Rich in oil, iron ore and other mineral resources concentrated in the north of the country, South Sudan is home to the third-largest oil reserves in sub-Saharan Africa, estimated at 3.5 billion barrels. Despite rising production pre-COVID-19, only 30% of the country’s oil-rich acreage has been explored to date and represents a frontier market for upstream investors. A landmark peace deal in October 2018, the resumption of production at several key oilfields, the launch of its first licensing round and a soon-to-be reformed regulatory framework have significantly strengthened the investment climate in the country, with opportunities for financiers, technical partners and project developers across upstream, refining, power generation and infrastructure sectors. Furthermore, South Sudan’s Ministry of Petroleum and Mining has specifically appealed to foreign investors for intervention in repairing damaged and outdated oilfields, as well as mitigating environmental damage associated with oil production, having launched a tender for an environmental audit last February.
Nevertheless, U.S. investors have remained cautious toward South Sudan, in part due to licensing requirements imposed by the U.S. Department of Commerce on certain South Sudanese oil operators in March 2018. Yet existing sanctions against South Sudan are far from blanket prohibitions: instead, they only require companies to obtain specific authorization before exporting, re-exporting or transferring items of U.S.-origin. China, for its part, has already taken advantage of the myriad opportunities within South Sudan’s oil and gas industry and currently represents the single largest foreign investor in the country. In a globalized market in which sanctioned countries can simply turn to alternative suppliers and financiers – as South Sudan has done with China – American companies must emerge as key sources of technology, capital and expertise to help mitigate the ecological and operational inefficiencies that have impacted oil production in South Sudan to date.
One company with a strong demand for U.S. exports and technology is Trinity Energy, South Sudan’s largest independent energy firm. The company is leading the construction of a $500-million crude oil refinery in Paloch, Upper Nile State that would refine up to 200,000 barrels per day for both domestic use and export to neighboring countries, including Ethiopia, Eastern DRC and the Central African Republic. Given that South Sudan is the only oil producer in East Africa, a project of this magnitude would be transformative for the region by fostering regional energy security and establishing an intra-African trade of petroleum products. Trinity Energy has already secured the land and undertaken feasibility and environmental studies for the refinery, and is initiating the Front-End Engineering Design study to pave the way for engagement with financiers, including the African Export-Import Bank. The Juba-based firm has also enlisted Chemex Global, an American full-service EPC/EPCM firm with experience in modular and conventional refineries, as project manager, and expressed a desire for the heightened involvement of U.S. suppliers.
“South Sudan is the only oil producer in East Africa; to restrict its growth poses a serious threat to energy security and development not only for the country, but also for the wider, landlocked region,” says Robert Mdeza, CEO of Trinity Energy. “While civil conflict has jeopardized business and destablized the economy, the 2018 peace agreement and establishment of the Government of National Unity in February 2020 has ushered in a period of renewed peace and optimism. As a result, we would like to see American investors adopt a more active role in exploring service and export opportunities for sustainable energy development in South Sudan, supported by a U.S. diplomatic approach rooted in compromise and engagement.”
Stakeholders across the board have reflected a similar sentiment, in terms of normalizing foreign investment ties and establishing methods for U.S. companies to responsibly engage with South Sudanese entities. This includes seeking legal advice and counsel, where applicable, on how to operate, partner and invest in the country, while aligning with existing regulations. After all, the U.S. has a long history of supporting the growth and development of South Sudan and the wider region. Over forty years ago, it was U.S. major Chevron that first discovered oil in the Bentu and Heglig districts of southern Sudan (now present-day South Sudan), along with the prolific Unity field north of Bentiu – leveraging American capital, technology and resources to give rise to the early stages of a Sudanese oil industry. The U.S. was also one of the primary sponsors and key supporters of South Sudan’s move toward independence ten years ago, playing a critical role in the negotiation of the 2005 Comprehensive Peace Agreement that laid the foundation for South Sudan’s subsequent referendum on self-determination and independence in 2011. Now, as it enters its second decade of independence, South Sudan is looking to the U.S. for partnership, mutual support and diplomatic friendship in positioning its petroleum industry as a catalyst for broader economic growth. Misguided notions that American companies are completely unable to do business in South Sudan inhibit the country from achieving long-term economic stability and erode a powerful history of American support of the world’s youngest and fastest-growing democracy.
Energy Capital & Power – in partnership with the African Energy Chamber’s U.S.-Africa Committee – invites U.S. companies, investors and organizations to participate in the first-ever U.S.-Africa Energy Forum (USAEF) (December 9-10, 2021, Houston, Texas), introducing American companies to African opportunities. To learn more about how U.S. firms can advance the agenda of sustainable, long-term investment in African energy, please visit www.energycapitalpower.com. To sponsor, speak or attend USAEF 2021, please contact Senior Director James Chester at [email protected]