As OPEC Cuts Take Effect, South Sudan Plans Output Increase

War-torn South Sudan says it will increase oil production on the heels of an OPEC deal that promises to push global oil prices upwards for the time being.

According to South Sudanese embassy officials in the UAE, Juba is determined to increase production despite ongoing civil war and the struggle for control of the country’s government through oil.

“We are planning to increase oil production as oil prices go up to increase our revenue and expand the ways of oil industry. We suffered the most due to low oil prices. Rise in oil prices is a good news for us,” Mayom Alier, Deputy Head of South Sudan mission in the United Arab Emirates, was quoted as saying.

In May of this year, South Sudan said it would resume oil production by July after a halt of more than two years. During the civil war, the country’s production capacity fell to below 130,000 barrels a day from 350,000 bpd in its only functioning Paloch oil field of Upper Nile state.

Production did in fact resume, hitting around 130,000 bpd; however, civil strife broke out again in July and continues. In October, the army of South Sudan was prompted to deploy more troops around the Paloch oil field to keep it operational amid sporadic clashes that continue to claim lives and keep the field’s production capacity uncertain.

Related: Oil Markets Optimistic As Oil Turns Lower

South Sudan gained independence from Sudan in 2011, but it has been a bloody road to establishing a stable government whose budget is dependent almost fully on oil. In December 2013, civil war broke out when President Salva Kiir Mayardit sacked the cabinet and accused Vice President Riek Machar of instigating a failed coup. The civil war ended in 2015—officially--but clashes have been frequent since.

South Sudan, which is estimated to have had 3.5 billion barrels of proved oil reserves as of January 1, 2014, is landlocked and must depend on Sudan’s pipeline through Sudan to get the oil to the Bashayer port on the Red Sea. Sudan had managed to retain pipelines and facilities when South Sudan gained independence, allowing Sudan to levy transfer fees on South Sudan for the transport of that oil through its territory.

South Sudan is now expected to be among the African nations that could derail OPEC’s production cut plans that went into effect on 1 January 2017. Libya is also ramping up production, and Nigeria is taking moves to return its production to previously high levels as the government subdues Niger Delta militants.

By Charles Kennedy of Oilprice.com

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