By Gabriel-Eddie Njoroge

State-owned South African oil company, Strategic Fuel Fund (SFF) and South Sudan’s Nile Petroleum Corporation on Monday signed a deal for the exploration and production of oil in South Sudan, as part of an investment in South Sudan’s struggling oil industry.

SFF will own and operate Block B2, which is an area of 31,000 square kilometers, as per 2018 agreement that South Africa agreed to, in which it will invest US$1 billion into South Sudan’s energy infrastructure.

It should be noted that South Sudan has the third-largest oil reserves in Sub-Saharan Africa, which is estimated at 3.5 billion barrels, contained within just 30 percent of the country that has been explored, according to South Sudan petroleum minister Ezekiel Lol Gatkuoth.

Oil production in South Sudan was at 350 000 barrels per day(bpd) at its peak, but production has been crippled, with oil fields severely damaged by almost six years of war. However, a September 2018 peace deal has helped revive production to around 160,000 bpd with the aim of increasing production capacity to 270,000 bpd by the end of the year.

South African Oil Minister Jeffrey Radebe, one of the principals that oversaw the deal, described the agreement as “a great deal” for both countries.

The deal, strategic for South Africa as an energy consumer, will see Block B2 operated by SFF, the ministry of petroleum and Nilepet, the national oil company of the Republic of South Sudan.

The Exploration and Production Sharing Agreement (EPSA) is the second one that has been signed since South Sudan gained independence in 2012 and acts as a sign of the progress for the country’s oil industry as production resumes at existing oilfields and new exploration begins.

The new EPSA contains a provision for a six-year exploration period, and under it, the SFF alongside Nilepet, will launch a comprehensive aero gravity survey exploration campaign, seismic acquisition and drilling wells with great prospectivity. The SFF will invest also in capacity building initiatives, training of South Sudanese citizens, investing in social and community development projects and ensuring local content and women empowerment.

“The petroleum resources of Block B2 are vast. For South Sudan to reach its target of bringing back production levels of around 350,000 barrels of oil per day (bopd) and beyond, we need committed new entrants like the SFF,” said Gatkuoth. “South Sudan has great potential, yet our country remains vastly under-explored, and we believe the entry of new players like the SFF will lead to new world-class discoveries very soon given the aggressive exploration program and great petroleum viability of Block B3. This will support South Sudan’s economic revival and improve trade with other African countries.”

“We are bullish about this strategic and unique opportunity into Block B2 with great petroleum potential. It provides South Africa with a chance to further strengthen its energy security while entering one of the top three most lucrative onshore oil and gas markets in Africa,” said Jeff Radebe, South African Energy Minister. “South Africa has supported peace and economic development in South Sudan since the country’s independence and this is the continuation of long-term cooperation between both our countries and people. Investment is key to guaranteeing the economic progress of South Sudan.”

The countries are now in talks to set up a 60,000 barrel per day refinery to supply oil products to the local market in South Sudan as well as secure exports to Ethiopia and other neighboring countries.

“SFF is looking forward to working with our partners in South Sudan to make discoveries on this block. We believe there are highly significant quantities of oil in Block B2. Our work program and acquisition of new seismic will reveal better information on various structures. We look forward to a few wildcats and appraisal wells in the near future. We are thankful to the Government of South Sudan for this opportunity,” stated Godfrey Moagi, acting CEO of SFF.

Productive parts of the Muglad Basin are contained in the B2 area which is part of the 120,000 km2 Block B which was split into three in 2012. Much interest has been directed towards South Sudan’s Block B acreages since the entry of Oranto Petroleum to Block B3 in 2017. Much of South Sudan’s oil and gas blocks are yet to be fully explored and resources assessed.