Europe reluctant to invest in Sudan
Sudan has strong potential for oil exploration and expansion but big European players will be reluctant to invest for fear of pressure from groups advocating divestment leaving the door open to Chinese firms.
By Agencies |
KHARTOUM: Sudan has strong potential for oil exploration and expansion but big European players will be reluctant to invest for fear of pressure from groups advocating divestment because of violence in its Darfur region.
This has left the door open to Chinese firms, less sensitive to shareholder opinion, whose country is hungry for energy.
European caution is unlikely to change given the high profile of the rape and killing in Sudan’s remote west, which international experts estimate has claimed 200,000 lives.
Sudan, emerging from decades of civil war, produces around 500,000 barrels per day of crude, mostly the sweet refinery grade Nile Blend and the more acidic Dar Blend.
Most of the oil lies in the south, scene of a bitter civil conflict for all but 11 years since independence in 1956. However, as the former foes in Sudan signed a north-south peace deal in January 2005, a conflict was fully under way in the western Darfur region, which Washington branded genocide.
European powers are reluctant to use the term, which Khartoum rejects. Lack of progress on Darfur and backsliding on the southern deal prompted the United States in May to strengthen sanctions it had placed on Sudan in 1997, which most analysts say have not affected the oil industry, except for banking administration.
Analysts say Sudan has instead looked east to Asia for investment, a policy that is unlikely to change. “If you look at production, it’s not affected production,” said Christopher Brown, Sudan analyst from Wood Mackenzie. The only major Western operator in Sudan, France’s Total, has been kept from starting work by a long-dispute on ownership rights to its Block B. A small British firm had been drilling until the government ruled in favour of Total.
“There are no Western operators, other than Total SA, which has not started yet,” Brown said.
While the sanctions are not directed against European companies, many fear reprisals from lobby groups that have waged an effective Sudan divestment campaign in the last few years.
“The European players would be worried about reputational risks,” said OB Sisay, deputy Africa analyst from Exclusive Analysis.
“The pressure groups could create serious risks for the companies... which leaves a lot of space for Chinese companies.” Top state-owned firm Chinese National Petroleum has major interests in eight of Sudan’s oil blocks, as well as owning 50% of Sudan’s largest refinery and partnering oil pipeline construction.
This has left the door open to Chinese firms, less sensitive to shareholder opinion, whose country is hungry for energy.
European caution is unlikely to change given the high profile of the rape and killing in Sudan’s remote west, which international experts estimate has claimed 200,000 lives.
Sudan, emerging from decades of civil war, produces around 500,000 barrels per day of crude, mostly the sweet refinery grade Nile Blend and the more acidic Dar Blend.
Most of the oil lies in the south, scene of a bitter civil conflict for all but 11 years since independence in 1956. However, as the former foes in Sudan signed a north-south peace deal in January 2005, a conflict was fully under way in the western Darfur region, which Washington branded genocide.
European powers are reluctant to use the term, which Khartoum rejects. Lack of progress on Darfur and backsliding on the southern deal prompted the United States in May to strengthen sanctions it had placed on Sudan in 1997, which most analysts say have not affected the oil industry, except for banking administration.
ADVERTISEMENT
Analysts say Sudan has instead looked east to Asia for investment, a policy that is unlikely to change. “If you look at production, it’s not affected production,” said Christopher Brown, Sudan analyst from Wood Mackenzie. The only major Western operator in Sudan, France’s Total, has been kept from starting work by a long-dispute on ownership rights to its Block B. A small British firm had been drilling until the government ruled in favour of Total.
“There are no Western operators, other than Total SA, which has not started yet,” Brown said.
While the sanctions are not directed against European companies, many fear reprisals from lobby groups that have waged an effective Sudan divestment campaign in the last few years.
“The European players would be worried about reputational risks,” said OB Sisay, deputy Africa analyst from Exclusive Analysis.
ADVERTISEMENT
The Sudan Divestment Taskforce, http://www.sudandivestment.org, has pressed US universities and even large funds and financial institutions to divest from companies with interests in Sudan, in what activists say is the largest movement since the anti-apartheid campaign. Sisay said the Darfur war activists were influential. “The pressure groups could create serious risks for the companies... which leaves a lot of space for Chinese companies.” Top state-owned firm Chinese National Petroleum has major interests in eight of Sudan’s oil blocks, as well as owning 50% of Sudan’s largest refinery and partnering oil pipeline construction.
ADVERTISEMENT
Malaysia’s state-owned Petronas and India’s ONGC have invested heavily in recent years as Western companies left. Analysts said there was good growth potential in Sudan’s oil industry, which has remained opaque for years because of its role in the north-south civil war and associated rights abuses. With the peace deal, new areas for exploration were opening.Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
