 ENERGY & MINING |
One of the short term priorities of the government is to solve the electricity problem, which is seriously damaging business and investment possibilities; so forth keeping potential investors away. It is worth noting that only 30% of the population has electricity. In 1998 the government made an investment act to encourage investors to widen markets, and in December 2000 The Investment Act was signed inviting all kinds of investors to participate in all electricity sectors. This Act was supported by a new legal framework. At the beginning of the year 2001 the National Electricity Corporation on behalf of the Sudanese government signed a contract with a Malaysian company to build the first independent power plant in the Sudan. The necessity for this kind of a big power plant derives from year 1999 when the Sudan became an oil exporting country. The General Manager of the National Electricity Corporation Eng. Makkawi tells us: "The emergency action plan done by the government which has been approved last year in 2000 says that we need to build a 1000 megawatt thermal power station as soon as possible and to start building more after this. We are suffering a severe blackout many times throughout the year because the demand is very, very fast. From this 1000 megawatt we have now contracted almost all, and one of the most recent agreements is a contract of 257 megawatt with a Malaysian company called Dar Ikhtisas that came out after one year and a half of negotiations. After we have finished this we will move on to the development program, which is to utilize our resources in the hydro power station. We have already finished the design of three dams in the northern part of the Sudan with a total of 2000 megawatts. The government is now thinking how to finance this huge project and if we do this our total energy capacity will be 3000 megawatt."
This first independent IPP built by Dar Ikhtisas is a successful example of the Sudanese-Malaysia cooperation and will spread optimism among other investors. Not only it is a significant achievement in terms of its size, but this IPP has also a very unique way of providing guarantees. Eng. Makkawi from the National Electricity Corporation explains: "The guarantees started in many aspects. First of all there was a negotiation on tariff. The government accepted to take a decision that the fuel will be delivered by the government and this is about more than 60% of the cost of any thermal power station. After that we started to negotiate how to build a structure of the guarantees and securities. One of them is the government guarantees and the so-called screw account. The revenues will be put in a screw account in a bank and at the time being the National Electricity Corporation will not give any money. The investor will take the money directly from the screw account and this is the best way of securing the investor."
Other recent power generation achievements are discussions on utilising solar and wind for generating electricity, as was discussed by The Minister of Energy and Mining, Dr. Awad Ahmed Al-Jaz, during his last visit to China at the beginning of the year 2001. These agreements will facilitate the development of other sectors, open new business opportunities, and further attract investors into the country. From the short term perspective it would be beneficial to build the power plants somewhere close to the oil and gas locations as it is currently the most demanding sector.
There are two backbones in the Sudanese economy: oil and agriculture. The current trade surplus derives from the oil revenues, which obviously reflects its huge contribution to the economy, but also the necessity to diversify the economy. Furthermore, it is essential to recognize the potential of the agricultural contribution, and to attract investors to this sector too. The African continent is one the last frontiers left for the oil discoveries. In the Sudan it was the Americans that discovered oil in 1974, but since their withdrawal a few years after the fields remained empty until the Asians came in 1997 upon the government invitation. It was regarded easier to invite the Asians to come and invest in the Sudan, as those countries had no political ambitions in the Sudan. At the moment the oil revenues are still not very substantial, because the investors collect their share first, but in five to six years time the Sudan is expected to become a medium-size oil exporting country. It is highlighted that the oil revenues should be reallocated to other sectors, particularly to the agriculture and infrastructure in order to speed up their development.
In August 1999 the Sudan became an oil exporting country. The export figures increased from 150 000 barrels per day to 220 000 barrels per day at the end of the year 2000 and the objective for the year 2002 is to reach 500 000 barrels per day. The main oil fields are in the southern and the western parts of the country, and the oil is transferred from there through the Khartoum Refinery, 50% owned by Chinese, to the eastern Sudan for exportation along the longest African pipeline of 1610 km. The oil sector is controlled by the Sudanese Petroleum Corporation acting as a regulatory body, whose Director General Hassan Mohammed Ali El Tom, is also the Secretary General at the Ministry of Energy and Mining. The Sudanese Petroleum Corporation is responsible for exploration, production, refining, transportation, mining, financing, planning, arranging licenses, supervision and new legislation. At the moment there are many applications for new fields waiting for to be evaluated, and some countries interested in the Sudan are Japan, India, Indonesia and Russia. Russian companies Slavnaft and Rolsnaft are interested in the oil in the mid parts of the Sudan, as well as in the gas in the Red Sea area. According to the Director General Hassan Mohammed Ali El Tom the potential is shifting its location a bit, as he explains "Now we are promoting the north of the Sudan because most of the areas in the middle, the west and the south are already licensed through current agreements, and some of them are already producing, some are very active in exploration, and in some of them there is a bit of oil but of course they still need to be developed."
It is highlighted that the exploration of the gas should be viewed as a priority, since on situations when there is oil, it can be used for exportations, and the gas is better to be used for local consumption. Director General Hassan Mohammed Ali El Tom confirms this by saying: "In fact I don't put great hope on finding exportable quantities of natural gas, but I put my hopes in quantities which could be used locally for power generation and for petrochemical industries in the Red Sea area. We need the gas for fertilizers and other petrochemicals, and it could be a medium for power generation, so whatever quantities we will get I think we will need it locally. If the scale is small it is better to use it locally and when we use it locally we save oil which we are now using for local power generation. If I have gas I will export oil and use gas locally. This is the same strategy in Egypt. They are expanding the local consumption of gas at the expense of oil, but they really were fortunate to discover more gas than they need so now they are targeting on exportation too." The most important market now for the Sudanese oil is the East-Africa, because the quality of the Sudanese oil is far better than the one of those countries.
| In regard of the relationship between the Sudan and OPEC, The Minister of Enery Dr. Awad Ahmed Al-Jaz has the following opinion. "I agree on the OPEC control because unless we have a level of common pricing in the oil sector nobody will come and spend his money unless he can recover the money he spent. The need for oil consumption is getting higher and higher, we have equal balance on the investment side, and we know that the price on the big consumer has been affected by the legal taxes. The government is making money out of this production which is difficult for the consumer in that place. So we agree with the position being taken by OPEC, as to balance between the consumption and the investment is the only proper role for keeping the industry to grow and to maintain."
 THE PIPELINE OF 1610 KM |
Some of the biggest companies operating in the oil industry are Higleig, The Greater Nile Operating Co. Ltd., The China National Petroleum Company, Talisman, Petronas, the Sudanese Petroleum Company, Sell and GAPCO. Recently there has been an ongoing debate whether the oil companies violate human rights, and whether economics can be separated from politics and it is ethical to have international and multinational companies operating in the Sudan. It has reached the point where the US lead debate has tried to make the existing oil companies leave the Sudan by trying to exclude them from the New York Stock Exchange for the reason which follows very much the argumentation behind the US embargo. Whether this US lead argumentation has legitimate roots, and whether human rights and displacement is really taking place, the cruel fact is that these matters are affecting the sector and making it very sensitive and vulnerable. Minister of Energy himself gives his opinion on this issue: "We are saying that those who are living around the area where we get the oil are the first people who benefit from the oil. It is not something we say, it is something real: those who live around the oil area get clean water, get electricity, get schools, get communication. This is what has been happening in the history of the Sudan in the remote areas and what we are saying after the development of these area. People come from a very far place and settle in these developing areas. Before the oil there was no settlement at all, nobody lived there, but the oil experts came and lived around the oil area. Because there is a lot of development and many people have chance to work in the industry, the locals have moved there too." The opinions about the whole new oil boom are divided more or less into two categories: into those who see that the oil will finally bring the peace to the South, and to those who see the Sudan coming even more of a battlefield of international interests. Either way, the oil definitely gives further reasons to argue for the independence for the South where some of the oil fields are located.
Mining has so far been fairly limited due to the lack of finances and difficulties in terms of accessing the mines and deposits. However, there are iron ore, manganese, magnesite, silver, gold, chromium ore, gypsum, mica, zinc, tungsten, copper and uranium. High grade gold deposits have been found at the Red Sea Hills, and are estimated in 1986 at 100 tonnes. The Minister of Energy today describes situation as such: "We have Chinese working in the northern area of the Sudan looking for gold, but we did not get the production started yet. It is on the way and the information we have on it is very promising. The French now are exporting around 60 tons of gold per year. We have other companies working in the western part of the Sudan, where we are expecting the production to come in soon. In the east we have reserves of iron to be exploited." |
