South Sudan Sees Increased Investment After Splitting Oil Block

South Sudan expects to attract more foreign investment into the newly independent country through its break up of an oil concession the size of Rwanda, the government’s spokesman said.

Block B, which covers most of South Sudan’s eastern Jonglei state, was split into three blocks after Total SA (FP)’s ownership was invalidated because it was signed with Sudan before the south gained independence, Barnaba Marial Benjamin said in an interview on Sept. 26 in the capital, Juba. Total, based in Paris, previously held 32.5 percent of the block and will be allowed to choose one of the new concessions, he said.

“The block was too big for one company,” Benjamin said. “That block B is bigger than the whole of Rwanda, so it was divided up into different blocks so that you bring in more investment, to make it a fair deal. Competitiveness is important.”

Total signed an exploration and production-sharing agreement with the government of Sudan in 1980, before suspending exploration in 1985 because of “escalating insecurity” related to a civil war in the country, according to the company’s website. South Sudan seceded from Sudan in July 2011, taking control of about three-quarters of Sudan’s output of 490,000 barrels of oil a day.

Total spokesman Florent Segura didn’t respond to an e- mailed request for comment. A person who answered the phone at the company’s headquarters yesterday said she would print out the questions and pass them along to a spokesman to comment.

Monitoring Situation

Segura told Bloomberg on Feb. 2 that Total was “monitoring the situation on a permanent basis in the Block B area to ensure the safety of its personnel and contractors as soon as operations resume.” Oil in South Sudan is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd. (ONGC)

Chinese, European and U.S. companies, including Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), are among the bidders for exploration rights, Benjamin said.

Jonglei has been plagued by ethnic violence, rebel militias and deadly cattle raids. The United Nations says more than 1,000 people were killed in battles between the Murle and Lou Nuer communities last year, while about 900 more were killed in clashes that lasted from late December until February 2012. The government said an Aug. 23 attack by a rebel militia group killed at least 24 of its soldiers.

Oil Shutdown

With independence, South Sudan became one of the world’s poorest countries, a situation that was exacerbated by its decision to shut down oil production in late January amid a dispute with Sudan over oil-transit and processing fees. South Sudan has been trying to attract investors in oil and other sectors to develop its economy.

Benjamin said his government has secured an interest-free loan of about $150 million from China to build a new airport terminal, and another of about $147 million to build power lines from Ethiopia to Jonglei, Upper Nile, and Eastern and Central Equatoria states. Chinese companies are constructing the power grid, which he said would be completed within 1 1/2 years.

Benjamin added that China has pledged further loans of as much as $200 million for projects including building new universities and developing agriculture.

To contact the reporter on this story: Jared Ferrie in Juba via Nairobi at pmrichardson@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.

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