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South Sudan Hits Peak Production As It Prepares For First Oil Auction

Time is running out for South Sudan, which is now preparing for its first oil auction, as officials reveal that the country’s four existing blocks have reached and passed peak production and are now in decline. 

 Ministry of Petroleum Undersecretary Awow Daniel Chuang told Bloomberg that Blocks 3 and 7 in Upper Nile have fallen to 103,000 barrels per day from an initial 120,000 bpd, while Blocks 1, 2 and 4 have dropped from 53,000 bpd to 48,000 bpd. 

Overall, crude oil production has declined from 185,000 bpd to 165,000 bpd. 

Currently, South Sudan has five producing blocks, operated by China National Petroleum Corporation (CNPC) India's Oil and Natural Gas Corporation and Malaysia’s Petronas. And last week, production at Block 5A was finally resumed after a 7-year pause, targeting a modest 8,000 bpd. 

Sudan’s first oil licensing auction launched on June 22nd and will offer up five blocks for licensing, but already, Petronas has reportedly indicated that it might not participate. Foreign investment is now make or break for South Sudan. 

Landlocked South Sudan could be a gold mine. It’s estimated that it’s 90% unexplored, but a five-year civil war took its toll, and delayed chances of new exploration and goals of returning to prewar production levels of up to 400,000 barrels per day.

In 2019, South Sudan--part of the non-OPEC group included in the OPEC+ production cuts--announced its first oil discovery as an independent nation, with 5.3 million barrels recoverable, but the pandemic has delayed progress.

“COVID-19 has been a challenge,” Chuang said, although there are other risks. “The unit production cost is very high, that’s a risk. If we’re unable to control the costs of production our profit oil will shrink, we need to address that. We need to ensure profit oil holds up, against cost oil.”

By Charles Kennedy for Oilprice.com 

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