Sudan and South Sudan Oil and Gas Report Q1 2013

Dallas, TX -- (SBWIRE) -- 01/28/2013 -- The restart of oil production from Sudan’s oil fields is a positive development, though we highlight that damaged fields, infrastructure, and technical challenges pose downside risks to the nearterm recovery of volumes. While we expect production to recover to pre-crisis levels, we believe this will not take place until 2016 when output reaches 448,990b/d. Although Sudan was able to successfully issue new licences, we are more optimistic regarding South Sudan’s oil potential, with the latest agreement potentially a prelude to increased upstream activity in the country.

The main trends and developments we highlight for Sudan and South Sudan oil and gas sector are: #The restart of production from South Sudan following an agreement between the two countries on transit fees marks a significant milestone, but outstanding security and border issues could undermine stability and again interrupt the flow of oil to markets.

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. However, we estimate Juba’s production will reach 147,500b/d in 2013 and return to precrisis levels of 360,000b/d by 2015.

Although Khartoum is targeting ambitious increases in production from fields under its control, we continue to expect output to fall short of stated targets to increase production to 300,000b/d by 2017. Despite the announcement of recent upstream investment pledges totalling US$1bn and the successful issuance of new licences, upstream activity and production from fields approaching maturity makes such a figure unattainable at present.

For South Sudan, the key upside risk to the reliability of exports rests with Juba’s continued pursuit of export options independent of Khartoum’s pipelines. A plan to link oilfields with a new oil terminal in Lamu, Kenya as part of the LAPPSET infrastructure project remains under proposal. We forecast an OPEC basket oil price for 2012 of US$107.1/bbl, which we see falling to US$99.10/bbl in 2013.

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