Sudan's oil leads to standoff
Start-Up is challenging alliance of big energy firms led by Total
A tiny start-up firm has challenged an alliance of major oil companies over the right to seek oil in a large area of southern Sudan , with opposing Sudanese factions each supporting a different side.
The standoff underscores the continuing uncertainty oil companies are likely to face as they jockey to take advantage of a fragile peace agreement intended to end two decades of violence in the north African country. While the known oil reserves in Sudan are relatively small in global terms, they are still important to the various factions in the country and to oil companies that hope to find more deposits.
White Nile Ltd., a company started by former U.K. cricket star Phil Edmonds and Africa mining investor Andrew Groves, triggered the flap Feb. 16 by announcing a preliminary agreement with the future government of South Sudan , to seek oil in a portion of a 110,000-square-kilometer tract in southern Sudan .
France's Total SA, in an alliance with units of Texas-based Marathon Oil Corp. and Kuwait Petroleum Corp., promptly cried foul, claiming it had a newly amended 1980 agreement giving it the right to develop the entire tract.
Each side has its backers and detractors. The Sudanese People's Liberation Movement, which is expected to lead a new south Sudan government when a peace treaty in the war-torn country takes effect in May, confirms a deal with White Nile and says Total lost its rights when it abandoned the tract in the mid-1980s. But the oil minister for the Khartoum-based Sudanese government, which will cede extensive autonomy to the government in the south under the peace treaty, says all oil deals have to go through its government.
The dispute could put pressure on the peace agreement, signed earlier this year, which aims to end a 21-year civil war between the Muslim Arab north and the largely Christian and animist African south. The conflict has left an estimated two million people dead and has economically devastated the area. The disagreement raises the prospect of further disputes over contracts, which could "undermine the entire peace process," says Josh Mandel, an Middle East analyst for U.K.-based consultancy Control Risks Group.
The peace agreement ushers in a six-year interim cease-fire period, with the north and south sharing oil revenue while a regional government in the south wields considerable autonomy, in anticipation of a referendum on southern independence. The SPLM, the main southern rebel group that fought the Sudanese government, is set to take a majority of the seats reserved for the southerners in a national assembly in Khartoum, as well as lead the government in Rumbek.
Sudan 's oil reserves, most of which lie in the south, became a flash point during the conflict between north and south. Though Sudan 's total known reserves may jump once the area is open to exploration, it is still a relatively small player with proven reserves of about 700 million barrels, according to industry data published by BP PLC.
Key to the dispute between White Nile and the Total alliance is a section of the comprehensive peace agreement saying oil contracts in existence at its signing on Jan. 9 would not be renegotiated.
Both White Nile and Total insist their rights predate the signing of the peace accords. SPLM says it signed a preliminary deal with White Nile last August for a concession area under the SPLM's control. "After that, Total went to Khartoum to get the same deal," SPLM spokesman Samson Kwaje says in an interview.
When it disclosed the preliminary agreement on Feb. 16, White Nile said it had a 60% stake in a 67,500-square-kilometer tract, called Block Ba, which covers more than half of Total's claimed total Block B acreage.
Officials representing Total and the Sudanese government say the French oil company and its partners agreed in December to revive Total's 1980 production-sharing pact with the government in Khartoum for Block B. "Our legal situation is clear," says Total spokesman Jean-François Lassalle. After leaving the country in 1984 because of the outbreak of violence, Total paid small annual fees to the Khartoum government to uphold its rights to Block B, Mr. Lassalle adds.
When White Nile announced its preliminary agreement with the future government of South Sudan , its shares jumped 13 times to 137 pence (€1.98) on London's Alternative Investment Market, a part of the London Stock Exchange designed for small start-ups that has no minimum-capitalization mandates and does not require that companies document their track record. Trading was suspended a week later at 138 pence.
Benoit Faucon, David Gauthier-Villars and Jackie Range of Dow Jones Newswires contributed to this article
- Database Search
- Unpaid Debt A comprehensive overview of the role of the Lundin Consortium in the oil war. ECOS calls upon the Swedish, Austrian and Malaysian governments to investigate whether, as a matter of international law, Lundin, OMV and Petronas 'were complicit in the commission of war crimes and crimes against humanity by others during the period 1997-2003.’ In response, the Swedish Public Prosecutor for International crimes opened a criminal investigation into ‘links between Sweden and the reported crimes’.
- In Depth For more specific information about the Lundin court case please visit the Unpaid Debt dossier.
