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South Sudan has announced an expanded budget for 2014-15 compared to the previous year, with a forecast rise in oil earnings of 23% and predicted non-oil earnings growth of 35%. The government has set aside SSP9,968m ($3.3bn) for spending on government agencies, compared to SSP9,733 for 2013-14, an increase of 2.5%. Given that the country is in the midst of a devastating conflict, the government’s forecasts are unlikely to be realised.

The Ministry of Petroleum and Mining awarded four contracts on 5 June for the sale of a total of 3.6m barrels of Dar blend crude for lifting in July, according to a source close to the deal. The tender was dominated by Sinopec subsidiary China International United Petroleum & Chemicals (Unipec), which won three contracts totalling 2.6m barrels. Unipec was awarded a contract for 600,000 barrels for lifting on 6-7 July and two contracts for 1m barrels: one for lifting on 19-20 July and the other for lifting on 25-26 July. The remaining 1m-barrel contract was won by Trafigura for lifting on 30-31 July.

On paper at least, the new ceasefire signed on 9 May between South Sudan President Salva Kiir and his opponent Riek Machar is a step forward. Not only does it recommit them to the terms of the 23 January ceasefire, but provisions for a transitional unity government and fresh elections go several steps further. As well as Kiir’s government and Machar’s forces, the peace process would include a group of key figures detained until recently by the government, representatives of political parties and civil society, and religious leaders.

Fighting has continued to threaten oilfield security in South Sudan’s main oil producing states of Unity and Upper Nile in recent weeks, but production has remained more or less steady at about 165,000 b/d, according to oil industry sources. Government oil sales, meanwhile, have increased by 1m barrels a month. The government closed a tender on 7 May for the sale of 3.8m barrels of Dar Blend crude from Upper Nile. Four contracts were awarded: one of 600,000 barrels and three of 1m barrels. The 600,000-barrel contract was won by Glencore.

A successful bid by US firm Defense Solutions on 7 May to buy 1m barrels of the South Sudan government’s crude was a first for the company. In recent months, most government oil contracts have been won by a small handful of traders: Glencore, Vitol, Trafigura, Sinopec subsidiary China International United Petroleum & Chemicals (Unipec), and China National United Oil Corporation (China Oil), jointly owned by China National Petroleum Corporation and Sinochem. Publicly available information on the government’s oil trades is scant, and it is even less clear how the trades are financed.

Oil production from South Sudan edged up to 166,458 b/d on 4 March, according to the latest figures from the Ministry of Petroleum. Production had been cut to about 155,000 b/d earlier in the year after the outbreak of fighting between government troops and rebel groups. “Production has crept up from about 155,000 b/d just after Christmas,” said an oil industry source in Juba. “They’ve perhaps opened up a couple more wells, or maybe the well dynamics are particularly good at the moment.”

An African Development Bank-supported project to rehabilitate and expand the electricity distribution network in Juba will begin procurement in June. The project will strengthen the Juba distribution network in order to improve reliability and access to power in the city, and to enable the absorption of power from the 42MW Fula Rapids hydropower project, where construction is expected to begin this year (AE 268/10). Work will be divided into four components; construction of the medium and low voltage network, project management and supervision including capacity building, project audit and the South Sudan Power Systems Master Plan Study.

Under a peace agreement signed in Addis Ababa on 23 January, the government and dissident elements of the Sudan People’s Liberation Movement/Army have committed to ceasing “all military actions”, to “freeze their forces at the place they are in” and to “refrain from taking any actions that could lead to military confrontations”. They also agreed to cease propaganda campaigns against their opponents, pledged to protect civilians and allow for humanitarian access, and to comply with a monitoring and verification process to be implemented by the Intergovernmental Authority on Development (IGAD).

Reports that both the government of South Sudan and nominal opposition leader Riek Machar have been in talks with Khartoum over securing control of South Sudan’s oilfields have roused fears that the already bloody fight could escalate further. Speaking at Juba airport on 6 January at the conclusion of a visit by Sudan’s President Omar Al-Bashir, Sudan’s foreign minister Ali Ahmed Karti told reporters that the two countries were “in consultations” over a proposal from the South Sudanese government for the deployment of a “mixed force to protect oilfields in South Sudan”.

A rebellion in South Sudan has already slashed oil output by around 100,000 b/d. Production from Unity State, amounting to more than 40,000 b/d, has completely ceased and there has been an estimated drop in output of more than 50,000 b/d from fields in Upper Nile State. In Unity State, output from the Thar Jath field on Block 5A, operated by the Sudd Petroleum Operating Company (SPOC) of Petronas and India’s ONGC Videsh, and the Unity field on blocks 1a and 1b, operated by the Greater Pioneer Operating Company of China National Petroleum Corporation (CNPC), Petronas and ONGC, was shut down after rebels took control of the area.

The African Development Bank board has approved an African Development Fund grant of $26m to rehabilitate and expand the distribution networks in Juba. The Power Distribution System Rehabilitation and Expansion Project aims to provide reliable electricity supply from existing and future generation facilities, thus satisfying the suppressed load and demand growth in Juba. The project consists of the construction of 145km of low-voltage 33kV lines; 370km of medium-voltage lines; the purchase and installation of 195 transformer stations; and 20,000 prepaid meters for connecting 20,000 new customers.

Norwegian development agency Norfund has confirmed to African Energy that construction of the 42MW Fula Rapids hydro plant in South Sudan will begin in 2014. Landmine and unexploded ordinance clearance began at the site this year and is expected to take a year to complete. Equity capital is fully subscribed, and Norfund hopes to mandate lenders soon, while bids are being evaluated for construction contracts and will be awarded in Q1 2014. Logistics are relatively straightforward as transport infrastructure for the project is mostly in place. Equipment will be brought from Mombasa via Uganda with only a 4km road to be built from Juba to Nimule.

The African Development Bank (AfDB) has begun lending to the South Sudan Distribution System Rehabilitation and Expansion Project, which was approved by the board on 18 September. The project aims to strengthen the distribution network in the capital, Juba, and is expected to cost around $26m. Work will include construction of a 33kV medium-voltage network and a 33/0.415kV transformer station, a low-voltage 415/240V network, a service connection, street lighting, project management and engineering and audit services. An AfDB appraisal team is working with the South Sudan Electricity Corporation (SSEC) and the government to review and finalise the scope of work, project costs and implementation schedule.

With the threat of another pipeline shutdown averted, South Sudan’s oil production is expected to increase from about 180,000 b/d to 200,000 b/d in the coming weeks, and to at least 250,000 b/d by year-end, according to oil industry sources in Juba. During a one-day summit in Khartoum on 3 September with South Sudan’s President Salva Kiir, Sudanese leader Omar Hassan Al-Bashir agreed to reverse his decision, announced on 9 June, to stop receiving, processing and transporting crude from South Sudan within 60 days. Under pressure from oil companies and foreign governments, Bashir had already twice delayed the anticipated shutdown, originally scheduled for 7 August, to 22 August and then to 6 September.

Russia’s Safinat Caspian Oil Refining Company is expected to complete construction of a 5,000 b/d oil refinery at Bentiu in Unity State by early 2014, according to industry sources in Juba. The facility will meet local demand for refined products.
The Ministry of Petroleum and Mining says the facility will be up and running by the end of 2013, but early next year is “probably more realistic,” said one industry executive.