South Sudan Oil Outlook Hinges on Shaky Peace Deal, WoodMac Says

(Bloomberg) -- South Sudan’s optimism about restoring oil output to 350,000 barrels a day depends on the success of a recent peace deal and both are unlikely, according to Wood Mackenzie Ltd.

Crude production fell by about two-thirds to 130,000 barrels per day as blocks were shut-in during a conflict that erupted in late 2013, after a dispute between President Salva Kiir and his former deputy, Riek Machar. The two sides agreed in August to end fighting that claimed tens of thousands of lives.

“We think that the power-sharing accord agreed in August is unlikely to lead to long-term political stability,” Aislinn Clarke, a WoodMac research analyst for sub-Saharan Africa, said in a report. “We do not see a return to pre-2011 production levels without a more realistic and concrete peace deal between the government and rebels.”

The full extent of damage to field infrastructure as a result of the conflict is unknown, as well as the performance of reservoirs that were closed, she said. China National Petroleum Corp., Oil & Natural Gas Corp. of India and Petronas Bhd of Malaysia are the main operators of South Sudan’s oil blocks.

Cash Flow

Two of South Sudan’s production areas yield Nile Blend, a light, sweet crude that could meet demand from Indian and European refiners as Iranian volumes decline. The government, which said last year it wants to restore output to 350,000 barrels per day, began restoring production in August.

South Sudan Oil Outlook Hinges on Shaky Peace Deal, WoodMac Says