South Africa eyes oil deal with South Sudan

South Africa is negotiating an oil deal with South Sudan, Energy Minister Jeff Radebe told media following reports that South Africa was in talks to build a US$1-billion refinery in Africa’s newest country.

Radebe said the negotiations with South Sudan were not exclusive: Cape Town was seeking to reduce its exposure to the highly volatile oil prices by securing deals in the sector with other countries including Nigeria and Equatorial Guinea as well.

South Africa is currently almost completely reliant on imported crude oil, but French Total recently announced a discovery off its shore that could contain as much as 1 billion barrels in total resources.

“It is gas condensate and light oil. Mainly gas. There are four other prospects on the license that we have to drill; it could be around 1 billion barrels of total resources of gas and condensate,” Total’s CEO Patrick Pouyanne said at the time.

At the same time, South Sudan, which is home to most oil reserves of the old united country, is eager to start raising its oil production after a devastating civil war that has yet not ended completely.

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Before the civil war began, South Sudan produced 350,000 bpd of crude, but now production averaged 180,000 bpd. Plans are to boost this to 270,000 bpd and eventually restore the pre-war production level. The country has oil reserves estimated by BP at 3.5 billion barrels as of 2016. 

Reports of a US$1-billion refinery deal with South Africa first emerged earlier this year, saying Cape Town had already spent almost US$1.4 million (20 million rand) on the refinery project. Radebe and the government were criticized by lawmakers of going about the deal in a secretive way. The Energy Minister dismissed the criticism saying all was “above board” in South Africa’s oil and gas negotiations with South Sudan.

This article was originally published on Oilprice.com