Press Release / April 8, 2013

South Sudan’s oil production restarts amid concerns about transparency

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As oil production resumes in South Sudan this week, Global Witness is calling on the government to implement the transparency measures passed as part of oil legislation last year and to clarify recent reports of secretive contract allocations.

“South Sudan’s oil legislation includes clear requirements for the publication of oil sector data and contracts which, if implemented, would enable citizens to monitor and verify the management of their natural resources,” said Global Witness campaigner Dana Wilkins. “This week’s resumption of oil operations will test whether the government’s commitment to transparency is genuine.”

When South Sudan gained independence from Sudan in 2011, it became the most oil-dependent economy in the world. South Sudan’s only route to export its crude oil is currently via Sudan’s pipelines and port. The two countries had spent more than a year and a half negotiating new transit terms when Sudan began confiscating crude oil shipments at the port in late 2011. South Sudan responded by halting all production and exports in January 2012. At the time, oil revenues made up more than 97% of the South Sudanese national budget.

More than a year on from the shutdown of operations, the oil transit deal and some key security arrangements have been resolved and South Sudan has announced the resumption of oil production. New export revenues, expected by June, will provide South Sudan with much-needed cash and could reinvigorate the country’s struggling economy.

Risks of corruption and mismanagement in the oil sector remain high, however. [1] In addition to the publication of data and contracts, it is critical that the government immediately addresses ongoing rumours that new oil contracts may have been awarded over the last year, apparently without the open, competitive, and transparent bidding processes included in the 2012 oil legislation. At a minimum, the government should immediately publish:

  • The most recent oil block map;
  • Information on all companies holding stakes in South Sudan’s oil sector;
  • All existing oil contracts.

There have also been recent reports of damaging changes made to the draft Petroleum Revenue Management Bill. [2] The changes are rumoured to include the removal of taxes, signatures bonuses and other fees from the definition of ‘petroleum revenues’ as well as fewer protections on how oil can be used as collateral for government borrowing. If true, these changes would significantly limit the extent to which the management of oil sector revenues is subject to public scrutiny.

“If managed well, the oil sector could provide desperately needed development and basic services for South Sudanese citizens,” said Wilkins. “The oil legislation specifically includes the transparency and accountability mechanisms necessary to help make that happen. Now is the time for the government to demonstrate its commitment to openness and public scrutiny.”

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Contact: For more information contact Dana Wilkins on +44 (0)7808 761 570, [email protected]itness.org or Annie Dunnebacke on +44 (0)7912 517 127, [email protected].

Notes:

[1] Last year, a leaked letter written by President Salva Kiir to over 75 government officials estimated that high-level theft had cost the state more than US$4billion since 2005.

[2] For more information see ‘Blueprint for Prosperity: How South Sudan’s new laws hold the key to a transparent and accountable oil sector,’ available at http://bit.ly/W5q0ud.