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International Asian trio abandon Sudan blocks

CNPC, ONGC Videsh and Petronas are owed more than $500 million in unpaid dues from Sudanese government

Three Asian national oil companies have walked away from onshore acreage in Sudan, in part due to more than half-a-billion dollars worth of unpaid oil revenues.

Industry officials said China National Petroleum Corporation (CNPC), India’s ONGC Videsh and Malaysia's Petronas have exited their jointly-operated blocks 2A and 4N as efforts to date to recover more than $500 million from the Sudan government have failed.

“All the three companies have withdrawn from the two blocks,” said an official with direct knowledge of the matter, adding that there are no immediate plans for them to withdraw their investments in other blocks they currently operate in Sudan.

The official added the international companies decided to discontinue their operations because they could not continue putting in money without receiving returns for years on end.

CNPC holds the majority stake in the blocks with a 40% working interest, while Petronas has 30% and ONGC Videsh has 25%.

The remaining 5% is held by Sudapet, Khartoum's state-owned corporation.

Together, the joint venture is called the Greater Nile Petroleum Operating Company (GNPOC).

India’s Economic Times reported that ONGC Videsh had quit its operation in Sudan, quoting the company as saying it “has reviewed the geopolitical situation in Sudan and has considered the option for exit from the operations in blocks 2A and 4 in terms of article 14.1 of the joint operating agreement".

“The intention in this regard has been conveyed to the government of Sudan on 10 May 2019,” the Economic Times added.

The partners have reportedly asked Sudan's authorities to terminate the production licences by the end of this month.

Sudan media reports suggested the government — most likely via state-owned Sudapet — will replace the Asian companies.

In 2003, ONGC Videsh acquired a 25% stake in GNPOC, which controlled blocks 1, 2 and 4, located about 800 kilometres from Sudan’s capital Khartoum.

After South Sudan was carved out of Sudan in 2011, the GNPOC acreage was split between the two countries.

Sudan ended up with blocks designated as 2A, 2B and 4N, with South Sudan controlling blocks 1A, 1B and 4S.

However, after secession Sudan’s share of the total production was insufficient to meet the requirements of local refineries and foreign players were asked to sell their share of crude to the government but due payments were not made.

Sudan later denied ONGC Videsh and its partners an extension of the licence to operate Block 2B after the initial contract expired in November 2016, subsequently selecting a company called Petco to operate this asset.

Sudan last year unsuccessfully urged ONGC Videsh to withdraw an arbitration claim that was filed in London last April to recover payments for oil supplied.

ONGC Videsh had then been looking to recover more than $400 million in unpaid oil revenues and pipeline lease payments, while the Sudanese government in Khartoum claimed that it was making efforts to resolve the matter.

Subsequently, at the request of Sudan, the tribunal recently suspended the arbitration proceedings in London by three months until 2 August 2019.

Petronas had not responded to a request for comment as Upstream went to press.

According to ONGC data, production from the two Sudanese blocks averaged about 5740 barrels per day in 2018, compared to 9680 bpd in the previous year.

Sandwiched between blocks 2A and 4 in the Muglad basin is Block 2AE, which Sudan’s Ministry of Oil & Gas has been trying to promote since last November.

Block 2AE covers around 3500 square kilometres and has two main proven hydrocarbon plays — a Tertiary play in the El-Mahafir area and a Cretaceous play in the eastern Bamboo area, and in the western Garaad-Koda area of the block.

Thirteen wells have been drilled on Block 2AE, some of which encountered oil and gas shows in the western and eastern parts of the block.

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