Petroleum exploration in Sudan began in the early 1960s. Activity was originally concentrated offshore in the Red Sea. In 1974, two years after the peace accord that ended the first civil war (1955-72), the Sudanese government granted the Chevron Corporation (U.S.) large oil concessions in Sudan. Chevron discovered and named the Muglad and Melut basins. It drilled for and found oil near Bentiu town in 1978. The government named the oilfield “Unity.” It was located in Block 1, inside Upper Nile province, part of the autonomous Southern Region. Soon after, Chevron discovered the Heglig field, in Block 2. Chevron spent about U.S. $ 1 billion on exploration but never recovered it costs. It suspended activities in southern Sudan in 1984 due to a rebel attack that killed three expatriate oil workers and other security concerns. The French firm Total, which acquired various oil concessions around 1980, also suspended its onshore exploration activities, but retained its rights, including to Block 5, which, at 120,000 square kilometers, is larger than the size of Blocks 1, 2, 4, 5A, and 5B combined.
The Islamist-military government that took power in 1989 was determined to develop Sudan’s oil potential. It forced Chevron to sell its concession and sub-divided it into smaller exploration blocks. In 1993 Canadian independent Arakis Energy acquired the portion of Chevron's concession north of the town of Bentiu, namely Blocks 1, 2, and 4. In June 1996, Arakis brought eight wells on stream in the Heglig field, subsequently trucking low levels of crude oil to a small refinery at El Obeid in Northern Kordofan for domestic consumption.
On December 6, 1996, in need of cash for the project, Arakis sold 75 percent of its interest to three other companies, with which it formed a consortium called the Greater Nile Petroleum Operating Corporation (GNPOC), whose value Arakis put at approximately U.S. $ 1 billion. Arakis was to be the operational partner. The three other companies were state-owned: the China National Petroleum Company (CNPC), Petronas Carigali Overseas Sudan Berhad (a subsidiary of Petronas Nasional Berhad, the national petroleum corporation of Malaysia), and Sudan’s state-owned oil enterprise Sudapet Limited. They would own 40 percent, 30 percent, and 5 percent of the project, respectively. CNPC and Petronas put up project financing until mid-1998.
Although Arakis had been working proven oilfields in Sudan since 1992, by mid-1998 it had relatively little to show for it. The Sudanese oil industry remained in rudimentary form, producing only for local consumption. The country still imported most of its petroleum needs.
On October 8, 1998, Canada’s largest independent oil and gas producer, Talisman Energy Inc., acquired Arakis and Arakis’ main asset, the Sudan project. Talisman, with its superior technology and experience, brought major improvements for the benefit of the war-stressed and cash-poor Sudanese government. It took only one year after Talisman joined the consortium to boost development of the Heglig and Unity fields in Blocks 1 and 2, to finish a 1,540-kilometer (1,000-mile) pipeline to the Red Sea, to build a new marine terminal for oil supertankers, and to pump and export the first crude oil from Sudan. This project transformed Sudan from a net hydrocarbon importer into a potential member of the Organization of Petroleum Exporting Countries (OPEC), the cartel of oil-exporting countries. In August 1999, the first oil for export earned the Sudanese government U.S. $ 2.2 million in one shot. Much more was to come. Talisman estimated that, over the life of the Heglig and Unity fields alone, the government of Sudan would earn approximately Canadian $ 3 billion to $ 5 billion (more than U.S. $ 2 billion to $ 3 billion), depending on the international price of oil.
Because of Talisman’s successful exploration, by 1999 reserves in Blocks 1 and 2 were discovered to be much larger than previously thought—403.6 million barrels in 1998 and an increase to 528 million barrels in reserves in 1999. In 2002, a breakthrough in exploration on Block 4 indicated that there might be an additional 160-240 million barrels of oil in the GNPOC concession. By April 2002, it was estimated that current proven plus probable ultimate recovery of the GNPOC concession would be one billion barrels of crude oil.
From 150,000 barrels per day of oil pumped by GNPOC in 1999 (annualized), production increased to 230,000 barrels per day (b/d) by year end 2001. Actual output for 2002 reached 240,000 b/d.
Talisman’s projections indicate a peak production from the GNPOC blocks at 250,000 b/d in 2005 and the sharp and continual decline in production to 40,000 b/d in 2020. This projected decline in production meant that the government needed to bring new blocks on line, in order to maintain at least a steady flow of oil revenue.
On October 30, 2002, Talisman announced that it had agreed to sell its Sudan interests to ONGC Videsh Limited, a subsidiary of Oil and Natural Gas Corporation Limited, India’s national oil company, for a net return on investment of 30 percent. International human rights pressure greatly contributed to the pressure for Talisman to leave Sudan. Chief Executive Officer (CEO) Jim Buckee said, “Talisman’s shares continue to be discounted based on perceived political risk in-country and in North America to a degree that was unacceptable for 12 percent of our production.”
The disastrous human rights developments in Block 5A from 1999 onward were related to GNPOC’s successful production in Blocks 1 and 2 and the approaching completion of pipeline facilities in GNPOC’s Blocks. Without the pipeline, the oilfields in Block 5A would have remained as Chevron left them, undeveloped, attracting little military attention. Block 5A was an area the government had long ago conceded to the rebels, as of no strategic interest and having a particularly difficult, swampy environment; but with the GNPOC pipeline completed only a short distance away, it became economically feasible, gained strategic importance, and became a military priority for the government.
On February 6, 1997, the International Petroleum Company (IPC), a wholly-owned subsidiary of Lundin Oil AB, signed an exploration and production-sharing agreement with the Sudanese government, granting IPC (referred to here as Lundin, the name of the Swedish family controlling IPC) rights to Block 5A, adjacent to and south-southeast of Block 1. IPC (or Lundin), the lead partner, held 40.375 percent of the concession, and the Malaysian state oil company Petronas held 28.5 percent; OMV (Sudan Block 5A) Exploration GmbH, owned by OMV AG, one of Austria’s largest listed industrial companies, held 26.125 percent; and Sudapet held 5 percent. Lundin also owned 10 percent of Arakis’ stock.15 (In 2000 Lundin and OMV also acquired a 24.5 percent interest each in Block 5B.) Lundin estimated there were 115 million barrels in reserve in Block 5A, but nothing has been produced so far from the concession.
Lundin’s explorations in Block 5A were suspended twice due to insecurity, last in January 2002. On March 27, 2003, Lundin announced the resumption of activities. In June 2003, Lundin sold out its interest in Block 5A to Petronas, while retaining its interest in Block 5B. A few months later, in September 2003, OMV agreed to sell its interests in both blocks to ONGC Videsh Limited of India.
Sudan is now developing its significant hydrocarbon resources. The country’s oil exports, which have increased sharply since the completion of a major oil-export pipeline in 1999, account for 70 percent of total export revenues. Additional growth in Sudan’s hydrocarbon sector will likely occur with a refurbished infrastructure, which has seen little improvement since the beginning of the country’s civil conflicts in 1955. As of January 2007, according to the Sudanese Minister of State for Energy and Mines, Sudan is considering joining the Organization of Petroleum Exporting Countries (OPEC) at some point in the future.
According to Oil and Gas Journal (OGJ), Sudan contained proven oil reserves of five billion barrels as of January 2007 up from an estimated 563 million barrels of proven oil reserves in 2006. The majority of proven reserves are located in the south in the Muglad and Melut basins. Due to civil conflict, oil exploration has mostly been limited to the central and south-central regions of the country. It is estimated that vast potential reserves are held in northwest Sudan, the Blue Nile basin, and the Red Sea area in eastern Sudan.
The Sudan National Petroleum Corporation (Sudapet) is active in Sudan’s oil exploration and production. However, due to its limited technical and financial resources, Sudapet often develops joint ventures with foreign companies in oil projects. Foreign companies involved in Sudan’s oil sector are primarily from Asia. They are led by the China National Petroleum Corporation (CNPC), India’s Oil and Natural Gas Corporation (ONGC) and Malaysia’s Petronas.
In October 2005, Sudan established the National Petroleum Commission (NPC) to bolster the development of the country’s oil resources. To accomplish its mission, NPC allocates new oil contracts, and it ensures an equal sharing of oil revenues between the national government in Khartoum and the Government of South Sudan (GoSS). In addition, NPC is responsible for resolving duplicate oil contract issues in which the GoSS has allocated contracts overlapping contracts previously granted by Khartoum. NPC is currently scrutinizing duplicate contracts given to Total and White Nile Ltd. over Block B and the White Nile Petroleum Operation Company (WNPOC) and Ascom Group of Moldavia over Block 5b. President Bashir is believed to co-chair the NPC with Vice-President Salva Kiir, who also heads the GoSS.
Oil production has risen steadily since the July 1999 completion of an export pipeline that runs from central Sudan to the Port of Sudan. In 2006, crude oil production averaged 414,000 barrels per day (bbl/d), up from 363,000 bbl/d in 2005. According to Angelina Tany, Minister of State for Mines and Energy, Sudan plans to be producing one million bbl/d of crude oil by the end of 2008.
China accounts for 60% of oil exports from Sudan. China obtained oil exploration and production rights in 1995 when the China National Petroleum Corporation (CNPC) bought a 40% stake in the Greater Nile Petroleum Operating Company, which is pumping over 300,000 barrels per day. Sinopec, another Chinese firm, is building a 1500-kilometer pipeline to Port Sudan on the Red Sea, where China’s Petroleum Engineering Construction Company is constructing a tanker terminal.
- Oil production: 344,700 bbl/day (2004 est.)
- Oil exports: 275,000 bbl/day (2004)
- Oil proved reserves: 1.6 billion bbl (2006 est.)
- Natural gas proved reserves: 84.95 billion cu m (1 January 2005 est.)
- Blocks 1, 2 and 4: In 1996, Canadian independent Arakis Energy (Arakis) began development of the Heglig and Unity fields (Blocks 1, 2, and 4), which contain estimated recoverable reserves of 600 million - 1.2 billion barrels of oil. Because the fields are not located near the Red Sea coast, Arakis entered into a consortium with the Greater Nile Petroleum Operating Company (GNPOC) to raise investment for a 994-mile pipeline from the fields to the Suakim oil terminal near Port Sudan. In September 1999, the first cargo of crude departed the export terminal. Although GNPOC originally constructed the pipeline with throughput of 150,000 bbl/d, its has since been increased to 300,000 bbl/d, while maximum capacity is estimated at 450,000 bbl/d. As of January 2007, combined production from Blocks 1, 2, and 4 was estimated at 260,000 bbl/d. The GNPOC joint venture is operated by CNPC (40 percent), with partners Petronas (30 percent), ONGC (25 percent) and Sudapet (5 percent). Block 5a: In April 2005, the Sudanese government signed an agreement with WNPOC for the development of the Thar Jath and Mala fields on Block 5A. First oil from the block came online in June 2006 at an initial rate of 38,000 bbl/d. As of March 2007, the field was still producing at 38,000 bbl/d, while full capacity is estimated at 60,000 bbl/d. Oil from the field flows through a 110-mile pipeline to Port Sudan. WNPOC is a consortium of companies, which include Petronas (68.875 percent and operator), ONGC (23.125 percent) and Sudapet (8 percent).Block 6: In November 2004, CNPC brought online its Fula field on Block 6 at a rate of 10,000 bbl/d. Current output on the block is 40,000 bbl/d, but is expected to eventually reach 80,000 bbl/d. CNPC has constructed a pipeline that links the Fula field to the Khartoum refinery.
- China National Petroleum Corporation and Indonesia’s state-run oil and gas company, PT Pertamina, is exploring Sudan’s offshore oil block 13. The companies signed a 20-year concession agreement with Sudan’s government that includes sharing future oil production from the offshore block.