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South Sudan Says Recovering Oil Production Boosts FX Reserves

Gradually increasing oil production and the higher oil prices this year are helping South Sudan to generate more foreign exchange reserves, according to Deng Tor Ngor, governor of South Sudan’s Central Bank.

“With increase in global oil prices, at least our situation would be much better than two years ago,” Gurtong news outlet quoted the bank’s governor as saying. 

South Sudan broke from Sudan in 2011 and took with it around 350,000 bpd in oil production. After South Sudan’s secession from Sudan, the two countries have been mutually dependent on oil revenues, because the south has 75 percent of the oil reserves, while the north has the only current transport route for the oil to international markets.

But then civil war in South Sudan broke out in 2013 that further complicated oil production. The oil price crash the following year additionally affected oil income and oil production in South Sudan.

South Sudan’s government and rebels signed a power-sharing agreement in August 2018, hoping to put an end to the civil war. Oil production at some oil fields that were shut in at the start of the conflict has resumed. At the end of August, South Sudan resumed production from the Toma South oilfield at a rate of 20,000 bpd, adding to South Sudan’s total daily average of 130,000 bpd.

South Sudan hopes to significantly boost its production in the near term, but according to energy consultancy Wood Mackenzie, the extent of damage to infrastructure is unknown, as is the performance of wells that have been shut-in since 2013. The biggest challenge to South Sudan’s rising oil production, however, would be whether the peace deal would hold long enough to allow for a sustained increase in oil production, WoodMac said.

According to the World Bank, South Sudan is the world’s most oil-dependent country as oil represents almost all its exports and around 60 percent of GDP. South Sudan expects to resume full oil production of 350,000 bpd by the middle of next year. The country has also reached a new deal with Sudan on oil transit fees. Under the new deal, South Sudan will pay $4 per barrel fee, down from $9.1 a barrel under a previous agreement from 2012.

By Tsvetana Paraskova for Oilprice.com

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