AOP talks to Joseph Podtung, President of Sudd Petroleum Operating Company, about the company’s plans to restart production at Block 5A and how issues like security and export capacity have impacted operations.
Sudd Petroleum Operating Company operates Block 5A in Tharjath, which has a production capacity of 80,000 barrels of oil per day of high-quality Nile blend. Facilities are not currently operating due to conflict in the area. Production in Block 5A began in 2006 at 40,000 barrels per day and peaked at 54,000 barrels per day in 2009. By 2014, however, production was reduced significantly to 4,500 barrels per day.
SPOC is owned by Petronas (67.8 percent), ONGC Videsh (24.2 percent) and Nilepet (8 percent).
What are the operational updates for SPOC in 2017?
As a Joint Operating Company mandated by the shareholders to operate Block 5A, our main focus for 2017 is formulating a plan for the production resumption.
SPOC oil production resumption strategy is guided by three business enablers. First, it must be fit for purpose resumption plan with quick repair without compromising Health, Safety and Environment. Under the current low oil price environment, the second enabler is cost optimization where we are targeting Unit Production Cost at USD10/bbl. The most critical business enabler for SPOC is the uncapping of Block 5A oil production.
Security of our people is paramount. It is very unfortunate that Block 5A has been on production shutdown mode since December 2013 due to the security concern. However, we have seen positive effort from the government to address the security matters to support production resumption. This includes the visit by Hon. Minister of Petroleum, Amb. Ezekiel Lol Gatkuoth to the fields in Unity States (Northern & Southern Liech).
For 2017, we can see that there is already positive security assurance development in GPOC oil fields where their security assessment has started and is currently ongoing. The government also have increased the deployment of oil protection security in the oil fields. With the success of GPOC security assessment, there will be a ripple effect to SPOC fields and we expect to gain our security assurance by the end of 2017.
We anticipate with the continued security stability of the country, we will be able to resume production by 2018.
South Sudan currently has very limited export capacity, and is dependent on their pipeline through Sudan to export oil. How does this impact your operating abilities and what are your plans to overcome this obstacle?
Economically, we have limited option to export crude out of South Sudan due to the high Capital Expenditure and longer period required to realize any new export options. The best option in the current oil & gas market situation would be to flow through the existing facilities that will benefit all parties involved in the upstream and downstream activities.
Previously, prior to production shutdown, the crude oil export capacity for SPOC fields have been capped at 5% of GPOC/GNPOC production volume. This have led to capping of the maximum export volume to about 5,000 barrels per day, even though SPOC fields have capacity to produce a higher volume up 18,0000 barrels per day.
In order to overcome this challenge, we have already setup an Uncapping Joint Taskforce since 2015 involving all stakeholders in the Republic of South Sudan and Republic of Sudan. Series of engagement have been conducted since then to find the best resolution to uncap production from SPOC.
In view of the declining production volume from various fields, uncapping and increased production from the SPOC fields is essential for mutual benefit of all parties.
Regional integration and regional infrastructure is a key priority for South Sudan and the East African community. In your opinion, what projects need to be prioritized in order to better facilitate South Sudan’s oil and gas industry?
First and foremost, Security is essential for the future growth of the South Sudan Oil & Gas Industry. With security will come stability and with a stable country, more investors will be interested to participate in the South Sudan economic activities
Human Capital Development is also paramount for future growth. We must be able to have the right people with the right skills to support the industry. As such, we need to have a more structured capability building programs in the country through establishment of oil & gas training institutions as well as enhance interaction, integration and sharing of knowledge and expertise across all parties in the oil & gas industry.
In terms of infrastructure, a reliable transportation network for movement of goods and people to the fields either via land, via water or air.
Border Opening between South Sudan and Sudan is also essential will to facilitate the development of the industry in order to provide easy access to the ports and other facilities.
South Sudan is largely seen as one of the last remaining exploration frontiers for oil and gas. What opportunities for SPOC do you see for continued development and exploration in South Sudan?
The potential is certainly there, but of course we need to address a number of issues. As mentioned earlier, the production from SPOC fields have been capped all this while. SPOC have actually yet to reach the peak of our production potential. We currently have 4 Field Development Projects that have yet to be implemented due to the capping that could easily bring SPOC total production to more than 40,000 barrels per day.
Our current facility is designed to handle 80,000 barrels per day of production per day. As such, there is still a big room for SPOC to grow and support the industry.
In addition, SPOC facilities may be a potential to receive and process crude from other surrounding fields and export through our facility.
What advantages does SPOC have over new entrants to the industry in South Sudan, in terms of knowledge, experience, etc?
SPOC is among the Pioneer Joint Operating Company in South Sudan. We have been in business for quite a while. We have built good network and rapport with the Ministry of Petroleum in Republic of South Sudan as well as with Ministry of Petroleum & Gas in the Republic of Sudan.
The strong support from SPOC Partners i.e. PETRONAS, OVL & Nilepet, is proven from their continuous commitment throughout the past few years of production shutdown. It is demonstrated that we are supported by Partners who are genuine in wanting to develop the country’s oil & gas industry in the long term.
Should there be any requirement or expertise that is needed, we can easily tap our Partner’s resources which have operation all over the world.
What advice do you have for international investors looking to enter the industry?
The oil & gas industry in South Sudan is still relatively new with vast untapped potential and unique geological characteristics. International investors looking to enter the industry must be resilient in facing challenges. Patience is vital and they must be willing to endure and work hand-in-hand with other players to develop the industry.
One of the key challenge would be how to attract the support services that are necessary for more competitiveness. When you have more players, you are able to drive down the costs.