South Africa searches for partners for South Sudan oil block

JOHANNESBURG (Bloomberg) -- South Africa’s Strategic Fuel Fund is welcome to bring in partners to help it execute a $1-billion agreement to drill for oil and build a refinery and pipeline in South Sudan, the central African nation’s oil minister said.

Under the agreement, signed between the two governments on May 6, the Strategic Fuel Fund holds 90% of the project in B2 Block with the Nile Petroleum Corp., South Sudan’s national oil company, owning the rest, Ezekiel Gatkuoth said in an interview at Bloomberg’s office in Johannesburg after earlier meeting his South African counterpart. The project, which Gatkuoth expects to reach production in about six years, includes the construction of a 60,000-bpd oil refinery in Pagak, he said.

“They have room to farm in” a partner, the South Sudanese minister said, adding that his government has the right to approve any partners and that a transaction would be subject to capital gains tax.

The partnership should benefit South Sudan by boosting production in a nation where output is half of what it was before a civil war, while securing energy supplies for South Africa, which imports crude for its refineries as it has little oil production of its own. Gatkuoth acknowledged that the project is likely to cost more than $1 billion. The SSF didn’t immediately respond to requests for comment.

In addition to bringing new partners into its oil fields, South Sudan is trying to diversify export routes for its oil.

Currently it exports oil through Sudan -- the country from which it seceded acrimoniously in 2011 -- at a cost of $24/bbl, but it’s now considering paying Uganda a fee to transport crude south to a port in Tanzania when new pipelines are built, Gatkuoth said. Exports through Ethiopia could also be an option.

The B2 Block was once part of an area held by Total SA until 1985 that was the size of Pennsylvania.