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Cablegate: Energy Ministry Official Says Sudan's Oil to Run Out By

VZCZCXRO5569
OO RUEHROV RUEHTRO
DE RUEHKH #1319/01 3270858
ZNR UUUUU ZZH
O 230858Z NOV 09
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4775
INFO RUCNIAD/IGAD COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RHMFISS/CJTF HOA

UNCLAS SECTION 01 OF 02 KHARTOUM 001319

SENSITIVE
SIPDIS

NSC FOR MGAVIN, LETIM
DEPT PLS PASS USAID FOR AFR/SUDAN
ADDIS ABABA ALSO FOR USAU

E.O. 12958: N/A
TAGS: EPET PGOV PREL ECON EFIN SU
SUBJECT: Energy Ministry Official Says Sudan's Oil to Run Out by
2025

1. (SBU) Summary: On November 9, Hamad Elneel Abdulgadir, Deputy
Secretary General of the Ministry of Energy and Mining (MEM)
complained to Poloff that the Ministry's efforts in training
Southern Sudanese for oil industry jobs had been a failure, one
reason that the National Petroleum Commission (NPC) is not
functioning. The Assessment and Evaluation Commission (AEC) ignores
flagrant violations of the Comprehensive Peace Agreement (CPA) by
the Government of South Sudan, he claimed. In light of the fact
that many of Sudan's current oil producing wells will run dry by
2025, the South's desire to build an oil refinery is uneconomic and
unwise. End Summary.

---------------------------------
Few Southerners Know Oil Industry
---------------------------------

2. (SBU) Deputy Secretary General of the Ministry of Energy and
Mining (MEM) in the Government of National Unity (GNU), Hamad Elneel
Abdulgadir, said the National Petroleum Commission (NPC) is
suffering because of lack of professional expertise in Southern
Sudan. (Note: The NPC, an independent body established by the CPA,
is charged with formulating policies for the management of the oil
sector and with negotiating contracts, but the NPC has only met a
few times since 2005. End Note) He also accused the Government of
Southern Sudan (GOSS) of appointing people to the MEM who are not
qualified to work in the oil sector. As a result, the Ministry
operates at substandard levels in executing oil policy, he claimed.
Abdulgadir expressed frustration at the failure of attempts to train
and professionalize a Southern Sudanese staff at the MEM despite
what he described as extraordinary amounts of money spent on
lectures and visits to oil fields. He blamed the Southern Sudanese
who participated in training programs in Norway and Malaysia for
failing to take full advantage of the opportunities. One reason for
the failure has been the lack of trust between the parties. "They
don't trust us so we must seek third parties to communicate with the
South," Abdulgadir said. Both the North and South agreed to the
Norwegians as consultants on oil sector issues, and the MEM has
provided them with access to oil revenue records and information.
Abdulgadir said he personally had trained Yousif Ramadan of the
Southern People's Liberation Movement (SPLM); Ramadan is now
responsible for keeping track of the oil revenues for the GOSS.
Ramadan succeeded because he willingly seized every opportunity to
learn the oil trade, Abdulgadir noted.

--------------------------------------------- ---
Assessment and Evaluation Commission Not Helping
--------------------------------------------- ---

3. (SBU) Abdulgadir also placed blame for problems in the petroleum
sector operations on the Assessment and Evaluation Commission (AEC),
which is responsible for monitoring CPA implementation. He
described the AEC as a "weak organization" because it fails to do
anything about what he alleged were "flagrant violations of the
Wealth Sharing Protocol of the CPA." The GOSS is putting up for
re-concession some oil blocks, despite the fact that these contracts
had been negotiated and signed before the CPA took effect. The AEC
merely watches; it does nothing to stop the GOSS from acting, he
complained. (Note: Section 4.2 of the Wealth Sharing Protocol of
the CPA provides that existing oil contracts "shall not be subject
to re-negotiation." End Note) In addition, he claimed, the South
is creating its own oil ministry and making decisions about oil
resources in violation of the CPA. Abdulgadir said he had given a
number of presentations on these points to the AEC, but without
response.

----------------------------
Current Fields Spent by 2025
----------------------------

4. (SBU) Most of Sudan's currently producing fields will be spent
by 2025, Abdulgadir claimed. As a result, the South's desire to
build an oil refinery is uneconomic and unwise, he said. The MEM
has already advised against building the refinery because the South
has not yet conducted a feasibility study. He added that the GNU
State Minister of Energy and Mining Angelina Teny also warned the
GOSS not to build the refinery without further study, but officials
in Juba have reportedly ignored her and have green-lighted the
project.

-------------------------------------
South Sudan Has No Post 2011 Oil Plan
-------------------------------------

5. (SBU) Abdulgadir said that with the many challenges facing
Sudan, now is not the right time for the South to secede;

KHARTOUM 00001319 002 OF 002


nonetheless, he believes secession will occur. The South is neither
politically nor economically ready for separation, he asserted, and
pointed to the separation of Ethiopia and Eritrea, which he termed a
disaster. Most importantly, Abdulgadir said, South Sudan has no
scenario for managing oil or other economic resources post 2011.

--------------------------------------------- ----
Sudan Needs Technical Help from the United States
--------------------------------------------- ----

6. (SBU) He admitted that existing U.S. sanctions have had a
negative impact on Sudan's oil sector; they have forced Sudan to
become overly dependent on the services of Chinese companies, that
do not operate at the same high technical levels as do U.S.
companies. He noted that oil marketing is also restricted; Japan
and Korea do not buy oil from Sudan because of U.S. sanctions.
Abdulgadir concluded that technological expertise is needed to
enhance oil recovery from Sudan's reserves, and to improve oil
refining.

7. (SBU) Comment: Many of Abdulgadir's comments appeared to be based
on personal opinions, with a Northern bias, but he was candid on
several points. His admission that Sudan's oil reserves will be
exhausted in 16 years was surprisingly frank for a GNU minister.
For the record, the AEC has an advisory mandate but no enforcement
authority.

WHITEHEAD

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