South Sudan oil sector reforms to attract investment

Daniel Awow Chuang, undersecretary at the South Sudan Ministry of Petroleum Image credit: Uganda International Oil and Gas Summit

25 August 2020 – Since independence in 2011, the Republic of South Sudan’s economy has been dominated by the hydrocarbons sector. Oil production remains central to the government’s fiscus, providing almost all the administration’s revenue. This dependence on the oil sector has seen increasing efforts by the government to diversify the economy, but also to consolidate and strengthen the industry. The Ministry of Petroleum is driving change in the national government and has implemented a series of reforms.

According to Daniel Awow Chuang, undersecretary at the South Sudan Ministry of Petroleum the starting point is legislation. “We want to improve the oil sector by introducing regulations in operations, the environment, employment – in everything, as it’s a very big industry. Every aspect of it has to be regulated. Regulations will provide us with the tools that will regularly be used, they will guide investors, service providers and operators in the oil and gas sector,” says Chuang.

Following an investigation ordered by President Salva Kiir Mayardit in 2019, South Sudan has also ended the controversial practice of pre-financing deals done directly with oil traders. Selling crude oil on the open market means it is now a competitive process, which greatly benefits the country as oil can be sold at premium prices. Previously it was offered at discounted prices of about 10%. All these transactions are now openly declared in the Ministry of Petroleum’s annual marketing report, in an effort to improve transparency.

In terms of personnel, the ministry has assessed deployment to ensure the right people are in the correct positions. The aim is to increase efficiency, professionalism and productivity by restructuring and reorganising the relevant departments. There is also a lack of local technical expertise in the oil industry. Chuang says this is being addressed, “We are developing a training centre, together with a new data centre. These are both key to providing an environment conducive to training and exposure. We plan to finish the training centre this year and start courses next year. The focus will first be on key areas where we lack expertise, and then teaching will gradually expand.”

Chuang believes training will also help improve local content, another focus area for the ministry. It has enacted new regulations to ensure local companies are contracted to provide services in the oil sector. The regulations aim to empower these companies to become more active in the industry, thereby improving South Sudan’s economy by preventing money from leaving the country. Chuang says local companies have sufficient capacity, capabilities and skills to service the oil sector. Foreign companies are also required to employ local labour, which will benefit both them, and South Sudan. The government expects local companies to strengthen the oil sector in some of the following areas – pipeline manufacture and maintenance, steel mills, recycling, waste management, supplies and earth moving.

South Sudan’s government believes these concrete actions it is taking to reduce bureaucracy and reform the oil sector, will not only benefit the country but will make it an even more attractive prospect for international investors.

 

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