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Boston, MA -- (SBWire) -- 09/26/2013 --BMI View: Only months after restarting, production in South Sudan appears set to again go offline as political risks again take their toll on the battered oil sector. Sudan has accused South Sudan of continuing to support rebel groups operating in the north. As a result, Khartoum has pledged to close its pipelines to the South by August 7. This will again leave South Sudan without access to export markets. Although diplomatic efforts are underway, South Sudan has already begun the process of cutting back output at fields as it prepares for another shutdown with no sense that a resolution is near. The long-term outlook for South Sudan is better than that of Sudan, with more prospective acreage and more interest from international companies; however, even here we see the risks heavily weighted to the downside. Maturing fields in both the north and south pose downside to our current forecast, which projects a gradual fall in output from the end of the decade after assuming a return to pre-crisis output levels, which itself remains uncertain.

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The main trends and developments we highlight for Sudan and South Sudan's oil and gas sectors are:

- Our view that border and security issues could again interrupt the flow of South Sudan's oil to market played out. Only three months after restarting, oil production in South Sudan looks set to go offline as tensions mount due to Juba's alleged support for rebel groups. The looming production halt underscores the precarious and uncertain relationship between South Sudan and Sudan. We expect both countries to suffer under another production stoppage, and we are currently watching events play out with a view toward further revising our forecasts downward.
- Diplomatic efforts were underway to avert the shutdown, but as of the time of writing, South Sudan had already begun the process of reducing output at its fields. There have already been warnings that another shut-off to production could result in damage to pipelines which have only recently begin to receive South Sudanese crude.
- Damage to production facilities and fields, a shortage of industry labour and the impact of the abrupt stoppage of production are among the challenges South Sudan will face in restarting output should another temporary deal be made. Although it remains uncertain as to whether production will go offline remains behind previously announced schedules, and we estimate output will average around 160,000b/d in 2013, a decline from our previous figure as we account for slowing output. We assumed volumes will reach 400,000b/d in 2014, but should a deal fail to be made to resume production we will have to alter our forecasts to the downside.

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