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South Sudan: No Oil Workers Evacuated from Upper Nile

South Sudan denies reports that oil workers have been pulled out of the strategic Palouch oil field in Upper Nile state.

South Sudan Minister of Petroleum and Mining Stephen Dhieu has denied reports that foreign oil workers have been evacuated from key oil fields in Upper Nile state, where he insists production is continuing as usual.

"We would like to reassure the foreign oil partners, joint operating companies and the citizens of South Sudan that the blocks 3 and 7 oil fields are safe and secure and... operations continue normally,” Dhieu told reporters at a news conference in Juba on Thursday.

Dhieu was speaking hours after Chinese national broadcaster, CCTV, announced that hundreds of workers from China had been evacuated from the Upper Nile oil fields.

The reported mass evacuation came after the armed opposition urged oil workers to leave, ahead of a rebel offensive on Palouch, the main processing center for South Sudanese oil.

Dhieu flatly denied that oil workers have left the fields in Upper Nile.

"There is no evacuation that has taken place," he said. "The whole of the workers are on their duties.”

The Dar Petroleum consortium also dismissed as baseless the reports of mass evacuations.

If the rebels were to shut down oil facilities just at Palouch, they would shut down all of South Sudan's remaining oil. It's really a critical choke-point in the conflict for the government's revenues,

​"All of the staff and all the workers are in the oil fields. So there is nothing like the evacuation plan because that was not in the area, it was not close to the area,” said Dar Petroleum spokesman Mayar Mayar.

But Luke Patey, a researcher at the Danish Institute of International Studies and author of a book on South Sudan's and Sudan's oil-steeped history, disagreed with Dhieu and Mayar.

Citing the CCTV report, Patey insisted there was a mass evacuation from the oil fields in Upper Nile and "skeleton crews of Chinese, other foreign and South Sudanese staff are maintaining minimum production at the oil fields."

"It's quite a severe event because the fighting in Upper Nile has never gotten so close to the oil fields," said Patey, author of The New Kings of Crude, which chronicles the history of foreign oil companies in Sudan since the 1970s.

No oil from Unity state fields

Patey said that since rebels loyal to former vice president Riek Machar overran the main oil fields in Unity state, shortly after the start of the conflict in December 2013, all of South Sudan's oil has come from Upper Nile state.

Palouch is of particular strategic importance because "all the remaining oil from Upper Nile state - so all the remaining oil in South Sudan - goes through Palouch. It's a big processing center," Patey said.

"So if the rebels were to shut down oil facilities just at that one location, at Palouch, they would shut down all of South Sudan's remaining oil. It's really a critical choke-point in the conflict for the government's revenues," Patey said.

South Sudan has been called the most oil-dependent country in the world, with nearly all of the government's revenues coming from oil. But since the country plunged into conflict 17 months ago, the amount of oil South Sudan has been able to produce and export has been cut almost in half, from a peak of 360,000 barrels a day to less than 170,000 barrels.

June export predictions

Analysts predict that oil exports will fall by nine percent in June compared to this month.

Dhieu admitted the government is getting less revenue from oil, but blamed the shrinking revenue stream on the global fall in the price of petroleum, not production cuts brought on by the fighting in South Sudan.

The National Assembly’s Energy and Mining Committee chairman, Gatwech Lam, agreed that output has not been cut because of the recent uptick in fighting in Upper Nile state, but "simply because of the technical arrangement within the company in Palouch." He did not elaborate, but did say that output fluctuations "are nothing new" in the oil industry.

Patey agreed that the fall in output could not be blamed on the recent surge in fighting in Upper Nile. He said the impact of those clashes has yet to be felt.

"We should expect in the coming months for production to fall at an even quicker rate," Patey warned.

Petroleum Minister Dhieu took the opposite view, saying he is optimistic that production will begin to ramp up again, particularly as fields in Unity state are brought back onstream. Lam was also upbeat about revenues from oil, noting that the price per barrel is moving up again.

Patey also had a long-term, positive outlook for South Sudan's oil industry. He said there is still a great deal of room for expansion and foreign investment that would eventually boost South Sudan's revenue stream.

"There's still a lot of territory in South Sudan that needs exploring, particularly in Jonglei state, and the oil fields in Upper Nile and Unity need a lot of secondary investment to get production back up," Patey said.

"But both of those activites - serious oil exploration and secondary investment in existing oil fields - require peace, require stability, require companies to invest hundreds of millions of doillars without seeing an immediate profit. So until that environment presents itself, we're going to see production maintained at this low level - underneath South Sudan's real potential," he said.

Karin Zeitvogel reported from Washington, D.C.