The oil fields in the Melut Basin were much greener the last time I visited. In September 2010, I drove with a small contingent of UN Military Observers from Melut to Renk, a long and bumpy journey during South Sudan’s rain season. At that time, when rain poured in sheets, I could barely make out the wells scattered along the roadside. They shimmered in the distance like a coins on the ocean floor. In addition to the rains, they were obscured by the thick reeds and monstrous blades of grass that define the season.
When I returned this week, with dust swirling in the heat, it felt like a different world. The contrast between state-of-the-art extraction facilities and the meager homes of local residents seemed even starker in the arid months. Under the midday sun, locals pump much needed water from the few borholes drilled by PETRODAR, the Chinese-Malaysian consortium who manages the Melut concession. Across from clusters of mud huts, hundreds of empty plastic water bottles and other foreign refuse signify the staggering difference between life inside and out of the facility.
Today, extraction from the Basin’s nearly 700 wells is at a complete standstill. Inside the futuristic facilities, closed circuit cameras depict two dozen angles on the absence of activity. Chinese, Malaysian, Indian and Sudanese technicians pace idly around the control rooms. The facility halls are lined with posters encouraging safe behavior and cooperative work attitudes that seem oddly placed given the absence of actual work.
These fields, which in ordinary times produce some 250,000 barrels of oil per day (bpd), now serve as bargaining chips in a standoff between South Sudan and Sudan. In January, the nascent Southern government daringly ordered the shutdown of all oil extraction in the newly independent state. The 350,000 bpd that sustain the fragile southern economy were tossed on the table in a bold negotiating move.
The shutdown came in response to a row with Sudan over oil transit fees, a serious sticking point between the two former civil war foes. South Sudan is landlocked and therefore dependent on a pipeline flowing north, through Sudan, to transport its oil to port at the Red Sea. Knowing the South’s dependence and eager to stave off an growing economic crisis resulting from the loss of oil revenue when the South seceded, the northern Republic is eager to capitalize on its pipeline advantage. Sudan is demanding about 36USD per barrel of oil that passes through the pipeline as well as nearly 1 billion USD in back transit fees for the period starting at the South’s independence in July. These rates are significantly higher than international norms.
In the brinkmanship style that seems to define north-south relations, the South shut off the spigot. In doing so, it effectively relinquished 98 percent of its annual budget. In a nascent economy that provides few revenue alternatives, many experts believe that move will lead to severe economic crisis-if not all out collapse. Already, the southern government has announced austerity measures, a notion that seems difficult to fathom in such an already impoverished and underdeveloped environment. The government is often unable or unwilling to pay salaries even when the oil flows unimpeded. During my time here, I have interviewed health workers and other government employees who claim to have not been paid for many months. What might austerity measures mean for these folks? How will overall stability and security be affected when cuts reach the army, police and other state affiliated armed elements? The southern government has suggested cutting “allowances” for the army-a portion of their pay that accounts for about 40 percent of their total take home.
In the recent weeks in Juba, I have noticed a sharp increase in the amount of uncollected trash throughout the city. Mountains of fly-infested rubbish once again define the main market and the corners of the city’s neighborhoods. Consequently, the number of billowing, black smoke columns on the horizon seems to have tripled. It would seem that sanitation bore the initial brunt of the cuts.