Shell Eyes Potential South Sudan Opportunities

LONDON (Dow Jones Newswires), Jan. 4, 2012

Shell is examining possible opportunities in South Sudan, which seceded from its northern neighbor, Sudan, in July last year, taking with it at least 75 percent of the areas known oil fields.

"We continuously review potential business opportunities around the world. We would like to better understand the current security, political and business environment in South Sudan, and how this has been impacted by the secession," a Shell spokesman said in a statement.

Ethiopian newspaper The Reporter on Saturday said Shell is planning to construct an oil pipeline from South Sudan to Ethiopia. Citing "reliable sources," the paper said a Shell delegation had visited South Sudan in November.

When asked whether Shell had met with local officials and discussed a potential pipeline project, a Shell spokesman declined to elaborate beyond the company's statement that it wasn't pursuing business opportunities in South Sudan "at the moment." The company doesn't have a presence in Sudan.

Although South Sudan retained most of the country's output and is now producing around 350,000 barrels of oil a day, the landlocked country still depends on Khartoum for refineries, ports and export pipelines.

Similar challenges also exist elsewhere in East Africa, a burgeoning oil province following recent major discoveries in Uganda's Albertine basin but without the necessary infrastructure to bring its crude to market. French major Total, U.K. explorer Tullow Oil and China's CNOOC are expected to invest at least $10 billion developing Uganda's oil assets, which will include the building of a 1,300-kilometer pipeline to the Kenyan port of Mombasa.

However, analysts cast some doubt on whether Shell would be prepared to make a significant investment into a relatively unstable part of the world.

Relations between the two Sudans have worsened in recent weeks, with the office of South Sudan President Salva Kiir late Monday accusing Sudan of stealing its oil by diverting as much as 1.2 million barrels of crude oil.

Royal Bank of Canada analyst Peter Hutton said a move into South Sudan would have little obvious operational synergy for Shell, which have been exiting Africa in the downstream, adding that their experience in Nigeria has probably made the firm's management more risk averse. "It all looks a bit of a stretch--not the direction investors will want Shell to go in," said Hutton.

Copyright (c) 2012 Dow Jones & Company, Inc.


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HENRY BAISI | Jan. 4, 2012
Shell exploits it does not develop. We do not want them in the Uganda Sudan region. We are capable of doing it ourselves

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