Attacks on foreigners working on South Sudan’s oil and gas facilities serve as a warning for multinationals to stay away from the new country’s national resources, just as oil prices recover enough for Juba to begin profiting from the oil sector.
Rebels in the northern portion of South Sudan said they had captured two Indians and One Pakistani during fighting that neared oil assets last month. Most of the oil in the country holding sub-Saharan Africa’s third-largest reserves is pumped by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd., and Oil & Natural Gas Corp. of India.
“The opposition is continuing a tactic of disrupting and dissuading renewed engagement from oil companies in South Sudan,” Luke Patey, an analyst at the Danish Institute for International Studies told World Oil.
There are faint signs that anti-government forces are willing to work with international organizations to remediate their image as an organization dangerous to the interests and citizens of other countries, as long as output can still be halted to strangle the financial power of federal authorities.
Ambassadors from Pakistan and India confirmed that representatives from the International Committee of the Red Cross had been able to visit the three workers in captivity roughly a week ago. Then, on Thursday, news broke that the rebels had released all three workers under orders from the group’s leader after Sudan and Ethiopia reached out to him at the request of India and Pakistan.
These types of kidnapping occurred in the previously united Sudan, but it seems “this violent trend is now moving south as the opposition strives to find ways to undermine the South Sudanese government,” Patey added. “Oil remains the only tangible source of revenue for South Sudan’s government. Even at reduced production levels, the government’s war efforts against opposition forces depend on it.”
At this point, the kidnappings and attacks in sub-Saharan Africa’s major oil-bearing nations have become the norm. Nigeria, the country that has been in an output war with Angola to keep its title as the largest African oil producer, has seen almost a year of violence from separatist groups like the Niger Delta Avengers, who use attacks on foreign oil assets to siphon off energy revenues from Lagos in hopes of securing guarantees of large infrastructural development projects in the oil-rich delta. Related: The First Sign Of Tighter Oil Markets Is Finally Here
Similarly, Angola has also seen “spates” of kidnappings, according to World Oil.
South Sudan’s oil output—which is the source of over 90 percent of government revenue—has fallen to 130,000 barrels per day or one-third of original levels, since the outbreak of civil war in December 2013. Nearly all of that production comes from a single field – the Paloch, which is situated in the far northeast.
Now, more than three years later, inflation has reached almost 500 percent per year, with the International Monetary Fund’s (IMF) gross domestic product (GDP) forecasts set to shrink by 10 percent in 2017. A man-made famine and clashes have led to massive loss of life.
The foreign workers seized by rebels in March work for Dar Petroleum Operating Co., a joint venture led by CNPC and Petronas. Since then, Petroleum Minister Ezeliel Lul Gatkuoth has made assurances that none of Juba’s plans to expand oil production would go into effect until “maximum” security was assured for foreign players.
“The government is putting these people in harm’s way knowing that it is untenable for them to work there,” according to rebel spokesman Mabior Garang Mabior, who is affiliated with the Sudan People’s Liberation Army in Opposition. The group has warned “companies that they shouldn’t be dealing with the government of South Sudan, that they shouldn’t be operating there, and there is war.”
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The rebels’ tone and the kidnapping tactic’s success in making millions of dollars for similarly motivated groups in the region in the past guarantees the continuance of attacks on foreign oil facilities and workers in South Sudan. After the South Asian workers regained their freedom last week, one of them made SPLA-IO’s message and determination clear to all oil majors: continuing operations in South Sudan equals maintaining a monetary alliance with Juba – which the rebels cannot allow for their field success.
By Zainab Calcuttawala for Oilprice.com
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