South Sudan factions vie for control of oil fields
Warring factions in South Sudan are battling for control of the country’s dwindling oil production in a sign both sides have given up on faltering peace talks and are instead seeking a military and economic stranglehold over the cash-strapped country.
Oil companies have evacuated non-essential staff from fields in Upper Nile state following renewed heavy fighting in Malakal, the regional capital, over the past week.
Malakal lies about 150km south of the fields in Upper Nile state that pump the bulk of the country’s crude. Oil production was hit earlier in the crisis when the rebels in late December took control of Unity state, the other oil-rich region.
Oil executives worry the forces loyal to Riek Machar, the rebel leader, will move beyond Malakal, trying to encircle the fields to gain leverage. They said however that a direct attack against the fields was unlikely.
An aide to Mr Machar said the fighting was heading towards the oilfields of Adar and Paloich, in Upper Nile state. “There can be no work because of the fighting. That will stop the oil,” the aide said. The Financial Times could not independently verify the claim about the rebel movements north of Malakal.
Colonel Philip Aguer, spokesman for South Sudan’s army, insisted the fields were so far safe in spite of rebel threats to “either divert or close down the oil industry”. His government last week intervened to overturn a local state directive to shut down the fields.
But an industry executive familiar with the situation described a more worrying scenario, with oil groups operating the fields in Upper Nile, including China National Petroleum Company and Malaysia’s Petronas, evacuating some staff from Paloich. “They are lifting as many non-essential workers as they can,” the executive said.
Industry officials say oil output has fallen to about 150,000 barrels per day, down 40 per cent from before the start of the conflict, which has killed thousands and displaced 900,000 people.
The output drop – and worries of further shutdowns – is forcing regular buyers of South Sudanese oil such as China to seek alternatives, triggering a rush for crudes of similar quality in Angola, Chad and as far away as Argentina. The crisis is also contributing to higher global oil prices of around $110 a barrel.
Regional and international mediators rushed to negotiate a ceasefire after the world’s newest country split in two in mid-December following a high-level political fallout out between President Salva Kiir and Mr Machar, his sacked vice-president. But the shaky January deal quickly fell apart as fighting flared.
Each of the two political leaders accuses the other of plotting an undemocratic takeover of the country, which in 2011 seceded from Sudan’s Khartoum government after decades of war.
The fighting in Upper Nile is so far the biggest violation of the ceasefire. Over the weekend, witnesses reported dead bodies on the empty streets of Malakal, with opposition forces in charge. The UN said some of the 20,000 civilians sheltering at its base in the town fought each other along ethnic lines, leaving at least 10 dead and sending 2,000 fleeing.
Mr Machar had originally suggested oilfields under his control could continue to pump and divert revenues into an escrow account, but since then he has appeared keener on halting oil production altogether. Without oil revenues, which make up 98 per cent of South Sudan’s income, Mr Kiir will find it difficult to maintain his government.
“Riek will cut off the oil production and squeeze Salva’s cash,” says a foreign observer in regular contact with Mr Machar. The observer added that the stalled peace talks in Addis Ababa, the Ethiopian capital, were “just theatre”.
But stopping production also risks eliciting a response from neighbouring Uganda and Sudan, both of whom are officially allied to Mr Kiir. Sudan’s own economic survival depends on its southern neighbour pumping oil, as it profits from pipeline transit fees.
- 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.
