Sudan-Chad oil firm: a balance of needs

Picture: President Idris Derby of Chad

The recent Memorandum of Understanding signed by Sudapet, Sudan’s state- owned petroleum company and Chad’s state-run SHT is

The fact of the matter remains that both Sudapet and SHT are facing human capital shortage . With a 1.5 billion barrels oil reserve, Chad has began to increase production in its fields and working hard to boost daily production from 0.14 mb/d to 0.17 mb/d amid the new discoveries by the Chinese national Petroleum Company (CNPC).  Chad is in dire need of manpower to boost production in the oil fields, increase work progress in the new 300-km oil pipeline construction that will transport crude from koudalwa field to the Djarmaya refinery, being built by the joint venture of CNPC and Chad state-company, located north of N’Djamena. Idris Derby’s government has an urgent need to generate economic development in this Sub-Saharan Africa country.

Production increase; the need to boost the economy, and also the expulsion  of  TexacoChevron and Petronas of Malaysia from Chad  due to a  tax imbroglio that went sour which led to the firing in 2009 of then Chad’s Petroleum Minister, Mahamat Nasser Hassan and the ministers for livestock and planning created the beginning of manpower shortage in Chad’s burgeoning petroleum industry. The exit of TexacoChevron and Petronas was a move that many industry observers commented as a strategy to bring in the Chinese national company which Derby’s government felt was offering them better deal in terms of infrastructure development. Before the exit of the American and Malaysian company, about 60% of Chad’s production was the responsibility of the duo.

On the side of Sudan which has about 5.0 billion oil reserves and the third largest producer in Sub-Saharan Africa, Sudapet has began to sense the symptom of human capital anemia in its circle. Come July this year, South Sudan where most of Sudan’s oil fields are located is expected to secede and become Africa’s newest country based on the result of the January referendum.  First, most of the south Sudanese that work in the oil sector will automatically shift to work for the about to be formed South Sudan national Oil firm.  This depletion in manpower is what Sudapet is trying to strategically balance at a cheaper cost through mutual understanding with neighboring Chad. Secondly, it has become obvious that the economy of Sudan which to a good extent depends on the revenue from oil will be highly affected once the south secedes. However, both sides have a grip on each others throat. 

Oil accounts for more than 90% of government revenue in the south and about 40% of the government in the north. While the 40% of the revenue which the north generates from oil export helps to cushion development in the region, a further reduction in production and sales of oil will mean disaster for the north.  Juba will definitely be in jeopardy and economically devastated  if Khartoum decides to close the pipeline that transports crude oil from the south to the port in the north. It is this foreseen shortage in manpower and shortfall in its economic basket that north Sudan wants to forestall by engineering a quick marriage with Chad.

Above all, the creation of a joint venture oil company between Chad and Sudan will also be a monumental victory for China, who through its national petroleum company has succeeded in expanding the new china belt in Africa known as “SCAAN” (Sudan, Chad, Angola, Algeria and Niger). As a result of proximity, economic need and religious –cum-cultural similarity it is easier for China to woo Chad massively through a strategic alliance with Sudan. This new venture will give China a bigger opportunity to have wider operations in both countries which has already become visible.  Now about 45% of China’s crude supply from Africa comes from Sudan. With the expulsion of Chevron in both countries and the exit of Petronas in Chad, China has become the domineering foreign oil company..