March 23, 2010 / 1:40 PM / 9 years ago

South Sudan aims to overhaul foreign oil deals

JUBA, Sudan (Reuters) - An independent southern Sudan would review deals struck between Khartoum and foreign oil firms amid concerns about excessive profits and environmental damage, a senior southern minister said on Tuesday.

An oil rig prepares to drill in western Uganda, near the shores of Lake Albert, June 15, 2007. REUTERS/Tim Cocks

“These are contracts that were signed during the war,” Presidential Affairs minister Luka Biong Deng told Reuters in his prefabricated offices in the southern region’s scruffy capital. “We have to look into these contracts.”

China National Petroleum Corporation (CNPC), Malaysia’s Petronas and India’s Oil and Natural Gas Corp are the main outside oil firms in Africa’s largest country and third biggest producer of oil.

Even though most of the oil lies in the southern third of the country, most of the deals were struck with the northern government during the 24-year north-south civil war that ended in 2005 after the death of as many as 2 million people.

The Comprehensive Peace Agreement (CPA) struck in 2005 provides for a 50:50 split between north and south in government revenues generated from oil in the south. The only pipeline out of the country is via the north.

However, the settlement is only temporary since, under the CPA, the south is due to vote on secession in January - and most indicators are that it will become Africa’s newest nation state.

Even though Juba’s semi-autonomous government has made clear it will respect existing contracts, Biong said it was concerned about environmental damage and also the high profits deriving from contracts negotiated when oil was a fraction of the $80 a barrel it now commands.

“They have really, really got a huge profit out of these contracts. It is in the interests of the south to review these contracts — leave alone the issue of the environment,” he said.

He also accused the firms of paying little attention to the needs of the communities around the wells, which mostly lie in the northern portion of what would become an independent Southern Sudan.

“They are using the contracts that they have now with the mindset ‘Get out as much as you can’ and you can talk about it later on,” he said.

“It depends on the way we are going to review these contracts. If these do not meet our minimum requirements, we definitely have to ask some of these companies to give way for newcomers. This cleansing of the whole sector is critical,” he said.

France’s Total SA, which holds a vast undeveloped exploration concession in the far south, would be welcome to begin long-delayed operations, Biong said.

U.S. firms barred from trading with Sudan due to sanctions imposed by Washington on Khartoum would also be gladly accepted, he said.

With the south relying on oil for 98 percent of its revenue, any interruption to supply while contracts are renegotiated would hit it hard in the pocket.

“We don’t want to send a wrong signal that we are going to cancel all the contracts but we are going to engage with them logically and in an informed way,” Biong said.

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