Total Hopes for Quick Deal on South Sudan Oil Block

Source: Reuters 10/3/2012, Location: Africa

French oil major Total is still negotiating the fate of a massive oil concession in South Sudan and hopes for a swift resolution after the government said it would divide the block into three parts, a company executive told Reuters.

South Sudan seceded from Sudan over a year ago, and later renegotiated contracts with active oil firms without making major changes. But last month officials said they would split Total's 120,000-square-km concession - known as Block B - into three parts to speed up exploration in the area. Total is still talking to the government about the block, which it has held since 1980, and hopes to resolve the negotiations soon, said Lionel Marais, managing director of exploration and production for South Sudan. South Sudanese officials have given different accounts of who would be granted the three blocks. "We are discussing with the government the best way forward on Block B to the satisfaction of all," Marais said in an interview. "There is some momentum, which gives us hope there will be a quick agreement."

A new petroleum law passed after South Sudan seceded said its new government was not bound by past agreements and had the right to review and split blocks. South Sudan is eager to start exploration in Block B because of rapidly declining reserves in its producing fields. The government depended on oil for about 98 percent of revenues before shutting production down in January in a row with Sudan. Oil experts say the discovery of oil in commercial quantities in Block B would be essential to financing potential new pipelines through east Africa that would reduce the landlocked South's reliance on pipelines running through Sudan.

Last week the two countries signed border and trade deals that will allow the South to resume oil exports through Sudan. Total halted exploration in Block B in 1985 because of insecurity from Sudan's civil war, which lasted until 2005. The United States had also imposed sanctions on Sudan in 1997 for its past role hosting militants including Osama bin Laden, but those were lifted for South Sudan after it seceded. "We've been stopped from exploring by the war, by sanctions and by the pending proper agreement with government. We are keen to start exploring as soon as we are authorized," Marais said.

Block B lies mostly in the eastern Jonglei state, a region that has been torn by tribal violence in recent years. Under the exploration and production sharing agreement signed in 1980 with Khartoum, the Block B consortium was shared by Total, Marathon Petroleum Sudan Ltd from the United States, Kufpec Sudan from Kuwait, and Sudan's state-owned Sudapet. Marathon withdrew in 2007 and its shares were divided by the remaining partners. After independence South Sudan's state oil firm took Sudapet's shares in southern oil consortiums, although Khartoum is still seeking compensation.

In recent weeks a small rebellion has sprung up in Jonglei, but Marais said the company's exploration plans would not be affected by low-level insecurity. "We will work with the state on security. So long as we are not in a situation of civil war this insecurity can be managed," he said.


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