Sudan Nile blend in decline – why we should be concerned

Only months after the referendum on the independence of South Sudan – where most of Sudan’s oil is found – the fight over oil between the North and the South in Abyei has created a new stream of 80,000 refugees. Most of Sudanese oil exports via pipelines passing through the North go to the Far East (65% to China (2009: 250 kb/d) equivalent to 6% of Chinese oil imports), contributing  to fuel what the Australian government hopes will be a perpetual mining boom (treasurer’s jargon: “mining boom Mk2”).

But Sudan’s sweet crude oil (Nile blend) from the main producing area has already peaked and what comes next is the development of many smaller oil fields and low quality, heavy, sour oil (Dar blend) requiring special refineries. Remaining reserves using current recovery techniques are only half of what is officially claimed. Given the uncertain investment climate resulting from the North-South separation, local grievances towards the oil industry – which has damaged the environment – and tribal hostilities, total oil production will not continue its past growth path but is likely to decline, to around half of current levels by 2020.

A World Food Program truck distributes food to Abyei refugees


All the oil money stays in the North, in Khartoum, where luxurious hotels are being built for oil staff and business people.

After this short introduction into the failure of a government to use oil wealth to develop the country in those areas where the oil comes from – vital to get support from local population – , let’s have a look at the map of oil fields straddling along the border between North and South:

Location of oil fields in contested area between North and South Sudan

The media report the area is oil rich but production in the Abyei area is actually in decline:


<< Data for this graph are from page 8 of the 2007 article “Sudan: Breaking the Abyei deadlock” by the Crisis Group.


The definition of the Abyei area has changed over time. The Abyei Boundaries Commission had the Heglig and Bamboo oil fields included but the interim boundaries according to the roadmap excluded them, while including the Diffra oil field.

The disputes are indicative for the problems facing Sudan: 80% of oil fields are in the South but the pipelines bringing oil to local refineries and to Port Sudan for export lie in the North.

A good description of the situation, including the socio economic context, can be found on the website of the European Coalition on Oil in Sudan


There are 4 groups of concession holders currently producing oil and ECOS sums up their activities in a paper “Sudan’s Oil Industry on the Eve of the Referendum” (Dec 2010) as follows:


(1) Greater Nile Petroleum Operating Company (GNPOC)

Production blocks 1, 2 & 4

“In September 1999, the first cargo of crude left the export terminal. In 2008, combined production from Blocks 1, 2 & 4 was estimated at just over 210,000 b/d of Nile Blend, reflecting a decline from its peak production of 328,000 b/d in 2005. It is believed that GNPOC’s past policy of pumping as much and as quickly as possible may have caused a loss of production potential. The ten fields located in Unity and Heglig (with over 400 wells in 2008) have estimated produced water ratios exceeding 65%, up to 80%. Overall production output in 2008 fell steadily, and is expected to last for another 3-5 years, depending on the company’s assessment as to when it is no longer profitable to extract the remaining reserves. GNPOC has reportedly made enhancing operational efficiency a priority, rather than maximizing production by drilling additional wells”.  p 15

GNPOC: 40% CNPC, 40%Petronas, 10%Sudapet, 6%Sinopec, 3%Al-Kharafi


(2) Petrodar Operating Company (PDOC): Production blocks 3 & 7

“Blocks 3 & 7 contain the Adar Yale and Paloich oil fields, with estimated recoverable reserves of 460 million barrels. The PDOC project includes a 300,000 b/d central processing facility at Al-Jabalayan and major production facilities at Paloich. In 2008, production from these two Blocks was approximately 200,000 b/d. Output rose significantly in 2009 thanks to the new Qamari field, which is expected to ramp up production to 50,000 b/d by 2010. Industry insiders say that since its inception, approximately 100 new wells have been added each year, and that Blocks 3 & 7 are close to – or already beyond – the production peak. PDOC expects production to  decline from 2013 onwards.” p 16

PDOC: 41%CNPC, 40%Petronas, 10%Sudapet, 6%Sinopec, 3%Al-Kharafi

(3) White Nile Petroleum Operating Company (WNPOC-1)

Production block 5A

“The first oil from Block 5A came online in June 2006 at an initial rate of 38,000 b/d. In 2008, the field was still producing around 25,000 b/d, full capacity is estimated at 60,000 b/d. The Thar Jath crude’s quality is poor and has to be mixed with Nile Blend to prevent a price discount. WNPOC-1 cannot produce more than 10% of GNPOC’s total output. Increasing the percentage is bound to affect the quality of the Nile Blend. Block 5A’s production was therefore in decline for 2008 and 2009, in conjunction with the decrease in GNPOC’s production. The SPLM has announced that plans for a refinery in Warap State would meet domestic needs and is meant to receive production from 5A and potentially 5B. This may boost production levels and encourage WNPOC-1 to restart exploration activities” p.16

WNPOC-1: 68,875% Petronas, 24,125% ONGC, 7% Sudapet

(4) Petro Energy: Production block 6

“In November 2004, CNPC brought the Fula field online at a rate of 10,000 b/d. Current output comes from a total of 8 oil fields and stands at 40,000 b/d of highly acidic crude. Further investments are expected, as CNPC reportedly found 36 million barrels of recoverable oil in the western part of the Block. Efforts are under way to boost production in the near future, including two new flow stations and oil storage tanks (each 50,000m³). While the Block’s oil goes straight to Khartoum, connecting the field to the Nile Blend pipeline is reportedly being considered.” p.16

CNPCIS: 95% CNPC, 5% Sudapet

(5) Total-led Consortium: block B

“This consortium is still being formed. Marathon Oil Corp. has been unable to keep its 32.5% interest in the Block because of US sanctions. In 2007, South Sudan’s Nilepet obtained 10% and Kuwaiti Kufpec Sudan Ltd. obtained another 2.5%, raising its stake

to 27.5%. This compensated for the entry of Nilepet and meant that the private companies in the consortium must bear 20% instead of 10% of costs, as neither of the state companies are investing any money. The remaining 20% are expected to be offered by Total in a public bid. Currently, Mubadala Development Company, a wholly-owned investment vehicle of the Government of the Emirate of Abu Dhabi, is reportedly likely to acquire an interest in Block B. Completion of the consortium is a pre – requisite for starting operations. The consortium’s contractual obligation to carry out operations is currently temporarily suspended as a result of force majeure circumstances. Total’s prominent position in the South is disputed because of France’s military support for the Government during the civil war.” p. 17

All together now:

The above production profiles have been adopted from Fig 3, p. 17 plus guestimated WNPOC1 and Petro Energy data from the quoted ECOS paper. Please note that there are many uncertainties surrounding these data. For example, Government statistics seem to be lower than Company data (to reduce Khartoum payments to the South)

Comparison to PFC Energy estimates (August 2002)

PFC Energy did a presentation at the Centre for Strategic and International Studies in 2002 with several scenarios on oil production in Sudan.

<< this is a superimposition of ECOS production curves for blocks 1,2 & 4 on PFC mean projections for blocks 1,2 (bright green) and block 4 (dark green). We see that actual production (black curve) falls short of projected production. PFC assumed reserves of 1.7 Gb while ECOS’ actual production was 808 mb with an additional future 536 mb






For the blocks 3,7, 5A and 6 actual production was higher than the PFC mean projection but ECOS expects production to fall off sharply after 2013 and dip below the PFC production profile.


In total, the amount of oil produced up to 2023 (1.3 Gb) could be a bit higher than the PFC estimate (1.2 Gb)


PFC Energy had a projection for the total of Southern Sudan:

It is not clear how PFC Energy defined Southern Sudan in 2002. The Comprehensive Peace Agreement (CPA) was only done 3 years later, in 2005. The Northern oil production end 2010 was:

Al-Foula field in block 6                                50 kb/d
Abu Jabra field in block 6                             5-10 kb/d
Northern parts of GNPOC concession      60 kb/d

The above superimposition of Sudan’s total production and the ECOS projection show that this seems to follow more or less PFC’s mean estimate. Sudan has a population of 40 million, growing at 1 million pa (2.5%). Although domestic oil consumption has flattened in the last 4 years a 2.5% consumption increase would mean that some time in the next decade Sudan can no longer export oil. This moment could come earlier depending on how local refineries can cope with the problem of declining Nile blend.

Comparison With Sudapet

In a June 2010 presentation entitled “Sudan’s growing exploration & development” the President and CEO of Sudapet, Salah Wahbi, showed this slide

The yellow columns represent the oil in place, the total amount of oil contained in the rock (which can never be extracted fully). The narrow blue columns are the recovery factors (in %, RHS) and the wide blue columns the estimated ultimate recovery applying these percentages to the oil in place. An average recovery factor of 23% yields an ultimate recoverable (EUR) of 3.6 Gb for all 4 operators. The red columns are oil already produced, in total 1.05 Gb, leaving 2.55 Gb as remaining reserves. This is only half of the 5 Gb of claimed proved reserves as quoted in the BP Statistical Review.

In another slide of the same presentation, Sudapet estimates water injection may produce an additional 500 mb and enhanced oil recovery 2.4 Gb. Experience from other countries show that such advanced techniques require huge investments. They may reduce the decline rate in existing fields.

The most interesting in the above graph is that GNPOC’s EUR for the Nile blend  is 1.6 Gb for a recovery factor of 30%, while 814 mb have already been produced, that is 50%, in a relatively short time of just 10 years. GNPOC is at the depletion midpoint.

Remaining Reserves

Summarizing the above, we arrive at following remaining reserves, with the Sudan Government’s assessment being the most optimistic

Assessment by the IMF

In its March 2010 working paper 10/79 the IMF is using reserve figures similar to Sudapet (not the BP quoted reserves) with a peak around 2011-2012:

The April 2011 IMF country report 11/86 describes the impact of the independence of South Sudan as follows:

The independence of South Sudan could have significant impact on the Sudanese economy.

North Sudan may lose some 75 percent of its oil revenues, which could translate into domestic and external imbalances. With oil revenue constituting more than half of government revenue and 90 percent of exports, the economy will need to adjust to a permanent shock, particularly at a time when the country has little access to external financing. The size and nature of the necessary adjustment could have significant implications for growth and macroeconomic stability.

Relative to the baseline scenario of a unitary state, the independence scenario relies on a number of assumptions, including

(i) a decline of about 75 percent in oil production, which roughly captures the geographic distribution of oil production;

(ii) a 10 percent decline in non-oil GDP, to reflect the share of the South in total non-oil economic activity as well as a decline in oil related services;

(iii) an increase in service receipts to reflect the transportation fees charged for the transportation of South’s share of oil;

(iv) a decline in both transportation payments and investment income payments to reflect lower oil production;

(v) a decline in imports of goods to reflect the shares of the oil sector and the South; and;

(vi) an increase in imports of petroleum products to reflect the shortfall in domestic production

The effects of independence are expected to be transmitted through an immediate impact on the fiscal and external sectors. Government oil revenues are expected to drop by about 75 percent (equivalent to 6 percent of GDP). With about half of this revenue loss offset by the reduction in transfers to the South, the overall fiscal deficit is projected to widen by about 3 percent age points of GDP. The North’s current account is expected to deteriorate by 4 percent age points of GDP during 2010–12, reflecting both a decline in oil exports and an increase in petroleum product imports. Capital inflows, including FDI, are expected to decline in the short-run relative to the baseline scenario, contributing to the emergence of a financing gap that could reach 3–4 percent of GDP in 2012.

Maintaining macroeconomic stability will be predicated on implementing the necessary adjustments in a timely fashion. These include, exercising fiscal restraint, by streamlining non-priority spending, reducing fuel subsidies, reducing tax exemptions and enhancing revenue administration. Continuing to allow greater exchange rate flexibility, tightening monetary policy and a swift implementation of structural reform will also be crucial for a smooth adjustment and to ensure sustainable growth.

World Bank report Dec 2009

In chapter 3 of the report  “Sudan, the road toward sustainable and broad based growth”, document 54718, Dec 2009

the World Bank has accepted peak oil in Sudan by 2013 at the latest:

Moreover, the WB report tries to calculate the year in which oil exports cease. Assuming a 7% pa increase in consumption and a low production scenario this could already happen in 2020.

The countries impacted by declining oil exports from Sudan are Asian countries:

Conclusion by ECOS with a focus on oil:

The fact that the Government of Sudan has pulled out of initial offers to finance investments in the oil industry infrastructure projects may indicate that, despite continued pronouncements of high future production levels, it no longer believes in major  production increases.”

….. none of the international private oil companies are showing any interest in actually entering the market, with the exception of marginal and inexperienced companies like Fenno Caledonian and Star Petroleum. Of the oil companies with a track record, only Chinese companies have so far expressed genuine interest in post-referendum investment in Southern Sudan.

“The lack of interest from companies other than Chinese companies will oblige the SPLM to suppress the tendencies within the party to avoid doing business with Chinese companies because of China’s friendship with Khartoum since 1995. It will be equally difficult to convince local populations that the presence of Asian companies is in their interest. According to Minister Lual Deng “security concerns at the local level” have been a major reason for stagnating oil production figures as “communities ask for compensation, and services etc. to the extent that these moves lead either to some expansion plans being shelved or, even worse, production stoppage.” To ensure the industry’s continuity, the GOSS will have to prioritize building a social support basis for the industry. This will require reparations for past injustices and guarantees that best international practices are applied.”



Sudan Oil Sector Background

Political disturbance in Sudan could lead to massive oil problem

Post Referendum Arrangements for Sudan’s Oil Industry

Environmental impact of Sudan’s oil fields

Total in Sudan (2009)

EIA Sudan page

Khartoum refinery