South Sudan Oil Conference Fails to Draw Biggest Energy Firms

South Sudan’s president was a no-show for the nation’s first international oil conference, a gathering that also failed to attract prospective investors from the biggest global energy companies.

The turnout showed only smaller companies are risking bets on the oil sector of the world’s youngest country.

South Sudan has 3.5 billion barrels of oil and 3 trillion cubic feet of natural gas in proven reserves, and is seen by companies as one of the last frontiers in energy exploration in sub-Saharan Africa. But a civil war that broke out in late 2013 dashed the hopes of Exxon Mobil, which has ditched exploration plans. Its rival Total has put such plans on hold.

Four million people have fled the conflict.

Oil production has fallen to about a third of the peak it reached before the war.

The government says Total is still interested in developing two of its biggest oil blocks. The company did not immediately comment when asked by Reuters why it did not send a representative to South Sudan for the conference.

“The elephant in the room is still the crisis,” said NJ Ayuk, chief executive of Centurion Law Group, an African energy-focused firm.

He spoke wistfully of 2011, when the country gained independence from Sudan. “Everybody was in love with South Sudan. Everybody was hopeful and wanted to help,” he said of prospective investors. “The challenge is bringing the country back to where it was in 2011, where most people could really see a dream.”

Britain’s Tullow Oil, a leading exploration firm on the continent that the government said had expressed interest in an untapped block, was represented by its Africa vice president.

But at coffee breaks, conference attendees said they worried that political obstacles, more than technical ones, would plague any possible investment.

A fragile peace deal broke down last year amid gunbattles between soldiers and rebels in Juba. International efforts to bring warring sides to new talks have not succeeded.

‘World-class oil industry’

There was brief applause when Second Vice President James Wani Igga, standing in for President Salva Kiir, said South Sudan “is emerging as a powerful nation with a world-class oil industry.”

A British drilling company executive called arrival at Juba’s airport “enlightening.” The airport is housed in tents amid renovations of the original terminal. Passports are stamped by officials without computers in a trailer provided by the United Nations.

Petroleum minister Ezekiel Lol Gatkuoth said the government would assert itself in talks with potential investors.

“I’m not threatening anybody, but if you don’t meet our terms, we will say, ‘Bye-bye,’ and then somebody else will come in immediately,” Gatkuoth said.

He said state-owned Nilepet would take a greater role in partnerships. “You will team up with Nilepet,” he told the conference, with a caveat: “I’m not encouraging you to leave — immediately.”

This is not a reassuring message, said Andrew Firth of Secure, a regional private security and risk management firm.

“The quickest way to drive the petroleum sector forward is by allowing the market to drive development, not for the government to drive [it].”

Luke Patey, a researcher at the Danish Institute for International Studies who studies East Africa’s oil industry, said of the turnout: “I think it’s a combination of the real risk that exists … and that the global oil price has been quite low compared to when South Sudan became independent.”

Gatkuoth, the minister, said the president had delegated his deputy to open the conference on his behalf. “He is very committed to inviting investors and open this conference but he had other national engagements,” Gatkuoth said of Kiir.

The minister said of Total: “They were invited to attend but I do not know why they did not come.”

         

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