The Sudan Handbook

142 thE sudan handbook

of 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and engineering companies have also withdrawn, such as Britain’s Weir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 environment

The 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).