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South Sudan Refineries to Bring Fuel Independence Closer

Nov. 1 (Bloomberg) -- South Sudan is set to become almost self-sufficient in oil products within a year as two refineries enter production, saving Africa’s newest nation foreign exchange it now uses to buy diesel from neighbors.

“By 2014, we would be 80 percent independent in terms of requiring energy products from any other country,” Paul Adong Deng, managing director of state-owned Nile Petroleum Corp., said in an interview on Oct. 29 in the capital, Juba. “By 2016-17, we will be entirely independent.”

South Sudan’s first refinery, which will process 5,000 barrels a day, will begin operating by Dec. 31 and a second one will start by the end of 2014, bringing total processing capacity to 17,000 barrels a day of crude oil, he said.

The facilities are being built in the oil-producing states of Unity and Upper Nile. The first, in Bentiu, is a joint venture between Nile Petroleum and Russia’s Safinat, with a 30 percent-70 percent equity split respectively. It cost “under $100 million,” Deng said.

“We envisage that before year-end, the construction would have been completed and the commissioning would have taken place” after a six-month delay caused by the rainy season and poor road conditions from Kenya’s port of Mombasa, through which the equipment was shipped from Russia, he said. Construction is yet to start on the larger one in Thiangrial.

South Sudan imports as much as 40 million liters (10.6 million gallons) of fuel a month from neighboring Kenya, Deng said. About 80 percent of imports are diesel and 20 percent gasoline.

Sudan Reliance

While South Sudan may review a decision to stop an arrangement under which it was using the refinery near Sudan’s capital, Khartoum, to process crude that was then trucked back to the south, Deng ruled out relying on Sudan for its energy needs for the “foreseeable future,” as a border conflict keeps bilateral relations tense.

South Sudan seceded from neighboring Sudan in July 2011 and took three-quarters of the formerly united country’s oil output. The landlocked country currently exports all its crude, about 220,000 barrels a day, through pipelines across Sudan. A dispute between the two neighbors over export revenue halted South Sudanese production last year, cutting the country’s economy by half to $9.34 billion, according to World Bank data.

“With the refinery operational, ultimately we will no longer continue under the threat of shutdown,” Information Minister Mikael Makuei Lueth said in an interview “Even if they shut down we will continue to refine our oil production.”

Fuel Smuggling

Oil product smuggling across the northern border will probably drop after Sudan’s government removed subsidies on fuel, Deng said. The removal of fuel subsidies triggered protests in Sudan as the cost of energy and transport rose.

Henry Dillah Odwar, who heads the parliamentary committee on energy, said South Sudan still needs to build roads from the refineries to Juba so it can bring fuel to the capital in the rainy season. Nile Petroleum is studying the viability of transporting the products by “special barges” as they work on constructing all-weather roads, Deng said.

South Sudan has sub-Saharan Africa’s biggest oil reserves after Nigeria and Angola, according to BP Plc data. Its low-sulfur crude, prized by Japanese buyers as a cleaner-burning fuel for power generation, is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s Oil & Natural Gas Corp.

The country is targeting production of about 800,000 barrels of oil per day by 2020, compared with about 220,000 barrels now, Mohammed Lino Benjamin, director of petroleum in South Sudan, said on Oct. 29.

To contact the reporter on this story: Mading Ngor in Juba at mngor@bloomberg.net

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

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