South Sudan had a good story going until December 2013 when a civil war broke out and dashed hopes of many including its regional neighbours. South Sudan was already walking a path towards becoming a notable African oil producer.
In 2011, when South Sudan acquired its statehood, oil production was about 350,000 barrels per day (bpd). Today this has plummeted to about 120,000 bpd due to well shutdowns prompted by civil wars. For comparison, Kenya expects to produce about 80,000 bpd, while Uganda plans a 120,000 bpd production. What is significant is that oil contributes over 90 per cent of revenues to South Sudan budgets. This makes the peace and oil stories critically and mutually urgent.
Year 2018 has seen several game-changing “handshakes” here in Africa. We had our Kenyan “bridge-building” handshake earlier this year while Eritrea and Ethiopia had their transformational handshake recently. The handshake last month between the South Sudan President Salva Kiir and Riek Machar gave South Sudan a second chance to prove its capacity to sustain nationhood…
The fact that the peace deal is “guaranteed” by President Bashir of Sudan gives it a strong chance for permanence. Khartoum has a genuine vested interest in a north-south economic co-operation. In respect of oil, the two nations share oil basins and oil export infrastructure via Port Sudan on the Red Sea with Sudan collecting $25 for every barrel of oil exported by South Sudan.
As Kenya mothered the Comprehensive Peace Agreement which heralded the separation of the north and the south, we harboured a far-fetched brief that the two nations could never work together after separation, and that Juba would require an alternative oil export route. This was the genesis of the LAPSSET (Lamu Port South Sudan & Ethiopia Transport) corridor concept. It assumed that South Sudan would export their crude oil via a new pipeline to a new port at Lamu with part of the oil feeding a 120,000 bpd refinery at Lamu.
By the time the LAPSSET study was endorsed by President Kibaki in 2011, South Sudan was more or less decided to continue exporting oil via Port Sudan. In 2012 a geo-technical coincidence gave Kenya its oil at Lokichar, which is located on the original LAPSSET pipeline route. This helped to sustain the LAPSSET corridor concept, based this time not on transit oil from South Sudan but Kenyan oil…
The three huge “high-prospect” oil blocks (B1, B2, B3) in the south of South Sudan are yet to be explored. Any oil discovered in these southern blocks can potentially be piped via Ugandan or Kenyan oil export pipelines.
Incidentally Total and Tullow who hold oil interests in Uganda and Kenya have just failed to agree terms for Block B1 andB2 concessions with Juba. Block B3 is held by Oranto, a Nigerian company with interests in Ugandan oil basins.
For those who have been to South Sudan, they will confirm that the country holds tremendous potential and resources in virtually all the key sectors — agriculture, livestock, forestry and minerals. As South Sudan embarks on their path to political and economic recovery, the emphasis should be how to use oil revenues to grow capacity in the other sectors so as to significantly diversify the economy away from oil to gainfully employ as many citizens.
The country should also maximise economic value from its membership of the East Africa Community especially in the ongoing regional infrastructure linkages (roads, SGR and pipelines). Simultaneously, the country should strengthen the existing trade links with Sudan.
Frameworks for lasting peace and economic growth can only be determined by South Sudanese themselves.
The ultimate proof of success and sustainability of the peace deal is when the South Sudan Diaspora feels confident to return and participate in socio-economic development, with foreign investments following in their wake.
Indeed the handshake gives South Sudan a second chance with everyone expecting a genuine political endeavour from South Sudan leadership.
The ingredients of the handshake should be nurtured and protected, with all the lessons learned since 2011 forming the basis for a renewed South Sudan.