South Sudan conflict hurting China's oil interests

The damage to China's oil interests in South Sudan has been exacerbated by the conflict that recently engulfed the nascent African country, but problems can be traced further back, claims the Guangzhou-based South Reviews.

Armed conflict broke out after a political coup on Dec. 15 last year split many South Sudanese along ethnic lines between followers of the president Salva Kiir, an ethnic Dinka, and followers of former vice president Riek Machar, from the Nuer group.

As of January, thousands of people have been killed and more than 200,000 have been rendered homeless due to the conflict. It has also left the economy at a standstill and has affected foreign investments in the landlocked country.

Japanese media reported on Dec. 25 last year that the South Sudanese conflict has impacted its oil production and exports significantly and that China has suffered the greatest financial loss because it is the largest importer of the African country's oil.

When South Sudan became independent after separating from Sudan in 2011, the oil sector was split into two parts. South Sudan took 60% of the country's production, where China had invested at least US$20 billion before independence.

The current clashes have led Chinese oil giant China National Petroleum Corp (CNPC) to evacuate nearly 80% of its workers from oilfields in South Sudan on Dec. 25 last year after five local workers died in an attack on their compound.

However, China began to see problems in the country's oil sector before the coup, the paper said. After its independence, Kiir was eager to control the oil industry and oil exploitation, which has been dominated by the Nile Petroleum Corporation (Nilepet), mainly controlled by CNPC.

Kiir has been trying to replace Nilepet with his Jarch oil group to gain greater control of the industry, while the country has also halted oil production and exports several times. The South Sudan government has also threatened to build new oil pipelines in collaboration with non-Chinese investment so that the country's oil production does not have to use pipelines that pass through Sudan.

(wantchinatimes.com Feb 5, 2014)