South Sudan Plans To Double Oil Production

South Sudan aims to double its oil production to 290,000 barrels per day in fiscal year 2017/2018, the country’s finance minister said on Friday, up from current output of around 130,000 barrels per day.

The newly independent nation’s new target of adding 160,000 barrels per day would bring production to a level higher than the 245,000 barrels per day it reached prior to the outbreak of conflict in late 2013.

The main oil firms involved in South Sudan’s production are China National Petroleum Company (CNPC), Malaysia's state-run oil and gas firm Petronas, and India's Oil and Natural Gas Corporation (ONGC) Videsh.

"The resumption is underway," news agencies quoted Finance Minister Stephen Dheiu Dau as saying, in reference to the planned production increase. "The conflict has affected the facilities, including the power."

Since its independence, South Sudan has relied on oil for all income—a situation that has significantly compounded ongoing political and economic instability due to the fall in crude oil prices.

According to South Sudanese officials, production in the past reached as high as 350,000 bpd but fell after a dispute with Sudan over fees for pumping South Sudan’s crude through Sudan’s export pipeline, which led South Sudan to halt production in 2012. South Sudan got the lion’s share of the oil when it split from Sudan in 2011, but it’s only export route is through Sudan, giving Khartoum leverage and leading to ongoing pricing disputes.

Even after restarting production, it never recovered to those levels, but it dropped to 245,000 barrels per day after the outbreak of the civil conflict in South Sudan in 2013, which hindered production in the oil-rich areas of the north.

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Inflation has jumped more than 800 percent a year, and the government is increasingly unable to pay civil servants and military forces.

Inflation has now slowed to 10 percent a month, said Dau, and the government plans to help the central bank to build foreign exchange reserves.

"We will ... reduce the money supply in circulation," he said. "We will stop our borrowing from the central bank, it's one of the causes that led to inflation."

In December, the International Monetary Fund (IMF) said the government's 2016/2017 budget was "an important step in the right direction", cutting the forecast deficit to 9 percent of gross domestic product from 30 percent in 2015/2016.

By Damir Kaletovic for Oilprice.com

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