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Global Energy Advisory - 19th December 2014

Politics, Geopolitics & Conflict

The Sudans: Where Oil Fits in

A year ago this week, South Sudan became embroiled in a civil war that has so far killed tens of thousands of people and put paid to its embryonic independence from Khartoum. It started when rebel forces targeted South Sudan’s oil fields shortly after fighting broke out in the capital, Juba. At stake is control of some 75% of all of Sudan’s oil production.

The situation in South Sudan was already unsustainable due to the civil war (production had already dropped from 350,000 bpd to 160,000 bpd), and now with oil prices dropping below $65 per barrel, this economy, solely dependent on oil revenues, has collapsed.

Interested parties can claim that Sudan’s woes have always been about irreconcilable tribalism, but this is a convenient argument that has long been used by Khartoum to its own ends. Oil has played a distinctive role in the more horrific of these ‘tribal’ problems. Recall that in 1972, north and south Sudan signed a peace agreement that stipulated equal sharing of the south’s resources (50/50). At this time, it was thought that the only valuable resource in south Sudan was uranium, so when oil was discovered in the south shortly after this peace agreement, Khartoum sought to change the rules of the game: there would be no equal sharing of valuable oil resources. In 1978 Chevron found a key oil field near the north-south border. Several years…

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