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The governments of Sudan and South Sudan have agreed to renegotiate the terms under which Juba exports its oil, according to officials from the two countries. Transit fees of almost $25/bbl, combined with the drop in the global oil price and the discount at which Dar Blend crude trades, meant that South Sudan faced selling its oil at a loss. Output dropped sharply, heralding a possible shutdown and requiring an urgent renegotiation of transit terms.

Chinese companies accounted for almost 80% of the oil sold by the government of South Sudan in 2015, while the government’s share of oil revenues fell from 60% at the beginning of the year to barely a quarter in November, according to data from the Ministry of Petroleum and Mining seen by African Energy. Overall crude production has fallen by close to 10% during the year. Government oil revenues have dropped to less than $20m/month, compared to more than $50m/month in Q1 2015 and more than $200m/month before the start of the civil war in December 2013, according to African Energy calculations.

South Sudan President Salva Kiir has shaken up the board of directors at state oil company Nilepet in a move that reinforces his personal influence over the company. Kiir issued a presidential decree in August making several new appointments to the board, including reinstating Benjamin Bol Mel, a business partner of the president, promoting current managing director Joseph Cleto Deng, Kiir’s former office manager, and appointing General Akol Kur Kuch, currently national security director.

South Sudan’s oil income has been slashed by lower output, falling global prices, and an increasing production share taken by the government’s upstream joint venture partners. The treasury has fallen behind with payments due to Sudan for the use of its export infrastructure and is paying its debt by diverting greater quantities of oil to its neighbour. In 20 months the conflict has claimed tens of thousands of lives, displaced 4.6m people, and reduced oil production by up to a third and the burden of the war effort is exerting further pressure on the treasury, which is consistently overspending its military budget.

South Sudan’s crude production in the first half of July was estimated at 160,000-165,000 b/d, according to industry sources. Sources in Juba have confirmed that Chinese oil workers were evacuated in May from key oilfields in South Sudan’s only producing state, Upper Nile, but any downturn in oil production was shortlived. Current output is slightly higher than the H1 average.On 8 July, Sinopec subsidiary China International United Petroleum & Chemicals (Unipec) won the contract for a cargo of 1m barrels of Dar Blend crude for loading at Port Sudan between 15 and 17 August.

Attacks by rebel forces in May have come closer to the oilfields in Upper Nile state than at any point in the 18-month conflict. On 16 May, rebel fighters captured the Upper Nile capital Malakal, and on 19 May they took Melut, 200km north of Malakal and just 40km from the main oil-producing hub of Paloich. The opposition claims to have besieged oilfields around Paloich and captured the town of Mangok, the gteway to the Adrar oilfield, one of the largest fields in the area.

South Sudan is maintaining oil production at just below 170,000 b/d, but the continued fall in the government’s share of production means that state oil revenue has dropped to less than $50m/month, leaving the government on the brink of bankruptcy. “At the moment we’re producing about 168,000-169,000 b/d,” an official at the Ministry of Petroleum and Mining told African Energy on 23 March. “A few weeks ago, we were producing 170,000 b/d, but it has dropped slightly.” The figure may be a slight overestimate, according to an oil industry source in Juba, who puts production at between 160,000 b/d and 165,000 b/d.

Hong-Kong registered Frontier Services Group (FSG) is carrying out logistics work in support of government-controlled oilfields in Upper Nile State under a $23.3m contract with the Ministry of Petroleum and Mining. Revenues from the continued operation of the fields are crucial to the government’s ability to fight opponents led by former vice-president Riek Machar.FSG’s board chairman is Erik Prince, the founder and former chief executive of Blackwater, a security company that carried out military operations on behalf of the US government in Iraq.

South Sudan has increased oil production to about 169,000 b/d from 160,000 b/d late last year, minister of petroleum and mining Stephen Dhieu Dau said on 27 January. The production figures do not tally exactly with export datas, but, with the advent of the dry season, there is an upward trend in sales from Port Sudan. According to the ministry’s latest crude lifting programme, 4.6m barrels were planned for lifting in January, equivalent to average production of 148,000 b/d, up from 142,000 b/d in December. A total of 4.8m barrels, or 171,000 b/d, is planned for lifting in February, and 4.95m barrels is planned for lifting in March, equivalent to 160,000 b/d.

According to the latest lifting programme, published by the South Sudan Ministry of Petroleum in early December, a total of 4.6m barrels will be lifted from Port Sudan in January, equivalent to average production of 148,000 b/d. This compares favourably with the 4.4m barrels programmed for lifting in December (an average production of 142,000 b/d) and 4.2m barrels in November (an average of 140,000 b/d). The volume for lifting matches that of October, when it was also 4.6m barrels, or 148,000 b/d.

In August, a 600,000-barrel oil cargo for September lifting was awarded to China International United Petroleum & Chemicals (Unipec). But, according to an oil industry source, Unipec was invoiced to pay not the government of South Sudan, but Chinese arms manufacturer China North Industries Group Corporation (Norinco). This arrangement has not been made before, but there is precedent for a direct contract award by the Ministry of Petroleum and Mines to Norinco: in August 2013, the government sold a 600,000-barrel oil contract to the company.

South Sudan’s oil production has fallen by about 25,000 b/d, or 15%, due to problems with well maintenance in the key producing state of Upper Nile, according to the latest sales and marketing data from the Ministry of Petroleum and Mines. The ministry has outlined a lifting programme for 4.2m barrels of crude for November, equivalent to 140,000 b/d. Production in H1 2014 averaged 165,000 b/d. The drop is significant, and will be costly for the government. The outbreak of hostilities in mid-December had already resulted in a sharp drop in output from 220,000 b/d in November 2013.

The government of South Sudan is pushing for the restart of production from outlying fields in the critical oil territory in Upper Nile, and is evaluating the resumption of output from shut-down fields in Unity State, according to a senior official at the Ministry of Petroleum and Mining. Production levels in Upper Nile State are threatened by technical issues with crude dewatering facilities, while the restart of production in Unity State is being hampered by issues over border demarcation with Sudan.

South Sudan’s 2014/15 budget, presented to parliament on 25 June, includes an allocation of SSP113m ($37m) for the Fula Rapids power project in Eastern Equatoria. According to finance and economic planning minister Aggrey Tisa Sabuni, the project will be financed by the African Development Bank, the government of Norway and the Juba government’s own funds.

South Sudan’s Ministry of Petroleum and Mining tendered five cargoes of Dar Blend oil from Upper Nile in early July, for a total of 3.4m barrels. Sinopec subsidiary China International United Petroleum & Chemicals (Unipec) won four of the tenders: three 600,000-barrel cargoes for lifting from Port Sudan between 8 August and 24 August, and a 1m-barrel cargo for lifting on 27-28 August. The final, 600,000-barrel cargo was won by Geneva-based Vitol.