South Africa on Monday signed a deal for the exploration and production of oil in South Sudan, as part of a $1 billion investment in the conflict-torn nation’s struggling oil industry.
The deal will see South Africa’s state-owned oil company, Strategic Fuel Fund (SFF), and South Sudan’s Nile Petroleum Corporation, explore an area of 31,000 square kilometres known as “Block B2”.
SA Energy Minister Jeffrey Radebe described the agreement as “a great deal” for both countries.
Exploration will begin immediately, and is expected to continue for six years.
South Sudan has an estimated 3.5 billion barrels of oil with only 30% of it being explored, Petroleum Minister Ezekiel Lol Gatkuoth said at the signing ceremony.
The country has the third-largest oil reserves in sub-Saharan Africa, according to the ministry.
At its peak, oil production in South Sudan was at 350,000 barrels a day, however production has been crippled, with oil fields severely damaged by almost six years of war.
A September 2018 peace deal has helped revive production, which has gone from around 155,000 barrels per day (bpd) at the end of last year, to current figures of 175,000, said Gatkuoth.
He said the government was aiming to reach 200,000 bpd by the end of 2019.
The oil sector’s revival was a key part of the peace deal mediated by Sudan, whose economy also suffered from the slowdown in oil output to the south.
South Sudan’s oil sector is currently dominated by Chinese and Malaysian oil companies, while companies from Russia and Nigeria have also signed deals to explore new oil blocks.
South Sudan achieved independence from Sudan in 2011, but remained heavily dependent on its northern neighbour’s oil infrastructure – refineries and pipelines – for exports.
The agreement with South Africa is part of a deal signed in November 2018 that will see Pretoria invest around $1 billion in the oil industry, money that would go towards building a refinery and pipelines as well as oil exploration and training of workers and engineers.