South Sudanese peace agreement likely to boost oil production and reduce likelihood of conflict with Sudan

South Sudan's president, Salva Kiir, on 12 September signed a final agreement on the country's revitalised peace process together with opposition groups, including the armed opposition Sudan People's Liberation Movement – in Opposition (SPLM-IO). Former national vice-president Riek Machar signed on behalf of the SPLM-IO.

Significance: The peace agreement is likely to boost oil production and consequently government revenues in the one-year outlook. South Sudan is seeking to raise its daily crude production from about 135,000 barrels per day (b/d) to 180,000 b/d in the one-year outlook. In an effort to achieve this, a co-operation agreement has been entered into with Sudan on security for the oil-producing fields and the provision of technical support to restart production in previously abandoned fields. Although South Sudan's output targets may seem ambitious given the significant damage to oil infrastructure since 2013, it is very likely that the government will succeed in reversing the declining output trend of recent years. This is due to Sudan's commitment to the recent peace agreement as one of its main architects. Sudan is likely to use its leverage to ensure that SPLM-IO forces do not attack or disrupt oil production activity. Sudan needs additional oil revenue and, therefore, is likely to protect its agreement with South Sudan on the increase of oil production. The risk of interstate fighting between Sudan and South Sudan, as in 2012 when both countries fought over the town of Heglig, is also likely to be reduced significantly due to increased security co-ordination at a senior level to ensure oil field security. Limited localised fighting is probable but unlikely to end the agreement. Machar will also seek to rebuild his political base with the help of his new position as South Sudan's first vice-president and revenues associated with upholding the agreement. However, should the peace agreement break down yet again, for example due to an attempt on the life on any of the major political leaders, and Sudan support the SPLM-IO in its attempt to capture government-held towns, the South Sudanese government will almost certainly end the oil-related agreements, ending the expected positive trend.