142 thE sudan handbookof oil reserves near the border, they have questioned the low prices
received for some shipments of oil (especially Dar Blend). There have
been claims that the full details of oil marketing contracts may not have
been disclosed, and that the government is selling crude oil to traders at
below market prices. These remain unproven. Accusations of corruption
are extremely difficult to assess, given the variety of oil exploration and
production-sharing agreements, the diversity of oil grades and prices,
the problem of determining the proper shares of the federal, southern
and state governments, the fact that some oil is exported while some is
refined domestically, and the lack of clarity over ownership of the border
reservoirs. Finally, the economic prospects of Sudan’s oil sector have
been clouded by national and international political risk. US sanctions
and a US-led divestment campaign against Sudan, motivated largely by
the ongoing crisis in Darfur, have had some effect. They have kept many
of the big Western firms out of the country – Marathon of the United
States, for example, was forced to sell its stake in Block B. Some services
and engineering companies have also withdrawn, such as Britain’s Weir
Group and Rolls Royce. Other firms have sought to remain in the country
and deal with the divestment campaign by improving their record on
corporate social responsibility. Nonetheless, the net effect has been less
competition within the sector for contracts and concessions, which is
likely to have reduced efficiency and cut into government profits.
On a local level, political instability also has the potential to disrupt oil
production. Blocks 1, 2 and 4 include volatile north-south border areas,
such as Abyei, the scene of serious fighting in mid-2008. Similarly, Block
6 has seen rebel attacks across the border from Darfur. Moreover, across
the country, there is evidence that some local communities, resentful of
the lack of benefits they receive from oil production, have begun to take
action against the operators. In late 2008, for instance, nine Chinese oil
workers were kidnapped in South Kordofan, and some were killed.
Although the oil companies operating in Sudan are unlikely to abandon
their existing investments, security concerns could deter new investment
and upgrading of existing oil infrastructure, especially in an environmentThe Sudan Handbook, edited by John Ryle, Justin Willis, Suliman Baldo and Jok Madut Jok. © 2011 Rift Valley Institute and contributors of falling international oil prices. Uncertainty over the future of southern
(www.riftvalley.net).