Boston, MA -- (SBWIRE) -- 09/04/2012 -- BMI View: We anticipate that Sudan and South Sudan's combined oil output will fall dramatically in 2012 to just 135,000b/d, down from an estimated 420,000b/d in 2011. At present, there are few signs of progress in negotiations over critical border delineation and oil revenue sharing disputes. Indeed, border violence seems to be on the rise following the SPLM's invasion of Heglig in April 2012. Until tensions ease and a formal settlement is reached, oil production is set to remain well below pre-independence levels due to South Sudan's lack of independent export infrastructure.
Main trends and developments we highlight for Sudan and South Sudan's Oil and Gas sector are:
- At the time of writing, South Sudanese oil production remains completely shut-in. We expect this to continue until fiscal pressure forces South Sudan back to the negotiating table or new pipelines linking South Sudanese fields to international ports are established. Our core view implies a small resumption of output in Q213 following the completion of a temporary pipeline linking South Sudanese fields with Juba, where crude can then be trucked south to Mombasa or east to Djibouti. Initial volumes are likely to be small but could reach as much as 30,000b/d, according to the South Sudanese oil minister.
- Khartoum is likely to try to boost production over the coming years as it seeks to replace volumes lost to the South during secession. We expect that Khartoum will struggle to meet its production goals, despite reported interest in the latest licensing round. International sanctions still prevent investment from all but a handful of national oil companies (NOCs) that may now have their eyes on richer pickings to the south.
- South Sudan is endeavoring to pursue a number of longer-term pipeline plans in order to bypass Sudanese infrastructure. These include a plan to link oilfields with a new port in Lamu, Kenya, or, alternatively, a new route transporting crude to the port of Djibouti. We do not anticipate that these will be completed before H215.
- Combined oil reserves are set to fall gradually, in line with higher production volumes, unless significant new investment is made in exploration over the coming years. That is threatened by the deteriorating security situation on the ground in the border regions.
- Oil consumption is forecast to grow over our forecast period - despite the deadlock - from an estimated 89,000b/d in 2012 to 103,000b/d in 2016 and 125,000b/d by 2021. We forecast an OPEC basket oil price for 2012 of US$111.47/bbl, which we see falling to US$107.00/bbl in 2013. Global GDP in 2012 is forecast at 2.6%, down from an estimated 3.0% in 2011, reflecting a faltering recovery in the US and uncertainty with regard to the eurozone debt situation. For 2013, growth is forecast at 3.3%.
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