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Oil Deal Could Rescue Sudans' Economies

  • Hannah McNeish
  • Gabe Joselow

South Sudan has resumed pumping oil following a 15-month shutdown that was among the country’s many remaining disputes with Khartoum. Hannah McNeish, reporting from the Tar Jath Oilfield in South Sudan's Unity State, talked to VOA's Gabe Joselow in Nairobi about this new development.

Joselow: Hannah, we understand that oil production has begun again in Unity State after being shut down in a pricing dispute with Sudan. What’s the significance of this for both countries?

McNeish: This is huge news. South Sudan relies on oil for 98 percent of its government budget. It took the decision to shut down oil six months after it gained independence in January 2012 and since then the economy really has been reeling. It’s also had disastrous impact on its neighbor Sudan - its former civil war foe as well - which used to earn huge revenues from oil being transported north. And this today really is the first time we’ve seen any movement. It may be only 8,000 barrels of oil [from one well in this oilfield], out of 350,000 that will now flow [per day], but it’s the first step in really rescuing both economies and finding peace between two neighborhoods.

Joselow: Oil was clearly one of the biggest outstanding disputes between Sudan and South Sudan. Does this development do anything to help the two countries resolve their remaining disputes?

McNeish: The two countries have agreed to demarcate the border, to pull their troops back to avoid any more conflict and to try to agree on contested territory, so really the oil is the big deal. It has such a big impact on both economies, and when it was turned off it was so much easier for tensions to flare. So now that it’s been turned on, people are hoping the rest will follow.

Joselow: When can we expect oil production to come back to pre-shutdown levels?

McNeish: On Thursday [April 4] in Juba, the capital of South Sudan, the undersecretary from the ministry of petroleum from Khartoum and the undersecretary from the ministry of petroleum in South Sudan both said that they actually expect to have all the oil back on by the end of May. This really does depend on the technical feasibility because the oil has been shut down for so long, and people don’t know what state the pipeline is in. But so far they’re hoping to start with this 8,000 barrels of oil from Unity State and, hopefully, ramp that up to about 30,000 [barrels per day] in coming weeks.

Joselow: What’s the impact of this on the ground for the South Sudanese people? And is there a worry of continued corruption around the industry?

McNeish: Previously there has been rampant corruption and there have been many calls for more transparency in where this money goes. There was a scandal last year where the president signed a letter calling for $4 billion of stolen public money to come back, but the oil shutdown really did have huge impacts on the country in terms of inflation, the new currency, the south Sudanese pound, plummeting against the dollar. There were shortages of fuel. There were shortages of food and medicines. So there is a hope that with this oil resumption that it’s a chance to turn a fresh page and start really investing in South Sudan, to do away with the corruption so people can really see what they fought for and what their new nation can bring them.

Hannah McNeish reported for VOA from Unity State South Sudan. She spoke with VOA's East Africa correspondent, Gabe Joselow.