Total Talks in South Sudan Reach Impasse

Negotiations between the Government of South Sudan and a group of investors including French supermajor Total broke down last week when both sides could not reach an agreement to develop a prized piece of onshore oil and gas real estate. For several months, South Sudan had been trying to sign an exploration and production agreement (EPSA) on blocks B1 and B2 with a group that includes Total, UK independent Tullow Oil and the Kuwait Foreign Petroleum Exploration Company (KUFPEC). Government officials said they could not reach terms over the over the proposed exploration period and cost recovery limit.

“Following lengthy discussions with representatives of the company Total we have decided it is in the best interest of South Sudan to open opportunities to other potential investors,” said Ezekiel Lol Gatkuoth, Minister of Petroleum of South Sudan, in a statement. “We had hoped for a favorable outcome but we believe these large and highly prospective blocks need a fast and ambitious development program to achieve their full potential.”

In the statement, the Ministry also said that blocks B1 and B would now be open to direct negotiation. A delegation from the South Sudan Government will attend Africa Oil & Power in Cape Town to hold discussions with interested parties.

Total acquired Block B in Sudan but quit working on the license in 1985 following the country’s prolonged civil war. The company continued its claim on the block even after South Sudan declared its independence and a new petroleum bill absolved the country of any obligations to previous agreements. Total’s inactivity on Block B has been a major source of consternation amongst South Sudanese officials.

Following lengthy talks in Kampala, Uganda earlier this month, negotiations broke down over the proposed exploration period and cost recovery limit. Total, Tullow and KUFPEC proposed an exploration period of 12 years but South Sudan would agree to no longer than 6 years plus an additional two-year reconnaissance period. The companies also proposed a cost recovery limit of 80 percent compared to the Government’s position of 47 percent. Officials said the companies refused to provide justifications for the increase in cost oil.

“All the attempts advanced to narrow the gap and streamline the positions were in vain,” said a ministry statement.

Blocks B1 and B2 were once part of the much larger Block B, a 120,000 square kilometer area that was split into three licenses in 2012. The area is rich in petroleum deposits but has witnessed scarce activity. In March, Nigerian independent Oranto Petroleum Limited signed an EPSA)with the Government of South Sudan for Block B3. The area covers 25,150 square kilometers and has estimated reserves in place of more than 3 billion barrels.