The Oil Revenues’ deal between South Sudan and Sudan: Does it make sense?

BY: Dr. Lako Jada KWAJOK, FEB/01/2016, SSN;

Today in Juba, the SSP (South Sudanese pound) plummeted to a new low with one US Dollar equal to 30 SSPs. It was down from one Dollar to 5.5 SSP nearly a year ago. Our national currency lost 545% of its value in a space of 10 months. It’s a rapid downturn of uncertain outcome.

The US Dollar has an inverse relation to the crude oil price. As crude oil prices continue to fall, the situation can only get worse with a stronger US Dollar and a rapidly diminishing value for the SSP.

It’s now very likely that crude oil prices could drop to the prices before the oil embargo that was imposed by the Organisation of Arab Petroleum Exporting Countries (OAPEC) in the aftermath of the Yom Kippur war between Arabs and Israel in October 1973. Then the price of crude oil was under 10 US Dollars per a barrel.

When we reach that, which is entirely plausible, only God knows what would happen to the working class in South Sudan. The layperson is feeling the impact of the drop in crude oil prices differently depending on where he or she lives in the world.

In Juba, the price of a litre of petrol soared from 6 SSP a month ago to 22 SSP today. While motorists are reeling from the high prices of petrol and diesel at the pump in South Sudan, their counterparts in the West are making significant savings out of low fuel prices.

Governments are creating more jobs; entrepreneurs are expanding their businesses and companies are hiring more workers. They are now smiling and laughing all the way to their banks as their fortunes are gradually getting bigger and bigger.

Right now a motorist, say in France which does not produce crude oil is far better off in terms of fuel expenses than his counterpart in South Sudan. Jesus! We do produce oil and yet our motorists have to pay more!

A memo issued by the South Sudan’s Petroleum and Mining ministry on 17/01/2016 regarding oil production which is 165,000 barrels per day reads, “We are left with no option at the moment rather than shut it down because it’s not feasible. We cannot sell the oil at a loss.”

But before the recent fall in oil prices, were we selling the oil at a profit? Let us examine the deal struck between the regime in Juba and the Sudan government in August 2013.

South Sudan agreed to pay $ 9.50 per barrel for the oil produced in Upper Nile state and $ 11.00 per barrel for that produced in unity state as transportation fees. The total charge made to $ 25.00 per a barrel by including the repayment of a 3 billion USDs compensatory package over a three years period.

Apparently South Sudan agreed to pay the Sudan a transitional financial assistance that is the average of the accepted oil transportation fees. It’s important to know for comparison that the greater Nile pipeline that transports our oil is 1,600 Km long.

At the time of the above agreement; crude oil prices were hovering between $ 41.00 and $ 42.00 per barrel.That means South Sudan was getting between $ 16.00 and $ 17.00 per barrel while Sudan was scooping a fixed $ 25.00 per a barrel.

Therefore, I don’t understand what the Ministry of Petroleum and Mining calls as, “selling the oil at a loss,” when it’s quite evident that it has been all along selling it at a significant loss.

Furthermore, Sudan’s Minister of Finance, Badr AL-Din Mahmoud told Sudan’s lawmakers that Juba failed to honour its commitments by not paying the transportation fees hence his government was forced to take its share in kind according to the cooperation agreement signed by the two countries.

No permission sought, and prior notification not given to our government – the Jallabas just helped themselves to our oil as they did before. It shows without ambiguity which country has got the leverage in the oil revenues issue.

The regime in Juba only has itself to blame for this unusual situation where the producer of a strategic commodity gets much less revenue than the “middleman.”

The August 2015 deal is a big blunder with tremendous negative consequences for the South Sudanese economy. It’s obvious that it resulted in loss of an immense amount of revenue that could have helped our economy.

Responsible governments do not negotiate and enter into such agreements without full knowledge of previous deals and experiences of other countries. Much of the relevant facts are in the public domain and accessible to everyone.

For example, Chad has been paying Cameroon 40.09 Cents per a barrel as transportation fees for its oil pumped from three oil fields in Doba, southern Chad to an export facility near the city of Kribi on the Atlantic shore. The length of the pipeline is 1,070 Km. It has been the case since the completion of the pipeline in 2003.

It was only on 30th October 2013 that the two countries agreed to increase the transportation fees to $ 1.30 per a barrel.

The Iraqi oil that is being pumped through pipelines from oil fields in Kirkuk to Baniyas (800 Km) and Ceyhan (970Km ) in Syria and Turkey respectively has comparable transportation fees to the Chadian oil.

In the USA, the pipeline that transports crude oil from oil fields in Alberta, Canada to Cushing in Texas is 4,924 Km long. The transportation fees are $ 3.78 and $ 4.54 per barrel for light and heavy crude oils respectively.

I don’t think the government negotiators were totally unaware of the above facts. However, their extraordinary leniency is quite puzzling. One would have expected them to rise above personal and party interests and focus on the interests of the country in the long term.

Three explanations could be relevant to why we ended up with such an unprecedented deal.

Firstly, the regime negotiators were negotiating while bearing in mind the need to preserve extra special relations with Sudan. They were our fellow countrymen in the past and could well be the same in future when the country is reunited again.

Therefore extreme leniency on the part of our negotiators is justified to alleviate the plight of our future fellow citizens who are suffering from a bankrupt economy like ours.

We should not underestimate the fact that Dr John Garang and many in the SPLM top hierarchy were and still supporting the idea of a unified New Sudan.

The former Federal Minister of Petroleum in the Government of National Unity (GoNU), Dr Lual Deng was quite vocal against secession on the eve of the referendum and we know he was not alone among the SPLM cadres.

It’s easy to understand why we were dragged into this unfair deal as the negotiators were likely to be his former colleagues who share similar views with him. When you add to that the insistence not to retire the names SPLM and SPLA to history museums and history books and the maintenance of strong ties with SPLM-N, things seem to fall into place.

There could be a line of thinking within the SPLM party that SPLM-N could one day ascend to power in the north with the facilitation of reunification and the realisation of the dream of New Sudan.

Secondly, we are just witnessing the result of unmerited appointment of people in high positions in the government based on tribalism and nepotism. It’s obvious that our negotiators were not up to the task.

The portrayal of our politicians as amateurs and buffoons by the Jallaba’s media could have some truth in it.

Thirdly, it must be understood that the regime negotiators were under enormous pressure to strike a deal at any cost because they needed money quite badly. It was a pretty weak position to begin with in such negotiations and the other party was well aware of that fact. They were no match to the Jallabas who managed to dictate the terms of the agreement.

Crude oil prices are known to be extremely volatile. It relates to its geopolitical qualities and history has shown the use of it as a weapon at least once.

Therefore it’s quite risky to depend wholly on oil revenues and neglect the utilisation of other resources for an alternative source of income.

We have seen how Russia, which is a superpower, was on the brink of economic collapse due to falling oil prices and heavy dependence on oil revenues. The Russian Rouble lost 40 % of its value against the US Dollar within weeks and few months and the Russian economy is not yet out of the wood.

The problem is that you cannot know for sure how much revenue you will get the next day let alone next week, next month or next year. Hence you cannot have an accurate forecast of revenues in few years to come.

Economic plans need accurate or near accurate revenue projections and this is why you hear about a 3-years, 5-years or 10-years plans. Obviously, these cannot be based solely on oil revenues due to their inherent volatility.

Our negotiators gave the Sudan something it wouldn’t have dreamed of – actual revenues for the next 3 years. By getting a fixed amount of $ 25.00 per a barrel, it knows exactly how much revenue it will get in the next three years regardless of the volatility of the oil prices.

The only caveat to that is a drop in oil production which seems quite unlikely. The Sudan can start a 3-years economic plan using the said funds or allocate them to a major project like building a hydroelectric dam.

While the Sudan seems to enjoy its new-found fortune, we are running out of cash and rapidly heading towards total economic collapse. Our negotiators shouldn’t have agreed to a fixed transportation fees that high.

Last week crude oil prices fell to $ 26.00 per a barrel and we do know that our oil sells at a lower price. It means whatever oil sales we get will not be enough to pay the Sudan and South Sudan goes away empty handed.

Again they shouldn’t have relinquished our right to reduce the transportation fees unilaterally when there is such a drop in oil prices.
END OF PART ONE

Dr Lako Jada Kwajok

30 Comments

  1. Gatdarwich says:

    Dr. Lako,

    It is possible, the Jenges’ machine, SPLA-IG won’t hesitate, but hurriedly imposed reunification of North and South Sudan if their partners in crimes, SPLA-N take power from President Omar El Bashir.
    The highly incompetent-power-hungry-greedy-traitorous, killer NyanKiir, and the Jenges council of Evils have proven beyond reasonable doubt of capable and determined of betraying South Sudan’s national sovereignty for selves-survival period

  2. Wafa says:

    Just shows that South Sudanes like all black Africans are monkeys. Better to move your oil by road to Kenya, stimulating the economy and making some saving at some time. But Macher and Kiir are tribalists and do not have development plans.

  3. Dutajieng says:

    Now who do you blame for the falling prices gov’t or who? It is a US policy of crushing the world economies to make them less resistive to their demands but for brainless tribalistic south sudanese like this self-proclaimed doctor it will take them uncountable years to click wat a cursed country with such p’ple

  4. Deng Monymor says:

    Oil is going to be like cotton in 5-10 years time. Nobody will be using it. Everything is the design of the West and they are now busy planning (or already have in plan) how to create energy they can use to control others with it while our learned individuals, on the other hand, enmesh themselves into the game of blaming. Do they really see what will happen in 10 years time? Does what Dr. Okuk calls “Permanent Head Damage” (PhD) make our learned scholars think like Westerners or is their learning falls into standard of Colonial education where colonies were taught not to think but always have unending hate towards their own kinds?

    Deng

  5. GatCharwearbol says:

    Economy has rebelled. It is Nuer’s fault. If it is not, whose fault couldn’t it possibly be? Well, at least Kiir Mayar doesn’t feel the pinch, so it is none of his business. Let us brace ourselves for the worst if peace doesn’t bear any fruit, which most likely is the case. Beware Kiir, economy is planning a Coup and it is going to be ugly. Inform False Millionaire and Bol right away. It might be time to organize a private army to fight this hard-head called economic.

    • Deng Monymor says:

      GatCharwearbol,

      Kiir knows how to breed Nyanteer and so he is fine. However, the fate of those who don’t enjoy this muscle building nutrition is unknown. How will you survive, cousin?
      Deng

      • Nuer-Another Israel in East Africa says:

        Deng Monymor,

        That is the dumbest question I have ever heard. Have you forgot that we have been in the bush for the last 2 years and counting? How do you think we have been surviving? Put your thinking cap on.

        • Deng Monymor says:

          Nuer-Another Israel in East Africa,

          If that was the case, how come he rushed into signing the Agreement without reading its content? Remember, the Agreement was an imposed document cooked and finalized in the West for not saving South Sudan, but for the West’s interest. From our Latjor State’s analyzes then, Cousin, your survival in these bushes has a wide road leading to Pinyoudo refugee Camp.
          If putting thinking cap on is what it takes, do we not have a cowboy cap already?

    • Bol says:

      Gat..bol,
      Ha Ha Ha …..We are working on it…..Kiir Have to go, but you are not giving us a choice, he has to be in J1 or Dr Riek will step in….Take Dr Riek and his deputy out of the equation and Kiir is out too…They both bad for leadership of RSS….You don’t need a lot of Agany beef to figure this out, do you?

  6. martin L. says:

    Dr. Lako,
    Any decision made by incompetent Kiir regime doesn’t make any sense!!

  7. Bol says:

    Dear SSN readers,
    Our editor has responded to our request for accepting donation in order to keep our Newspaper running and do other more stuff necessary for Freedom of Speech. Being a very shy man, he puts up a very small link on top right hand side of the home page….It is hard to notice! I have taken it upon myself to spread the word, on pro pono basis …..Please donate what you can….Money….Honey or bush meat it will all help…..Thanks for your generosity

  8. Gatdarwich says:

    Bol,

    Please cousin, halt abusing our patriot Editor !

    Editor, will not and shall not appoints a natural born traitor of your likes to be his secretary of information!

    Bol, reminds Gatdarwich and other commentators as of when did the Editor appointed you secretary of information?

  9. False Millionaire says:

    Mr Gatcharwearbol,
    My only regret is the fact that,giving the events of 15th December 2013,the CIA and the yankees were too foolish to have chosen Dr Riak as the spring board to parachute them into RSS.With the blood staint in his hands from the events of 1991,he was as will never be the right man to mobilize the masses for the task.
    FYI my most dear friend,u can never succeed in anything on earth without americans backing u.
    The illusion of economic power driving Russia and Chine into inciting South Africa,Brazil among other developing countries into an idea of a developing countries’ bank,a conspiracy to undermine the international monetary fund that’s purely american one holding the world’s economy by the nick,what did the americans do about it?
    Every learned person u included understands all too well the american reaction.
    They stopped buying the oil from abroad and opted to produce their own.They have become the number one oil producing country in the world.And so without the demand,the prices of the oil fell.And so such heavy weight oil producing countries like Russia and Saudia Arabia are seeing their economy crumbling.Things will get worst with Iran’s oil ready to flow into the market.
    Under such stoney circumstances,what should u expect of a stone age backward RSS which leaders are mere thugs without any notion of ideas of peace and development in them?
    Hippos and crocos are as they will be in abundence in our marshes for many more centuaries to come.
    I am very confidant that me and my family will subsist to absorb the chock and see the end of the tunnel.
    But repent for those we have lost as a result of your miscalculation.
    The yankees will certainly come back.But let’s prepare to learn how to accommodate them without sacrificing ourselves!!!

  10. Itikwili says:

    Ya Dictor, the question you posed and are labouring to attend to is irrelevant at this critical point of this country’s history. isn’t it the case that the incompetence to negotiate, plan and direct the economy of this country’s worked to save us from the ongoing tyranny of the ethnic government run solidly by the jieng council of elders? Imagine a country run based on sound economic principles and money keeping coming, where would the rest of the 63+ tribes be when it is already mentioned somewhere how an individual in this warlord government has been using armoured tanks to primitively displayed as a show of force and power to grab chunks of land and calls it Juba 2 or 7? So you want this group to have all the money to fuel these tanks? what is the value of good economic planning when all the resources therein including the state infrastructures; the tanks, doscas, name them will be used to lync, terrorize and ethnically cleansed populations? do you really need more money in the hands of this ethnic government to continue with the killings in Yambio, Wonduruba, Mundri, Pageri, Opari, name them? What is even the use of this analysis when we all know we are dealing with a hijacked nation-state run by people whose culture is only to sit and receive? What efforts is the ethnic group making in the oil production if not only to wait for the Chinese to produce and wait for the money to come and swallow? run to the border in Nimule and Kaya to collect the ready made? At least nature and incompetence has worked in our favour; with the nearly no-economy the ethnic government has been wasting away every passing second!

    • Dr Lako Jada Kwajok says:

      Dear Itikwili,
      Thanks for your well-presented arguments. However, I disagree with some of your assertions. I like to think that competence is closely related to pragmatism and rational thinking. When these qualities are in abundance in a government, nothing can go terribly wrong. When a competent government commits heinous crimes against its people, it’s usually a sort of an anomaly. Examples are: Nazi Germany where a civilised society, led by a competent government with cutting-edge technology, committed genocide against the Jews. Also, we have General Franco of Spain who was a nation builder but his regime committed atrocities against his people. The incompetent government kills people directly by using lethal force and indirectly by lack of health services causing high mortality from preventable diseases and absence of economic development leading to famines and increased incidences of death from malnutrition.

  11. GatCharwearbol says:

    FM,

    “What should you expect of a stone age backward RSS which leaders are mere thugs without any notion of ideas of peace and development in them?”. You couldn’t say it any better. However, dwelling on the past will hold us hostage for ages to come. 1991 is a gone case and it shouldn’t hold us hostage. Now, the event of 2013 of which Nuer paid heavily will take us sometime to shelf it. So it is fitting to say that let us forget about development. You and your family have no choice except to deal with life and all its mud that its throw at every one. So be courageous. If Nuer could withstand the grueling 2 years and counting ;you couldn’t be a chicken enough to start shivering right now. Man up my friend.

  12. False Millionaire says:

    Gatdarwich,
    U and your race are only good for looting and spoiling others’ good projects.
    If u are jealous about the funds that will be contributed to finance SSN,just go hang yourself and leave Bol and the editor,the only citizen who has long taken the cross alone to provide our needs for freedom of expression.
    Selfish citizens like u will not be expelled from the forum if u don’t pay.
    But keep your mouth glued and leave the good work for others.There will be no shortage of contributors without u!!!

  13. Gatdarwich says:

    False millionaire,

    Contribution challenge?
    Inform Gatdarwich through Editor as to how much your traitorous Jenge’s b…..s have financially donated towards this website, and Gatdarwich will and shall promptly pay double that amount to the Editor-through PayPal period
    If you have donated “honey or bush meat”, then let Gatdarwich know where you live, so that “honey and bush meat” shall be urgently delivered to your door!

    Ngundeng bless,

    Patriot, Gatdarwich

    • info@southsudannation says:

      Gatdarwich,
      I have abundantly made it clear why and what the call for donation is for.
      Therefore, I wish and I strongly advice you not to take this issue to the direction which you are trying to steer it to.
      Also, this is a personal matter and as such, show some respect to all, including this editor and other South Sudanese or friends of the website.
      Editor

      • Gatdarwich says:

        Editor,

        No ill-intents or offend intended.
        Gatdarwich is just being brutally honest to the false millionaire and the likes period
        Your professional advice is well taken!

        Ngundeng bless,

        Patriot, Gatdarwich

    • Bol says:

      Gatdawrich,
      (your traitorous Jenge’s b…..s) …..Interpretation…Your traitorous Jeng’s Bol/ Bull Shit !? Who am I dealing with? a Bully, Disadvantageous Street Kid or a lunatic who is about to blow himself up anywhere for the delusional course of Ngudeng? FYI, the words traitor doesn’t fits me in all sense. Please grow up and learn some manners. I can be your mentor for free.

      • Gatdarwich says:

        Bol,

        Gatdarwich have culturally instill excellent manners, behaviors, and attitudes.
        As per my selection of words, I often and always merticulously selects and uses unambiguous terminologies that are descriptively can be proven of your likes’ inborn manners, behaviors, and attitudes(you are innately traitorous and deceptive by nature). Bol, It is not your fault, but it’s squarely the Jenges nhialic’ collateral mistake!

        Ngundeng bless,

        Patriot, Gatdarwich

  14. False Millionaire says:

    Mr Garcharwearbol,
    I get the impression that u are the fatest elephant bull among nuer masses.To do otherwise without u directing them is impossible.Even entering the gate of hell couldn’t really mean hell to them if it’s u ordering them into it.
    I am sorry to speak to u in french my friend.
    That must be why it’s still hard for u to understand that the CIA and the yankees have blackmailed u to jump into the mud miscalculating that u would see the end of the tunnel within two hours.Those two hours have turned out to be two years now and will soon become two hundred years.If u are really a human mineral,certainly u would have the patience to bear to fight for two hundred years.
    But u are chasing the wind because the CIA and the yankees are the likes of prostitutes who quickly shift to the side of those who may appear to represent their interests.
    Better never believe that the fate of Savimbi and the UNITA was a mere Hollywood comic strip!!!

    • Patriot, Gatdarwich says:

      False millionaire,

      CIA might be compelled to take decisive action against your Jenges kleptocratic-genocidal regime in Juba, given the way your traitorous uncle, killer NyanKiir and the lunatics-fanatics-Jenges council of EVILS run South Sudan affairs–like Jenges–Gongrial kraals.
      It is highly possible, cousin!

  15. GatCharwearbol says:

    Mr. False Millionaire,

    If you are aiming at repeating this lie often enough so it becomes truth, you are delusional. Blame the CIA as you want, but the truth is, it is Kiir Mayar and co conspiracy to get rid of the opposing group of Dr. Machar. No CIA involved here. you are just being paranoid thinking that American is after you when there is no such thing.

  16. False Millionaire says:

    Gadarwich,
    Every one knows that you and your likes have the big mouth to talk too much but end up doing nothing at the end.
    If u want to prove me wrong,do the work behind the door and keep your ananimity!!!

  17. Gatdarwich says:

    False millionaire,

    Gatdarwich is not joking, but talking really clean $$$$$$$$ period

  18. Hoiloom says:

    False

    They say if a lie is repeated over and over people will tend to believe it as a fact. I guess this is exactly what you’re trying here. There was no coup attempt but an assassination attempt on the life of Riek Machar. Keep living under illusion!!
    I think you’re only frustrated because the God of heaven rescued Riek and your project failed miserably. Now you have to deal with the same man you tried to murder three years ago. One advise to you and the other extremists like JCE do not attempt again because the Nuer will be sleeping with one eye open unlike 2013.

    Hoiloom

  19. False Millionaire says:

    Gatdarwich,
    Bravo.But I hope u will not disappoint.
    If u do,the same God of ngundeng who hates liars will turn u into a woman if u are a man and into a man if u are a woman.
    The ball is on your side sir.Good luck!!!

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