Second chance for Sudan to restore good old oil days

It is not very common that a country tastes an oil boom, goes bust and then works yet again, pinning its hopes on restoring the good old oil days.
That is the case in Sudan.
It was in a brief span of 12 years where the country enjoyed the membership of oil exporters' club. It was not only an economic bonanza netting the country an income never seen throughout its history as an independent state, but more important a political one as well. Oil was one of the factors that helped in ending Africa's longest running war, though with a heavy price. Part of the deal was to give South Sudan the right of self-determination, which it exercised to create the newest country on earth a year ago.
Part of the price Sudan has to pay was the loss of 75 percent of known hydrocarbon reserves that went with South Sudan.
Again it is the typical stereotype oil image in many developing countries where rightly or wrongly it is accused of fueling civil wars, corruption and in the case of Sudan it even helped in pushing for South Sudan separation.
Under the 2005 Comprehensive Peace Agreement that ended the two decades long war between the two parts of the country, it was agreed that the South will get 50 percent of the oil produced there.
As such the simple logic goes for separation. If under unity the South gets 50 percent of what it produced, why not go solo and get the 100 percent of what it produces. Moreover, having oil provides the new country with a stream of hard currency income that gives the land-locked country some economic viability.
But more seriously Sudan's oil experience has mirrored a classic case of the resource curse, generally known as the Dutch Disease, where the oil takes the center stage of the political interest at the expense of other important economic issues.
Symptoms were all over; appreciating national currency, neglect of other productive sectors particularly agriculture and as a result growing import food gap. The case of Gezira agricultural scheme summarized it all. Once known as the biggest farm in the world under one management producing cotton as well as other cash crops, the scheme simply collapsed because of neglect and lack of focus.
Add to that the rising expectations of people to taste the dividend of the oil bonanza. And this usually comes favoring cities at the expense of rural areas — agriculture and farmers. One big outcome of this is the shot up in domestic oil consumption that has increased more than 200 percent to around 100,000 barrels per day currently. Part of the increase is attributed to what economists say is the suppressed demand.
During the tough years, consumption of oil products was kept at bay, but with the flowing and an increase of oil production, consumption shots up as well. The concrete example is doubling the capacity of Khartoum refinery to pump out 95,000 bpd.
One of the toughest challenges that faced Sudan after separation of South Sudan last year was how to secure oil supplies to meet domestic needs. Theoretically Sudan now pumps some 120,000 bpd that should be enough to meet that goal, but foreign companies still operating share part of that amount, which creates a gap that pushed finally the government to raise subsidies on fuel.
A move that was long overdue and it came with a typical expected political price in the form of anti-austerity demonstrations that has been witnessed by a number of Sudanese cities, though limited.
Last week Sudan announced results of its third bid round, where nine blocks from all over the country were awarded to different foreign companies with expected results of as early as six months as some officials said. In fact work in the awarded blocs is not new, some of them have been changing hands for several years. It remains to be seen how the new winners will demonstrate.
The new awards is part of an overall strategy that includes increasing production from existing blocs, namely blocs 6 and 4 in western Sudan as well as bringing on-stream bloc 17 and enhance oil recovery. Activities in these blocs are expected to bring the country's total production to 180,000 bpd toward the end of this year or early next year.
That should be enough to cover comfortably domestic needs. Fingers crossed, production should increase from these blocs in addition to what could come on-stream out of the new-awarded blocs and Sudan could be producing in terms of volume what it used to produce before separation of South Sudan.
But the main question remains — how to make use of the new lifeline of hard currency income to revive the agricultural sector that represents not only the backbone of the economy, but more important a source of income and job opportunity to bulk of population.
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