SUDAN - The Oil Sector.

Sudan's oil production was only able to reach significant levels after completion of the first crude oil export pipeline from central Sudan to the Red Sea coast in 1999. Exploration began in the mid-1970s, and Chevron drilled several successful wells in the Abyei area in the early 1980s, beginning with Taiyib-1 in 1981. Chevron pulled out in 1984, after an attack on its installations by the SPLA, and Sudan did not have the technical or financial resources to develop its own resources.

Serious investment began in the mid-1990s, including in Abyei. In 1996, Canadian independent Arakis Energy began developing the Heglig, Unity, and surrounding oilfields - in Blocks 1/2/4 - then estimated to contain recoverable reserves of 600m to 1.2 bn barrels. Arakis entered into a consortium with several other firms called the Greater Nile Petroleum Operating Co. (GNPOC) in order to raise money for the 1,590-km Greater Nile Oil Pipeline from the fields to the Suakim crude oil terminal near Port Sudan. The pipeline passes through the middle of Abyei's main oil producing area.

GNPOC brought in Chinese, Indian and Malaysian companies, which provided most of the engineering, equipment and construction for the fields' facilities and the pipeline, as well as 70% of the line's supplies - with Arakis eventually having left the group. In September 1999, the first cargo of the Nile Blend, a light/sweet grade, left the export terminal. After 1999, Sudan's production took off. A level of 181,000 b/d was achieved in 2000, with steady increases in all the fields of the concession until around 2003, when production was about 262,000 b/d. During that time, production began at fields in Block 4, a large portion of which is also in Abyei.

By 2003, more than one quarter of Sudan's oil production was coming from Abyei. Since then, production at most of the fields in the concession has begun to decline, including all the fields within Abyei. A few new fields came online in other parts of the GNPOC's concession, stemming the overall decline; and, more importantly, additional fields and infrastructure (including new pipelines and refineries) began to come on stream in other parts of Sudan starting in 2003.

By end-2006, crude oil output from fields in the Melut Basin's Blocks 3/7 operated by the Petrodar consortium, as well as Blocks 5A and 6, represented about half the country's production of 500,000 b/d, which had in effect doubled in only three years. Abyei's oil production is declining, and estimates drop sharply after 2006. Abyei's relative importance to Sudan's oil sector has also declined as most of its fields are depleting. From over a quarter of all oil output in 2003, it is likely be less than 8% in 2007. To counter these problems, there is horizontal drilling, indicating the fields are already at the tertiary recovery stage. But Block 4's oilfields have enabled GNPOC to maintain a production capacity of more than 265,000 b/d, which Khartoum hopes will eventually rise to 350,000 b/d by end-2007. This stream produces the Nile Blend.

Blocks 1/2/4: Although GNPOC originally built the pipeline with throughput of 150,000 b/d, its has since been increased to 300,000 b/d, while maximum capacity is 450,000 b/d. In January 2007, combined production from Blocks 1/2/4 was 260,000 b/d. GNPOC is operated by China National Petroleum Corp (CNPC) with 40%, in partnership with Petronas of Malaysia (30%), Oil and Natural Gas Corp (ONGC) of India (25%) and the northern government's Sudapet (5%).

GNPOC's Nile Blend is a popular crude mostly exported to China. But a part of this blend is being used by Sudan's oil refining sector. Sudan has four refineries, with a total capacity of 142,000 b/d. Sudan's main refineries are located in Khartoum and Port Sudan. Sudan's total refining capacity by 2011 should reach 192,000 b/d (see below).

In July 2006, CNPC announced completion of the Khartoum refinery expansion, which doubled its capacity to 100,000 b/d. The Khartoum refinery processes the Nile Blend, which has a low sulphur content and high fuel-yield. The expansion has alleviated the short supply of fuels available in Sudan, while giving the country some additional export capacity. The Port Sudan refinery is located near the Red Sea and has a capacity of 21,700 b/d. Sudan's electric power sector has a capacity of less than 1,000 MW. China is having a 1,250 MW hydro-power plant built as part of a giant dam project in the south. There should be additional power plants in Sudan as several parts of the vast country have had no electricity.

In 2004, Sudan had 760 MW of generation capacity. The country then generated 3.8 bn kilowatt hours (Bkwh) of electricity, and consumed 3.6 Bkwh. The majority of electricity in Sudan is generated by conventional thermal sources (76%), with the remainder coming from hydro-power (24%). The country's main hydro-power generating facility is the 280 MW Roseires dam located on the Blue Nile river basin, about 315 miles south-east of Khartoum. The facility has frequently been attacked by rebel groups, and low water levels often cause its capacity to fall to 100 MW.

The state-owned National Electricity Corp (NEC) is responsible for power generation, transmission and distribution in Sudan. NEC transmits electricity through two inter-connected electrical networks, the Blue Nile Grid and the Western Grid, which cover only a small portion of the country. Regions not covered by the grid often rely on small diesel-fired generators for power. Only 30% of the population currently has access to electricity, but the government hopes to increase that figure to 90% in coming years.