Sudan Becomes A Major Source Of Sweet Crudes; May Produce Over 1.15M B/D By 2010:.

Sudan is turning out to be a major oil province and may soon become a producer of natural gas. Its crude oil production, mainly involving sweet grades, is expected to increase to 650,000 b/d in 2006 from 500,000 b/d, Minister of State for Energy & Mining Angelina Teny told the Sudan Development Programme Summit in Dubai on Feb. 13. A member of her team subsequently told APS Sudan's production will rise to more than 1.15m b/d by 2010.

Ms Teny told the conference participants that Sudan now had a crude oil pipeline capacity of 1m b/d. Seven of its 21 blocks are producing oil. Two other blocks, one in Northern Darfur and another in the east, are under negotiation.

PetroSA of South Africa was expected to sign an exploration and production sharing agreement (EPSA) at the end of February with the state-owned NOC, Sudapet, for Block 14 in the north. PetroSA will operate the block and the 2D seismic survey and microbial geochemical sampling will be conducted in mid-2006. The company has shot a gravity/magnetic survey and identified two promising basins, Mourdi and Misaha.

Khartoum hopes to exploit offshore natural gas discoveries close to Port Sudan. Ms Teney told the Dubai conference: "We want to hear from people keen to explore for natural gas" (see following pages).

The global perspective for petroleum could not have been better for those EPSA holders from Asia which are producing oil in Sudan, as world prices for sweet crude oils are over $60/barrel. Saudi Arabia's oil industry on Feb. 24 came close to the most serious terrorist attack in its history when suicide bombers targeted the Abqaiq processing plant, the world's biggest oil producer. The attack, later claimed by a local branch of al-Qaeda, did not interrupt oil production or exports but oil prices jumped amid fears that terrorists were planning a new offensive in their fight against the industry.

Abqaiq is the nerve centre of the world's oil trade. Damaging it would be unleashing a hurricane that engulfs the world. Within days all governments would step in to curtail oil consumption in a co-ordinated effort.

The attack involved two cars laden with bombs. Lt-Gen. Mansour al-Turki, a Saudi Interior Ministry spokesman, said the cars were stopped and then exploded as they tried to ram the gates of the facility's outer fence. However, western oil industry executives were on Feb. 25 quoted as having been told by Saudi oil officials that one of the cars got through the first security perimeter, leaving it just one mile from the huge facility before it exploded under heavy gunfire from the guards. Three Saudi guards were killed along with the attackers, Dubai-based al-Arabiya satellite TV reported.

April WTI on the New York Mercantile Exchange (NYMEX) jumped $2.37/b to $62.91/b, and London Brent rose $2.06 to $62.60/b.

Abqaiq processes two-thirds of the kingdom's crude oil output of 9.5m b/d and is a critical artery for exports which supply more than 10% of the world's needs. Its Interior Ministry said: "The damage was only limited to a fire, which was brought under control immediately. Production operations were not affected". The fact that senior Saudi officials, including the kingdom's oil minister, were so quick to comment made it more likely that the attack had been serious. The Financial Times on Feb. 25 quoted Muhammad-Ali Zainy, analyst at the Centre for Strategic Energy Studies, as saying: "The terrorists were successful in penetrating the secure area. Saudi...protection is not as solid as we thought".

Sudan's Oil Production System: Sudan's light/sweet export crude, the Nile Blend, is particularly popular in China, India and Malaysia. The crude oil is 33[degrees] API with a sulphur content of 0.04%. It has low metals content. China, the world's second largest energy consumer and oil market next to the US, is pinning its hopes on the oil prospects in Sudan. This is the site of China's largest overseas oil production. Its largest state-owned oil group, China National Petroleum Corp (CNPC), has recently started up its second biggest group of oilfields in Sudan.

There are three main oil production centres in Sudan under further development and which will enable the country to pump more than 1.15m b/d by 2010:

The Grand Heglig and Unity fields in Blocks 1, 2 and 4 in the centre of southern Sudan, are producing about 460,000 b/d of the Nile Blend, up from 350,000 b/d in late 2004. The output is exported through a 1,540-kilometre pipeline to a terminal at Port Sudan on the Red Sea. The developing consortium, Greater Nile Petroleum Operating Co. (GNPOC) is owned 40% by CNPC, 30% by Petronas Carigali Overseas of Malaysia, 15% by ONGC Videsh of India (which bought this stake from Talisman Energy of Canada in March 2003 for $771m), 5% by Sudapet, 5% by Gulf Petroleum involving Qatari interests, and 5% by Al-Thani Corp. of Dubai. With ONGC acting as E&P operator and CNPC operating the export pipeline, GNPOC hopes to raise its production to more than 500,000 b/d within 2006 or next year.

Petrodar Operating Co. has developed four big fields in Blocks 3 & 7 in a $1,500m project. It is owned 41% by CNPC (operator), 35% by Petronas, 8% by Sudapet, 6% by Sinopec, 5% by Gulf Petroleum and 5% by Al-Thani Corp. Petrodar came on stream this month at the rate of 75,000 b/d, which will be rising quickly to 125,000 b/d and reaching 150,000-200,000 b/d by end-2006. An executive working on this was on Feb. 15 quoted by Dow Jones as saying: "It will be good to sustain 150,000 [b/d] this year".

The export crude is called Dar Blend, a heavy/sweet grade which is acidic with an acid number of 2.4. It is likely to sell at around dated Brent minus US$7/b. The European trader Vitol is marketing 100,000 b/d of the blend. On Feb. 6 Argus said output of the Dar Blend would rise to 200,000 b/d by June and 350,000 b/d in 2007.

In its Feb. 15 report, Dow Jones said the executive spoke to it on condition of anonymity "because he was not authorized to speak to the press". The project's maximum capacity will be around 300,000 to 350,000 b/d, Dow Jones quoted the executive as saying. He did not specify a timeframe for the launch, saying the entire production and export system was then undergoing testing. Dow Jones quoted a Sudanese state oil official as saying he was hopeful Petrodar production could reach 250,000 b/d this year.

The Petrodar oilfields - Palogue, Adar-Yale and Agordeed - are located about 650 kilometres to the south-east of Khartoum. Although CNPC had promised to develop them at top speed to produce 200,000 b/d from mid-2005 and 300,000 b/d by end-2006, the project has been delayed due to unexplained technical problems. These fields lie in the Melut Basin, a prolific area.

China's No 2 state oil giant Sinopec farmed into the Petrodar consortium in 2004 with a 6% stake. Now Sinopec is on the look-out for additional E&P investment opportunities in Sudan.

Petrodar has had a 1,400-km crude oil export pipeline built to a Red Sea terminal near the existing one at Port Sudan.

The oilfields in Blocks 3 and 7 are said to contain about 3,700m barrels of oil, mostly recoverable. It is said unofficially that Sudan's total recoverable oil reserves may eventually exceed 5,000m barrels.

El-Foula Block in western Kordofan held 100% by CNPC which is the operator for Petrodar and this tract, is being developed to produce 300,000 b/d by 2010. The block is located to the west of Grand Heglig fields and is believed to contain more than 1,000m barrels of recoverable oil.

CNPC is to have a spur line to link up with the GNPOC pipeline for export. It will also have a 730-km, 200,000 b/d pipeline from the block to the Elgaly oil refinery near Khartoum, a 100,000 b/d plant which has been expanded from about 58,000 b/d as a 50-50 venture between CNPC and the government.

These three main production systems are creating the infrastructure needed for blocks in remote areas to become more attractive to E&P investors. But the three Asian companies already involved are all eager to raise their E&P investments in Sudan and too aggressive to let foreign competitors take up any of the prospective areas to be offered by the Khartoum government in the coming years.

Abu Gabra and Bashair fields in Block 6 are producing over 40,000 b/d. They were brought on stream in 2004 by CNPC at the initial rate of 10,000 b/d. The fields lie in the west of the Grand Heglig and Unity structures. CNPC owns 95% of the company developing this block, and Sudapet holds the remaining 5%. The output from the two fields is sent to the Elgaly refinery near Khartoum. But Block 6 is relatively small compared to the others which contain large oilfields.

Oil production in Sudan has risen quickly since mid-1999, when the crude oil export pipeline of GNPOC was completed. In that year, production averaged about 63,000 b/d, up from 12,000 b/d in 1998, 9,000 b/d in 1997, 5,000 b/d in 1996 and 2,000 b/d in 1995. The output rose to 174,000 b/d in 2000, 211,000 b/d in 2001, 233,000 b/d in 2002 and 255,000 b/d in 2003. By late 2004, production had exceeded 350,000 b/d.

Sudan's Energy Minister Awad Ahmad al-Jaz, who has been in this position for many years, is very ambitious for his country. Now he is focusing on major natural gas reserves found in the 1970s by Chevron of the US, as well as on Sudan's offshore oil prospects. There are also good prospects for natural gas in the offshore areas.

Aside from Heglig and Unity, fields in the Muglad Basin produce crude oils with a 33-to 42[degrees] API range, with only 0.5% sulphur content. Most of the crudes are highly paraffinic, which require heating to maintain the flow in the pipeline.

The Muglad Basin is part of a huge Cretaceous system extending across central Africa and includes the Doba Basin in Chad plus oilfields in southern Sudan.

In August 2001, in recognition of Sudan's growing significance as an oil exporter, OPEC granted the country an observer status at its meetings. But Minister Jaz has made it clear he is not particularly keen on getting Sudan to join OPEC as a member.