Sudan, be it the northern Republic of Sudan or South Sudan, is one of the most dangerous places to drill for oil, as we have already established. Yet somehow interest in entering both countries’ oil sector does not wane despite the omnipresent risk of a new conflict, either locally or on a national level. Now Russia is lining up to get into both Sudans at the same time, although at varying rates of intensity and interest – after a relatively calm 2018 externally, the new year might bring about a seemingly unexpected breakthrough for Russian companies. What is more, it is not small-to-mid-size companies that are appraising both countries, but oil majors that can advantageously turn government backing to useful account.
The main pillar of Russia’s Sudan offensive is the construction of a refinery in Port Sudan, first alleged to be Africa’s largest (surpassing the 350kbpd Skikda refinery in Algeria) and then revamped into a 222kbpd project. Interestingly, African media report that two companies have so far issued letters of interest to the Sudanese authorities – the U.S.-based Energy Link International and the Russian TK Ural Trade. Neither of them boasts any expertise in the materialization of large projects, the first seems to be an Asia-oriented energy consultancy company whilst the latter’s activity or street credibility is largely untraceable. Given that the U.S. company proposed to build a smaller 100kbpd refinery, Sudanese authorities might prefer a Russian investment. Yet there could be more below the surface.
According to Russian media reports, Gazprombank might become an investor in the Port Sudan refinery project, based on a preliminary agreement. The inclusion of any Gazprom-related entity makes it a much more interesting matter, all the more so as there have been rumours circulating for several years already that Gazprom Neft (the branch of Gazprom responsible for oil production and refining) is interested in tapping into Sudan’s offshore oil. Sudanese authorities are wooing the Russian side as good as they can, hoping for a late 2019 start of construction. Interestingly Sudan might not be the ultimate market outlet for the goods produced – on the back of an average 10 percent GDP growth Ethiopia witnessed over the past seven years product demand growth has risen accordingly, by some 9.5 percent every year.
Oil product demand is expected to double in 20 years, reaching 190-200kbpd…