South Sudan and South Africa Has Reached 6-Year Deal for Oil Exploration

South Sudan and South Africa on Monday signed a six-year production-sharing agreement for an untapped exploration block in the East African country, where production has been hit by civil war.

The ceremony was attended by South Sudan’s Minister of Petroleum Ezekiel Lol Gatkuoth and South Africa’s Minister of Energy Jeff Radebe, where they singed an exploration production agreement for Block B2 in greater Jonglei State, according to Reuters.

Radebe described the agreement as “a great deal” for both countries and committed to pay $50 million for exploration, adding that South Africa was also interested in building a pipeline and refinery bringing their total projected investment to $1 billion, according to a memorandum of understanding signed in November.

The exploration will begin immediately and is expected to continue for six years.

Block B2 was once part of a 120,000 square km area known as Block B, which was divided into three licenses in 2012 and is thought to be rich in hydrocarbons although very little drilling has been done there.

The world’s youngest country, after the split from Sudan in 2011, South Sudan has one of the largest reserves of crude in sub-Saharan Africa, only a third of which have been explored. But production dropped when civil war broke out two years after independence. A September peace deal is largely holding but a plan to form a unity government by May 12 has been delayed.

In April, director general for petroleum at the ministry of petroleum Awow Daniel Chuang announced that production was expected to reach around 195,000 barrels per day (bpd) by the end of the year, from 175,000 at present, with the government aiming to reach 200,000 bpd by the end of 2019.

The government said production would reach pre-war levels of 350,000 to 400,000 bpd by mid-2020.

During South Sudan’s civil war, more than 400,000 people died and a third of the country’s population was displaced.

In related news, WoodMac consultancy group expects South Sudan production to increase to more than 170,000 bpd by 2020. Production could reach 230,000 bpd in the same period if a lasting peace is sustained, generating more than $3 billion of revenue for the government, it said.

The group issued a strategy paper in 2018 assuming the increase in production will be done by re-opening shut-in wells, work-overs and repairs.

“To increase production beyond this would need significant capital expenditure, which the operators will be wary of until political stability is properly established.”