'll see how we can protect it."

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