INTERVIEW: South Sudan eyeing crude production, refinery-building blitz

South Sudan plans to almost double oil production to 350,000 b/d and supply the East African products market by building a slate of new refineries after overcoming the triple challenge of COVID-19, the war in Ukraine and powerful floods, the country's petroleum minister told S&P Global Commodity Insights.

In an interview on the sidelines of the OPEC International Seminar in Vienna, Puot Kang Chol said the world's youngest country was targeting a return to pre-civil war output of 350,000 b/d.

South Sudan was producing just over 160,000 b/d, Chol said. "Our target is to go back to pre-conflict production. We were at 350,000. Our objective before the conflict was to reach 450-500,000."

Shortly after independence from Sudan in 2011, civil war erupted in South Sudan.

Chol said COVID and the war in Ukraine had increased the costs of production, while historic floods inundated oil fields in the country last year.

More recently, oil output -- the primary source of government revenue -- has been threatened by the months-long conflict in Sudan which began in April when forces loyal to rival generals clashed in Khartoum and Port Sudan.

Landlocked South Sudan depends on its smaller-producing neighbor to export its oil through Port Sudan on the Red Sea.

"Up to this moment the warring parties have been responsible enough to make sure the pipeline is not touched and is not affected," Chol said, meaning production has not yet been affected.

"We are worried ... If it was up to South Sudan, we would have brought that war to an end. It is not in our interest and it is not in the interest of the Sudanese."

While crude production and exports have not been affected, the country has struggled to import critical materials for its oil fields through Port Sudan, instead routing them through Kenya's Mombasa, pushing up prices.

In addition, Chol said South Sudanese crude was still trading at a discount because "ships are afraid to come to Port Sudan [and] businesspeople, the traders, want to maximize their profit out of any given situation." The discount "ranges from one month to another", depending on levels of competition.

Seeking investment

South Sudan produces heavy, acidic Nile and Dar blend crudes. Platts, a unit of S&P Global Commodity Insights, last assessed Dar Blend at a $1.55/b discount to Dated Brent on July 5.

The country was exploring alternative export routes for its crude, Chol said, but did not have a timeline for doing so. "We have not reached conclusion yet as to whether we will shift everything from Port Sudan but what we are saying is that we are a landlocked country, we need to open all our routes."

Last year the country bought land in Djibouti to construct an export terminal and is also considering Lamu in Kenya.

With ambitious production targets, Chol said the country was actively seeking new investment in its oil sector.

"We have been reaching out to companies, to IOCs, NOCs to say look there is a potential in the republic of South Sudan and we have now peace in the country, and it will be important that you come and explore this potential."

Savannah Energy, the UK junior, is acquiring production assets from Malaysia's Petronas this year, while Chol said South Africa's SFF was doing imaging on its Block 2.

Refining capacity

Juba will also require investment to expand its refining capacity. The country currently has one small refinery, Bentiu in the northwest, capable of producing roughly 7,000 b/d, Chol said.

But "we want to ramp up that and we want to build other ones ... Our target is not only to supply the local market but also the regional market."

Amid a discussion about African energy security post-pandemic, with 600 million Africans lacking access to electricity, Chol said answering the continent's energy demand was his "number one priority".

"As tragic as pandemic and war in Ukraine is, it also gives opportunity," he said. "It gives us a new platform to say there is need for a shift in our thinking so that we meet our own target here."