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INTERVIEW: Coronavirus adds to South Sudan's oil industry's woes

Highlights

Production hit by low recovery rates, coronavirus

Serious logistical, water content challenges persist

First oil licensing round could start in early-2021

London — Logistical and technical issues continue to hinder South Sudan's oil sector, which has already been hit hard by the coronavirus pandemic, the country's senior oil official told S&P Global Platts in an interview.

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Awow Daniel Chuang, undersecretary at the ministry of petroleum, said the global pandemic had exacerbated an already fragile situation in the world's youngest nation.

"The lack of proper logistics in the oil fields is causing a lot of problems. Currently it is difficult to access the area, which is forcing production costs to increase," he said. "Being a landlocked country does not help, as most of the goods and materials required for oil production come from overseas? So, logistics is one of our biggest problems."

South Sudan's production has now dropped to around 170,000 b/d from 180,000-185,000 b/d prior to April, Chuang said, as the surge in coronavirus cases has led to disruptions in oil field operations.

INTERVIEW: South Sudan hopes to clear TFA oil payments to Sudan by 2021

Militancy and tribal strife in South Sudan -- which gained independence from Sudan in 2011 after a bloody civil war -- have largely thwarted hopes of restarting all the country's oil fields, which previously produced over 350,000 b/d.

Production slumped to 130,000 b/d in 2014 because of a protracted civil war, but some shut-in oil fields reopened last year after the signing of a new peace deal.

But security concerns remain a big issue for oil companies, and the coronavirus pandemic, has just added fuel to the fire.

The worry is that South Sudan's daily production is likely to continue dwindling if the spread of the coronavirus is not contained in the near future.

But Chuang said the ministry still had lofty ambitions of reaching 250,000 b/d by 2021.

"The current blocks should be producing around 200,000-210 000 b/d because extraction factors have improved slightly," he said.

"Within a very short period of time, we should be able to achieve 220 000 b/d and then 250 000 b/d. But this will not be achieved this year. We have the potential to reach 300,000 b/d by around 2022."

Technical hitches

Chuang also stressed the lack of technical knowhow along with the lack of international investment was weighing on the oil sector.

"We need more investment by oil operating companies to improve the production extraction rate, and thereby increase the country's oil production. Recovery factors are very low in South Sudan and this is a major problem. We have in the past struggled to improve recovery factors for hydrocarbons and need more investment and modernization," he said.

The limited number of experienced technicians in the country was also a major issue.

"With South Sudan being such a young country, we were not part of the oil operations in Sudan, so we are starting afresh. We do have a good number of engineers, but given the size of our oil operations, we still need more to be trained, so that they can start working in the oil fields," he added.

South Sudan holds the third-largest oil reserves in sub-Saharan Africa but the recovery rates at its oil producing blocks remain very low.

This has a lot to do with the high water content of the extracted oil.

The ministry has been working on reducing the water content but remains it a key issue.

Chuang said water content is close to 80% with the 20% comprising oil.

Some programs to address this issue at oil production facilities have been put in place but technical issues persist.

"The expansion [of the water extraction facility] has already been completed but is not yet fully functional due to some technical challenges. The facility is now being modified as there may have been some errors in the construction of the design. The modifications should be completed by end of this year," he added. "If we can improve the recovery factor, then we can extract more oil from these fields."

Plans on hold

The country's exploration plans have bene put on hold, but Chuang remained optimistic that the work would rebound swiftly

In May 2019, South Africa's state-owned Strategic Fuel Fund signed a six-year exploration and production sharing agreement with South Sudan for the lucrative Block B.

Chuang said it was still waiting for the company to start work.

"The fund was supposed to conduct geophysical surveys, and has established an office in Juba, so we are now waiting," he added.

South Sudan's plans to launch its first oil licensing round have inevitably been delayed the pandemic.

The round was supposed to launch in March or April this year, but Chuang said the ministry is now targeting an early-2021 date.

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