His Excellency Ezekiel Lol Gatkuoth, Minister of Petroleum of South Sudan, talks to AOP about the challenges faced by Africa’s youngest nation, the state of the energy industry and new investments.
How have security concerns affected investment in South Sudan’s oil and gas sector?
In the six years since the birth of the Republic of South Sudan we’ve suffered challenging times, so even as we discuss the huge potential here in the country, we have to acknowledge that there are difficulties to overcome. As with the founding of other nations, we’ve endured conflict and unrest. In short, we have an enormous amount of work to do to make sure our people are safe and can prosper in this land. It’s now time to change our outlook on this issue. The future holds great promise and the government is committed to creating a peaceful, pro-business environment. We’re already seeing improvements, with the Sudd Petroleum Operating Company preparing to restart operations and the Dar Petroleum Operating Company continuing to produce oil.
The government is moving its resources to protect the oilfield areas, then the logistics corridors, so that we can let the private sector get on with its work. Securing these areas also means peace for the people living there, the ability to bring in food and essential goods, and employment over the longer term. There are pockets of insecurity in some rural areas but this should not hold us back. South Sudan’s development will be based on oil and gas, so our duty is to get the wells producing, explore new areas and bring in new business and make sure our people and the petroleum industry is secure from criminal activity. In the downstream industry a more secure environment will positively impact the economy overall and allow us to build a more efficient system that will reduce fuel shortages.
How does South Sudan plan to diversify its export routes?
South Sudan is looking at alternatives to our current export route through Sudan to the Red Sea. The reasons for this go beyond the transit costs of exporting through our northern neighbor. We intend to keep this route open and to meet our commitments to the north, and to maintain the strong oil and gas sector links between South Sudan and Sudan that already exist beyond the pipeline exports. We are now looking to integrate further with our East African neighbors and we are looking to share the cost of infrastructure. All options are on the table, including road transport and a pipeline to Ethiopia, and a pipeline to Kenya.
The more diverse our export routes, the more the global market can depend on the delivery of South Sudanese crude. Additionally, in the East African Community there are 150 million people and booming demand for energy and petroleum products. The discussion should not be limited to crude oil exports – South Sudan has a rightful place as East Africa’s source for all petroleum products, since our upstream industry is the most mature by far.
What is your assessment of the state of local content in 2017?
Part of our drive to create a pro-business environment is to create an environment where local companies in particular can succeed. In order to make that happen, we first need to bring in the outside investors to open up our unexplored acreages, get the fields on stream again and have that initial investment made. After that we have faith that South Sudanese companies will seize the opportunities on the table. The Petroleum Act of 2012 does include provisions for local content and I believe for now these are exactly what we need. It is a matter of making sure that the operators and international services companies actually follow the law and use indigenous contractors when they can. In the fields of logistics, well services, engineering and construction, aviation, maintenance and manpower, South Sudan is not lacking in highly competent people and companies. There is now a local drilling contractor too, and I have met South Sudanese managers of plenty of international companies. The law is in place, the skills are here, and this positive trend will continue. The private sector will be a major driver for growth in South Sudan. In the petroleum sector our companies are ready to welcome foreign investors.
What measures will the Ministry take to promote gas monetization?
In March 2017 the Ministry of Petroleum signed a memorandum of cooperation with the Equatorial Guinea Ministry of Mines and Hydrocarbons. Parts of this agreement deal with gas monetization, as well as local content, where Equatorial Guinea will lend its experience to our own upstream industry to help us make better use of our gas resources. The discussion here is really about properly assessing what we have, introducing more innovation to the sector, and making use of our oil and gas resources to strengthen the nation and improve people’s lives. Oil and gas companies will be encouraged to explore and fully assess South Sudan’s gas resources first of all. Second, the law prohibits gas flaring and in the future the wastage of our national endowment will not be tolerated. The Ministry of Petroleum will promote any new means of capturing gas and using it – that is where the pro-business agenda comes in. We are open to new ideas. Third, we need to get gas-to-power initiatives going urgently. South Sudan has a massive power deficit, and the solution is right there under our feet. All of this presents huge opportunities to forward-thinking investors.
Oranto Petroleum recently signed an EPSA in South Sudan, and negotiations are underway with new entrants. What does this signify?
Oranto Petroleum’s entry to South Sudan is something to celebrate. This exploration and production sharing agreement was the first brand new petroleum agreement signed by the post-independence government. In 2012 we resigned agreements for new block boundaries with the joint operating company partners after South Sudan became independent from the Khartoum government. The contract with Oranto and negotiations with new players are a new, exciting development and an expression of how the Ministry of Petroleum intends to proceed. South Sudan is looking for real explorers, companies that are committed to opening up the frontiers of this country. This will be a challenge, but in what other country can you find such vast unexplored onshore areas? We’re also looking for companies that are prepared to move fast, innovate and exploit oil and gas resources to the fullest, and to commit over the long term. The Ministry of Petroleum has a clear stated position on this: We are interested in working closely with serious investors that have relevant experience, and we will place our faith in those companies that demonstrate commitment.
This interview is part of the Africa Energy Series: South Sudan 2017 book, which was released at Africa Oil & Power in Cape Town. Read the full report here.