The Bankruptcy of Oil Finance in the Republic of South Sudan
By Khurthii Manyuat, Beijing, China
August 3, 2017 (SSB) — The political and military system in the Republic of South Sudan are based and totally depends on oil revenues which mean the decline of oil revenues is directly responsible for the financial crisis that threatens the functioning of such an expensive system.
The financial crisis has created a large number of arrears of wages for soldiers and other arms of government institutions. Because of the financial crisis, the government has failed to perform on the incorporations of the rebels and the government’s commitment to reconciling many arms groups’ mutinies.
After the death of founding the father of South Sudan, many rebels emerged and got adopted to be a bribe to peace and reconciliation. Therefore with current financial situations, the government is handicapped and unable to substitute the rebel-bribes equation. The financial crisis to which its monoxide is being smoked by south Sudanese resulted from the decline of oil production.
There are four main reasons for the decline of oil production in the republic of south Sudan as follows;
First, South Sudan oil reserves have declined. After ten years of development and extraction, most of the oil had been extracted. And according to current conservative estimates, South Sudan oil production will continue to decline until 2035 where all wells would be completely exhausted and dry.
Second, oil production is frequently interrupted. In January 2012, South Sudan voluntarily stopped production of oil because of the dispute over stolen oil as well as over the transit costs. The shutdown of oil production caused contraction of South Sudan economy. The GDP dropped to 46% in 2012.
After nearly 15 months of negotiations, South Sudan resumed oil production in April 2013. But at the end of the same year, forces loyal to the president and his former Vice President went into violent that later spread all over the country, leading to another closure of oil production and subsequent evacuation of hundreds of foreign workers. Most of the key equipment in the oil fields were badly damaged as a result of violent clashes.
Thirdly, South Sudan use to pay plenty of oil transit charges to Sudan. Being land locked country has subjected her to only listen to Sudan. Our crude oil pipeline passes through Sudan to overseas markets, and in accordance with the provisional agreement reached in August 2012, the total cost for equipment and pipelines used for Nile petroleum company is 11 $ per barrel, the petrodollar company is 9.1$ per barrel.
In addition, South Sudan is paying 30. 28 billion dollars to Sudan as economic compensations after seceding to be an independent republic.
Well, it doesn’t make sense in any way or anywhere to catch a thief and please him/her by giving the recovered property and call it a compensation for his/ her exhausted energy resulting from too much running away from you.
After transportation of crude oil through Sudan to export terminals is all done, petrodollar pays the sum of expenses 24$ per barrel and Nile petroleum company pays the sum of 26$ per barrel.
Fourth, international crude oil price fluctuation. The fall in international oil prices in 2009 led to a fall in the budget of the government of South Sudan over the previous year by 1/3. And after a brief pickup, international crude oil prices dropped by half in 2013, and subsequently, less than 50$per barrel in 2016. However, since the outbreak of the civil war, the government of South Sudan is just receiving 5$ per barrel of crude oil in the wake of the civil war.
There is no oil producing country that will accept to continue drilling its oil just for 5$ dollars a barrel. Only South Sudan with its best song called “immature nation” or young nation that drill its oil in the benefit of a furious enemy Sudan.
5 $ dollars might be something greater to a man sitting in v8 but what about this reality. The diplomatic risk behind that little dollar. Sudan will always be holding tests in any of the negotiating tables because of this pipelines passing through its territory. Take Abyei issue as a reference. South Sudan would not be successful in negotiating Abyei unless there is independence from such a diplomatic risk.
The government should untie this nod by quickly implementing refinery construction project. With refinery, Bitumen would l be available to construct concrete highways that will link up the country instead of invisible 5 $ dollar
Khurthii Manyuat, is a student of the petroleum engineering China University of Petroleum in Beijing, China. You can reach the author via his email: Kurmanyuat@gmail.com
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