Economic disaster for South Sudan, its oil now sells for only $20-25 a barrel!!!!

Various media sources, DEC/22/2014, SSN;

A looming economic disaster is predicted for the failing nation of South Sudan now enduring its second year of a national civil war and its oil is selling at what traders call the lowest oil prices IN THE WORLD, AT ONLY $20 TO $25 A BARREL.

The reasons are attributable obviously to the rapidly falling oil prices worldwide but also more importantly due to poorly conceived and what can best be called as short-sighted polices of the current president Salva Kiir’s government such as the unfavourable pipeline contracts with the Khartoum government and other oil contracts with foreign countries and companies or individuals.

South Sudan is surely to become one of the biggest casualties of the oil crunch. OPEC members specially led by Saudi Arabia as its biggest oil exporter, have decided to keep pumping oil at their current production levels as a way to counteract the United States shale oil boom, driving down oil prices.

Reportedly, oil companies in some new shale regions in the US and the tar sands in Canada are also realising prices significantly below international benchmarks because of a lack of pipeline or rail capacity to transport their production. But traders said none were making as little as South Sudan.

Against the Brent, the North Sea benchmark selling at around $61, the extremely low realised price is partly due to the low quality of South Sudanese crude.

But most importantly, the South Sudanese oil is sold cheaply due to an ill-advised, ill-fated and hurriedly made decision that was agreed upon by Kiir’s government to introduce a fixed payment for the use of a pipeline that runs north through neighbouring Sudan, rather than a sliding scale linked to global prices, as the industry favoured.

“The lack of a sliding scale is a big mistake,” says a South Sudan-based oil executive. “They are making a very small amount of money.”

In 2012, the governments in Juba, in the south, and Khartoum, in the north, signed a deal for the use of the pipeline running from southern oilfields to Port Sudan on the Red Sea after months of negotiation to secure South Sudan’s independence.

Against the advice of the industry and despite the memory of an oil price crash in 2008-09, during the global financial crisis, Juba government of president Salva Kiir agreed a fixed payment.

In effect, the government banked on oil staying at $100 or more a barrel and pledged to pay $11 per barrel for the use of the pipeline plus another $15 a barrel as compensation to Sudan for the loss of oil income after independence.

The package was seen as an expensive political necessity to secure independence from the Khartoum regime after decades of war. But international officials say the decision to back a fixed fee, rather a sliding one linked to prevailing international price, “is now unravelling”.

The International Monetary Fund estimates that oil accounts for 95 per cent of the South Sudanese government revenue and forecast that the African country’s fiscal deficit will balloon to 12 per cent of its gross domestic product next year.

“Developments in the oil sector in South Sudan constitute a quadruple whammy . . . the government of South Sudan is facing the severest of fiscal contractions,” said an international official who asked not to be named.

South Sudanese revenues have now fallen to about $100m a month, equal to an oil price of about $20.5 per barrel based on output of 160,000 barrels a day.

“They are squeezed,” says the same international official.

Oil executives believe South Sudan could become an example of how falling oil prices can exacerbate political risk as countries are forced to slash budgets.

The US Department of Energy said: “Geopolitical risk may also be elevated because of lower government spending”.

Oil production in the world’s youngest country has more than halved since civil war broke out last December. Oil executives and diplomats say a return to full production is unlikely without a peace deal between the warring factions.

Unfortunately, at the never-concluding so-called peace talks between the Kiir government and Machar’s rebels, the government has been accused of borrowing heavily to execute the current civil war and against the future well-being of future generations of South Sudanese.

This accusations came from the rebels after the government refused to to disclose its national debt or how much it owes to investors and foreign countries. Billions of dollars have allegedly been borrowed by the Kiir government and with the prevailing rampant corruption in the country, most of these monies have allegedly ended in the private accounts of those in government and the military generals. END

18 Comments

  1. Eli says:

    Writer
    Thank you for this economic update and detailed analysis. This is a good news for us in the opposition. South Sudanese citizens in general have never and are still not benefiting from any revenues from this bogus so-called oil productions in the new nation anyway.
    HOW COULD ANYONE BENEFIT IN THE HANDS OF THE ILLITRATE STUPID EMPTY MINDED JENGE KIRR REGIME FULL OF IGNORANT IDIOTS? Instead the little the corrupt regime in Juab got was embazzled and stollen by those crooked criminals in dinka-kirr lead pacts of thieves. Everybody in South Sudan knew this was coming, and now we shall make it even worse by closing down the the main highways in particular Juba’s lifeline supply of unworthy trades routs of Nimule- Juba highway.
    2015 IS THE END OF KIRR’S REGIME. This is their Christmas gift MORE BAD NEWS, merry Christmas Juba-kirr.

    Reports on sudantribune.com said, there’s huge panic in Juba city during this christmas period and the regime is aware of the looming dangers on its doorsteps, that itself is part of the war campaigns.
    Juba is our prime TARGET, WE URGE OUR FELLOW CITIZENS TO BE VIGILANT, WE ALSO ASK OUR SUPPORTERS TO GET READY FOR THE WORSE, WE MUST DO WHATEVER IT TAKES TO BRING DOWN THIS GENOCIDAL REGIME ASAP.
    We wish you a Merry Christmas and Happy New Year
    SSNLF
    Eli Wani

  2. Bol says:

    Dear Editor,
    This could be a blessing in disguise…. Set up oil refinaries, cut down on imports and boost domestic production… (The tragedy is not that things are broken, the tragedy is that things are not mended again ) Alan Paton. Cry, The Beloved Country.

  3. False Millionaire says:

    That could not have been unexpected.This is just the beginning becouse now a-days,oil is discovered almost everywhere on earth.Even China may have it’s oil reserves in it’s territory one day.Who should be obliged to buy oil from another country then when it should be available on one’s own backyard?

    The true value of oil was fast money making that could permit a selling country to buy n import equipments for development of it’s human n none petroleum resources like agriculture,infra structure,transports,health care n education.China has achieved much of this already without oil n the collapsing oil business is a wonderful music tune to china.Dr John Garang’s thinking about the value of development of agriculture by use of oil revenues,so far as RSS has fresh waters n fertile soil,will be remembered tearfully for a very long time.In much thesame way,the wasted vast oil revenues by the SPLM/A elite n the tragedy the have provoked that has caused detruction,suffering n loss of many lives will be regretted for life.That’s becouse the protagonists are struggling for power in order to control oil revenues.Now with the collapse of oil prices,if Juba wins the war,it would not have oil money to enjoy.If it’s the SPLA-IO or the G11 who wins the war,they would have the power over the country but without oil money.Hard times are ahead n too unbearable conditions of suffering would push human rational limits in RSS to extreme.In such context,extreme poverty would push weak hearted men into selling half pair of their testicles to needy sterile wealthy men n others would sell their half pair of kidneys to needy wealthy sick people.Those with two eyes would be forced to sell off one eye.That’s what it is to dig one’s own grave.It’s a hard lesson to take but yet it’s just another natural fate God allots to the fools.Merry Christmas n may God have mercy!!!

  4. AGUMUT says:

    Editor
    Thank you so much, $ 100 million per month still good for that small population.

    • Tangata Riri says:

      Agamut:

      Taking this $100m number at face value, discounting debt servicing liability (which GOSS refuses to disclose) and doing a little maths, that’s means less than 50 cents USD per citizen per day (assuming a population of 8m citizens).

      Looking at 2014/2015 budget – government salaries & security expenditure account for around 75% of government expenditure. This leaves something like 13 cents per citizen per day for service delivery.

      What services can be provided or sustained for 13 cents per day?

      Another way to look at it is that our country has only $25m per month available to invest in infrastructure, health care, education, business stimulus etc. This $25m needs to service the needs of all 10 states. That’s around $2.5m per state. The actual value is likely to be much less.

      How much does a pickup truck cost? How much does a bag of cement cost? How much does a liter of fuel cost? How much does a course of antibiotics cost? $2.5m will not stretch far.

      We’re back to the dark ages I’m afraid. We’d better stop the anti-UN rhetoric because they and the NGOs will be delivering the services our government won’t be able to afford for the foreseeable future. 🙁

      • AGUMUT says:

        Please go visit oil producing countries? 24hrs service in order to survive because nobody can receive a gallon to drink. Most of South Sudanese will end up behind Bars if they put mind in National income.

  5. Tyson says:

    When you have underdogs stacked in your government, what do you expect? In 21st century, RSS is the only country to be ruled by illiterate, bogus and myopic hooligans. What do you expect the illiterate and criminal Jieng to do? They are not able to manage their luaks and surely, managing a state is an impossible uphill task. The Jieng colony ended up sucking government coffers and consequently killing the country. It is time the masses rise up to nail this rotten government. The Bukinabes have done it and yes, we too can remove these monsters!

    • J.Chin Jacob says:

      Tyson,
      Don’t you feel ashame in your dirty jungle called Equatoria?
      Did I read you well saying our government?
      When did you become in love with that word ”Our Government” after all this time you are known for your traitorous act, backsliddings, cowardness and for being a slave-minded bogus.
      Who told you that oil revenues is/was the target for South Sudanese patriotics and don’t you know that this country you are yelling and struggling to get was liberated without money or food sometimes?
      Fyi, we are not food lovers aka nyamnyam like you, we are not use to a refuge life, we don’t have dual or more citizenship like you in equatoria jungle and we don’t wish South Sudan to be choas because of tribalism and regionalism as appears in your daily songs but the time will come when we will be able to pick that dirty role of yours and am afraid you will go back to your refuge life for sure.
      Sharing a country with slave-minded folks like you is really a curse, i didn’t know that you are such animal-minded-creatures in South Sudan, you people are truly sick in your minds & hearts but that sickness of yours has only one treatment, it is just to flash you out of South Sudan back to where you truly belongs and leave us in peace.

  6. Editor,

    This is a good news for all South Sudanese citizens. It would even be much better if the oil price could fall even farther below $5 a barrel. This oil money has no use in South Sudan development. Only foreign military enjoy our debts and oil money plus some very corrupt officials in Kiir killer government.

    For example, allegedly Amum bought a house for $15 million cash in Nevada, USA in 2008 and Salva Mathok bought a six bedrooms house for $3 million cash in Nebraska, USA in 2007. Another good news is that Salva Mathok’ children are spoiled they all quit schools. None of his children is going to college.

    Thus, Salva Mathok’s stolen oil money is not benefiting his family in USA.

  7. Jake says:

    This is good news. The dictator’s downfall will be expedited. Especially now his own greedy community. They are now starving in greater Bhar elgazal. The war they thought would on kill the Nuers population is now killing them more. Let the oil prices fall further. The country is already at extremely high debt levels. So Kiir won’t be able to request any loans from anywhere else. This his downfall is imminent.

  8. Eli says:

    Dear Compatriots,
    The mad dogs in Juba are running around like headless chickens, that is not going to help them. We are not like them travelling on roads or sleeping in houses, but we are guerilla fighers and we move around in the night times. For them to think that they can find us in Eastern Equatoria alone or on Nimule-Juba road or in camps or settlement is stupid mistakes ( read sudantribune news for more).This is part of the tactics is to inflict psychological warfare as well as militarily we will make life as hell for this regime.
    V.P Wani Igga and Mobutu Mamur Mete, why are you running around spreading lies? You puppets will soon face the consequences if you dare to come after Gen. Martin Kenyi. Why don’t all of you puppets go back to your savior dictator Kirler and kiss his feet and sing: “BABA JA TERINGLI, BABA JA TERINGLI” !!!!!!!!!!! SHAME ON YOU PUPPETS. The rebels are not camping in Lobonok or Nimule, or on mountains, or hills or in those three abandoned training areas as you claimed WE ARE EVERYWHERE IN THE BUSHES AND INSIDE JUBA, WE WILL STRIKE ANYTIME.
    “RUJALKUM JAIIN MIN KULU TIJA, INTU EJIR MIN BELET NA, ZAMAN BITAKUM JA KALAS”. OR “YOUR MEN ARE COMING, YOU BETTER RUN FROM OUR LANDS YOUR TIME IS UP”.
    Eli Wani
    SSNLF

    • J.Chin Jacob says:

      Coward Eli Wani,
      Keep on barking, weeping, mourning, spreading your baseless propaganda but the truth is, you are such a chicken-hearted-human, I ‘ve never heard a frustrated coward begging the powerful government to leave the country so that he and the likes could easily come into power peacefully without a drop of sweat, what a joke in a country that has claims the lives of over two millions patriotics.
      Good luck liar!

      • Eli says:

        J.Chin Jobless
        You are Kirr’s prostitute. Remember you idiots, it took many decades for your bogus regime to win, because of your stupidity. What makes you think others wont defeat your husband kirr killer in a decade? You stupid pig. You are the ones running around like headless chickens, we will send you back to your mosquito infested swamps.
        Bad luck to you idiot.

  9. AGUMUT says:

    Few fools Southerners are dreaming of receiving monthly payment from National oil,dream on.Damns have to find work without delay otherwise they will end up in their REBELS Camps,please Oil money means to create jobs.

  10. Hope Sodogo says:

    Loss of Oil Revenue will create more problems for the common people. The common people in Juba will pay the price because there will be more killings because of robberies like never before. Grabbing government money made some content with stolen money. The same, in the absence of easy Oil will begin to rob and mug citizens for little cash at night,

    Most of the buglers in Juba do it in full uniforms and at gun point even when there was money to go around. If this crimes were committed when there was a lot of oil money, then I presume that the crime rate will be worse when the only source of revenues for the taking dries up.

    Kiir must go I agree, to pave way for a fresh start but I don’t think Marchar is the guy. Why? Because Marchar was one of the looters of public funds. when he was in the system. Marchar never complained about corruption or poor governance of Kirr. But when he was thrown out by the later, then, he began criticizing and distancing himself from the very system he helped to create Thus, to Machar, it was good and sweet when he was part and parcel of the criminal gang of ROSS.

    So let us not full ourselves by believing that when Kiir is gone and Marchar is in, things will be better but I must submit that this is false hope. Even as Prime Minister, with Executive powers, I doubt that Machar will bring democratic change. Rather he will make sure his wife, son and close relatives are holding some constitutional posts as before; he will also make sure he grabs enough $$ to maintain his future political dream.

    This is not a propaganda on my part against Kiir’s Dinka or Machar’s Nuer. No. Rather, this is a cry against the ill equipped leadership of S.Sudan.

    Therefore, S.Sudan citizens should demand the retirement of both principals (Marcher and Kiir). Both must go!
    If the Nuer want a Nuer in power let them choose another Nuer. I know of many more capable Nuer who can lead better than Machar. Likewise, if the Dinka still want power, let them choose another Dinka and there are many of them out there.

  11. Chief Abiko! says:

    Dear Mr.Hope Sodogo:

    Your comment is very much grateful!Take care! My dear fellow Southerner,forget about oil in the South Sudan!The oil eaters are not the Southerners themselves!The owners of the oil,South Sudanese,they are totally getting NOTHING at this point!!! The oil eaters,they are OUTSIDERS!!!!They are the one who are sucking the bloods of South Sudanese people to death!!!!!!!!!!!!!!

    What the government in the South Sudan is eating,theyare eating left out food. THE MORSELS!!!!!!!!!

    For politics,I am very far from it!!!!!!!!! I do not like to bother myself in this crazy killing at all!!!!!!Thank you.Happy The New Year 2015! Back to you in the forum to the audience!

    Missouri,USA

  12. Hope Sodogo,

    Dr. Machar complained about the corruption in the government that is why he fall apart with dictator. If Dr. Machar is a yes person like Wanni Igga, then he would still be a vice president now. For example, Machar accused Kiir of dismissing state governors while he was a vice president. Machar advised Kiir not to use decree as a way to get ride of opponents while he was a vice president. Dr. Machar also advised the president not to withdraw our military from Heglish in 2011 while he was a vice president. Dr. Machar was in the frontline in Hegline too encouraged soldiers to keep advancing while on other hand, Kiir asked the military commanders to withdraw without informing his vice president who was in the frontline too. What Kind of president is Salva Kiir? On March 7, 2011, Dr. Machar asked the parliament to pass two five terms for both president and governor positions, but the president disown Machar decision. Overall, Dr. Machar had done alot when he was a vice president.

  13. Eli says:

    Dear Editor;
    MERRY CHRISTMAS TO YOU AND HAPPY NEW YEAR TO YOU TOO SIR. YOU HAVE BEEN A TRUE VOICE TO THE VOICELESS, IT IS CREATIVITY AND TRUE NATIONAL SPIRITED HEROES LIKE YOU WHO WILL BRING REAL CHANGE TO OUR BROKEN NATION. WITHOUT ANY DOUBT 2014 WAS A DIFFICULT YEAR FOR OUR PEOPLE JUST AS 2013 WAS, BUT 2015 MIGHT BRING SOME PROGRESS, HOWEVER THAT PROGRESS WILL NOT HAPPEN WITH THE ATTITUDE WE CONTINUE TO SEE COMING FROM KIRR’S JUBA REGIME. THEY HAVE TO GO TO PAVE WAYS FOR TRUE LASTING PEACE.
    PLEASE KEEP ON THE GOOD JOB, WHEN THE MAJORITY OF SOUTH SUDANESE LOST HOPE AND NOBODY SEEMS TO CARE FOR THEIR OPINIONS, YOU MR. PETER WANKOMO BROUGHT HOPE BACK TO US.
    MAY GOD BLESS YOU AND ALL SOUTH SUDANESE FROM ALL WALKS OF LIFE
    Eli Wani

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