Sudan Is To Have Major Oil Refining Ventures.

The Sudanese government is planning to expand the capacity of its oil refining sector from 151,700 b/d to 260,000 b/d. This will enable the country to become an important exporter of petroleum products. The existing refineries at Khartoum and Port Sudan will be upgraded and expanded so that each one of them will have a capacity of 100,000 b/d.

Sudan already has become a major producer and exporter of high quality of crude oil. Its output is expanding rapidly from about 360,000 b/d now to 585,000 b/d by mid-2005, to 750,000 b/d or more by end-2006 and to 1.15m b/d by 2010 (see Oil Market Trends of this week).

The upstream oil investors from Asia are the main developers of the downstream business in Sudan. These include China National Petroleum Corp. (CNPC), ONGC Videsh of India, and Petronas of Malaysia.

Sudan has been self-sufficient in petroleum products (except for jet fuel) since the June 2000 opening of the Khartoum Oil Refinery in the Elgaly area, 30 miles north of Khartoum. This is a 50-50 JV between the government and the state-owned CNPC - the latter being the biggest oil investor in Sudan.

The Khartoum refinery has a capacity of 70,000 b/d expanded in June this year from 58,000 b/d in 2003 and 50,000 b/d in June 2000. It produces benzene and butane gas for domestic consumption and export, as well as gasoline for local use.

A portion of the surplus gas eventually will be used in the production of electricity, according to government officials. Some of the power plants will be converted from burning heavy oil to natural gas.

There are also plans to develop natural gas in both onshore and offshore areas for local consumption. The government is preparing new incentives for gas E&P investment by foreign companies. There will also be incentives for foreign investors in gas-fired power ventures (IPPs).

Sudan's oil consumption averages about 70,000 b/d. This is likely to increase rapidly if the Khartoum government and southern rebels finally sign a peace treaty by Dec. 31, 2004, as was promised by a recent UN Security Council meeting in Nairobi (see News Service of this week's APS Diplomat).

Following the opening of the Khartoum refinery, the price of gasoline was reduced considerably throughout the country and the price of butane gas cylinders, which Sudanese use for cooking, dropped from $5.30 to $2.60.

In June 2004, the Indian government approved plans by ONGC Videsh for a $194 million project aimed at building a 450-mile petroleum products export pipeline running from the Khartoum refinery to Port Sudan. The project is to be completed in about 14-16 months.

The Port Sudan refinery, on the Red Sea, has a 21,700 b/d capacity. Its expansion to 100,000 b/d will make it an export plant.

CNPC is working to upgrade the Khartoum plant to 100,000 b/d by early 2006 at a cost of $340 million. Under a contract signed with the government in August 2003, CNPC is to build a 730-kilometre pipeline from the Fula oil E&P blocks in Western Kordofan to the refinery. The pipeline will have a capacity of 200,000 b/d.

Sudan has two other refineries - El Gily, with a nameplate capacity of 50,000 b/d; and El Obeid, with a capacity of 10,000 b/d. Plans in the 1990s to build a 25,000 b/d refinery at the Heglig field, in the South Kordofan state, have been shelved.

In March 2003, Petronas acquired Mobil Oil Sudan's oil distribution network for an undisclosed amount. Mobil Oil Sudan held a 20% share in the country's oil products market. Petronas also acquired three oil storage depots, at Port Sudan, Khartoum, and Elgaly.

Part of ExxonMobil, Mobil Oil Sudan had been in the country for many years marketing a variety of petroleum products. These have included gasoline, jet fuel, marine fuels and lubricants. Since April 2003 its operations have been under the name of Petronas Marketing Sudan. Petronas holds major stakes in oil E&P ventures in Sudan (see OMT of this week).

Another major player in Sudan's market for petroleum products is the Daud Abdel Latif (DAL) Group. This was established as a British company in 1952, when it bore the name of Sayer and Colley. This was later acquired by a local businessman, Daud Abdel Latif. The group, including a local distributor of petroleum products, now is diversified and the distributing division uses Shell fuels.

DAL is a marketer of Shell gasoline, diesel, lubricants and other products. The Shell Company of the Sudan Ltd is responsible for the sale of Shell fuels and lubricants throughout Sudan. Shell has a network of retail outlets in various parts of the country.

In August 2000, Sudan's National Petroleum Company announced plans to lay pipelines to supply Eritrea and Ethiopia with petroleum products from its Khartoum refinery. Eritrea has not yet benefited from Sudanese oil and relations between the two countries soured in April 2003 when Khartoum accused Eritrea of supporting Sudanese rebels in the eastern part of Sudan. Although Eritrea denies the charges, future trade relationships are unlikely under the current climate.

Sudan has plans to export oil products to fellow members of COMESA (the Common Market for Eastern and Southern Africa), including neighbouring Kenya. Exports may be delayed, however, by concerns over human rights issues in Sudan, and some Kenyan officials have called for a boycott of Sudanese oil.

In April 2002, Sudanese and Kenyan government officials announced that they were working on logistics for the construction of a new pipeline that would link oil fields in Sudan to the Kenyan port in Mombasa.

Under the COMESA treaty, trade within the zone is not subject to tariffs, which means that Sudanese oil products are to be cheaper for COMESA members-states than other alternatives.