FACTBOX: Sudan power struggle threatens East African crude flows

Fighting between factions on the streets of Khartoum for control of Sudan has entered its third week as the conflict continues to weigh on the smallest oil producer in the OPEC+ coalition.

Most of the hostilities between paramilitary Rapid Support Forces (RSF), under the command of General Hamdan Dagalo, and General Abdel Fatteh al-Burhan's Sudanese Armed Forces (SAF) have been centered in the capital, which contains the country's only operational oil refinery, near the border with oil-producing South Sudan, and in Port Sudan, where crude export terminals are located.

Trade flows

-- As civil war looms, analysts expect oil infrastructure to come under fire, impacting crude flows and potentially dragging South Sudan into the conflict.

• Crude flows have so far been unaffected by the fighting, according to South Sudanese officials. Exports actually increased in April, data from S&P Global Commodities at Sea shows, with 130,400 b/d of crude shipped from Sudan's Bashayer terminal to the UAE and Malaysia, up from 77,000 b/d in March and 96,000 b/d in February. However, on April 28 South Sudan said the crisis had put downward pressure on its crude price.
• Juba has attempted to mediate in the conflict amid fears crude exports could be disrupted or cut off.
• Both Sudan and South Sudan produce Nile and Dar Blend crudes that are heavy and slightly sweet, meaning they can be easily converted into fuel. Key markets for the countries' barrels are the UAE, Malaysia, Italy and Singapore.

-- Supplies from South Sudan are vulnerable to the conflict.

• South Sudan, East Africa's largest producer, pumps 160,000 b/d but relies on a pipeline via Khartoum to export terminals on the Red Sea to access international markets. Juba pays Khartoum fees and tariffs for the privilege, representing a key revenue stream for Sudan.
• Sudan has been plagued by political instability in recent years, reflected in the overthrow of long-time president Omar al-Bashir in 2019 and a 2021 military coup. The unrest, combined with economic malaise, unpaid government debts and the COVID-19 pandemic, has taken a toll on Sudan's hydrocarbons sector, causing production to fall from some 71,000 b/d in 2019 to around 50,000 b/d today. Major foreign operators -- China National Petroleum Corporation, ONGC Videsh and Petronas -- have all walked away from upstream businesses in Sudan in recent years, leaving the oil fields in state hands.
• Last year Sudan offered 18 oil blocks via direct negotiation. Previously the government hoped to boost output to 150,000 b/d. However, most of the country's fields are mature, so production is expected to decline further in the coming years.

Infrastructure

-- Overreliance on Sudan has led South Sudan to explore potential new pipelines to ports in Djibouti or Lamu, Kenya.

• The Greater Nile Oil Pipeline stretches 1,600 km from South Sudan's Unity and Helig oil fields to export terminals on the Red Sea, south of Port Sudan. Capable of carrying 250,000 b/d, it is operated by the China Oil & Gas Pipeline Network Corporation and Malaysia's Petronas, which has evacuated staff. Two weeks into the fighting, South Sudan's oil minister Puot Kang Chol said deliveries of key materials to its oil fields had been interrupted.
• Some 70 km north of Khartoum is the Garri refinery and a large power plant. The country's only refinery, Garri processes 100,000 b/d of Sudanese and South Sudanese crude, representing around 60% of Sudan's daily fuel demand. Last week the RSF claimed in a video to have seized the refinery, although Sudan's government later issued a denial.

-- Domestic supplies in the East Africa region are at risk of disruption from the conflict.

• The fighting has also hit Sudan's domestic fuel supply chain, resulting in chronic fuel shortages even though Sudanese officials say the Garri refinery is operating at full capacity. Widespread electricity outages in Khartoum appear to have been caused by the destruction of pylons. There has been no fighting to date around power plants, with the battles focused on the army headquarters and the airport.
• Following the 2021 military coup, which overthrew a joint military-civilian ruling council, protesters blockaded roads and oil pipelines to and from Port Sudan, halting crude flows. This time, analysts say, RSF paramilitaries are likely to target oil and export infrastructure to cut off a key source of revenue for the SAF.

Prices

• Platts, a unit of S&P Global Commodity Insights, last assessed Nile Blend at $74.45/b on May 2, a $4.20 discount to Dated Brent and the widest spread since June 2020.
• Dar Blend was assessed May 2 at a $2.55/b discount to Dated Brent.
• South Sudan's minister of information, Michael Makuei, said April 28 that the fighting had pushed the crude price below $70/b, with buyers unwilling to take cargoes from Port Sudan without a discount.
• With long queues of evacuees forming at fuel stations in Khartoum, the price of diesel has more than doubled in Sudan, according to reports.