Several Sudanese cities recently suffered from low fuel stocks on the market due, according to initial assessments, to periodic maintenance at the Khartoum oil refinery and manipulation of fuel shares by distribution companies. However, this does not negate the fact that the energy sector, including electricity, suffers from low efficiency caused by deterioration of the oil sector as well as receding investments over the past period, due to 24 years of U.S. sanctions on Sudan.
Facing limited options in the short term, the government is likely to have to increase oil derivatives imports to meet domestic demand. In the long term, however, it will have to exert intensified efforts to carry out its plan for developing the oil sector, diversify the energy mix through building thermal power and renewable energy plants. This requires big investments that the government can only provide through foreign financial support.
Recurrent Crises
This is the not the only crisis of its kind. Rather, it occurred more than once over the past three years and coincided with another problem: daily power outages for long hours in various cities due to the already inefficient power grid.
Currently, a possible solution to this crisis appears to be unlikely due to the annual maintenance work at the Khartoum refinery which started in last March and, according to several estimates, will continue to next May. Additionally, the government was not able to provide credit in hard currency to cover needed imports. The oil ministry accused distribution companies of inventing the current issue and manipulating fuel quotas to sell them in the black market higher than controlled prices.
Oil derivatives prices have risen in the black market, with the price of one liter of benzene going up ten times the official price to reach 80 Sudanese pounds (US$4.4).
The oil sector suffers from general weak efficiency caused by several factors including economic impenetrability due to U.S. sanctions imposed on the country between 1993 and 2017.
Since South Sudan seceded in 2011, the oil industry suffered a severe decline, with daily oil output falling to about 120,000 barrels, compared to an average of 450,000 barrels per day before the secession. Additionally, efforts to reform the infrastructure, including pipelines and refineries, were delayed causing an inability to meet increasing demand on oil derivatives.
Currently, the only two working refineries are the Khartoum refinery, which has a daily capacity of 30,000 barrels, and another small one in al-Obaidi. Three other refineries with a daily capacity of about 34,000 barrels stopped, causing a decline in refining capacity required to meet daily demand on benzene, gasoline and other derivatives.
At the same time, the power grid faces several problems the most serious of which is weak efficiency, which escalated over the past years causing daily power outages for long hours in several cities. The most recent outage occurred in January 2018. Moreover, only 45 per cent of the population have electricity, while the remainder rely on biomass fuels and diesel-powered generators to get power.
Currently Sudan’s aggregate capacity of 3.3 megawatts and a productive capacity of 14.4 megawatts of which 66 per cent is generated by dams, but it is insufficient to meet increasing demand on power at various sectors.
Countermeasures
In the short term, the government will try to reduce fuel shortages through increasing oil derivatives imports to meet domestic demand on benzene, gasoline and others. But this will not be possible due to shortage of hard currency. This will require the sealing of oil agreements with Sudan’s partners for a period of three to four years to provide oil derivatives and pay the cost at later dates, according to Ishaq Bashir, the head of the oil committee at the parliament.
In the long term, the government will need to pump huge investments to enhance the efficiency of the energy sector in the future. In this context, it initiated work in two main areas to counter the country’s energy problems.
The first area is development of the oil sector, where it plans to launch exploration projects to increase oil production by 50 per cent in the coming period. Sudan plans to launch the first round of bids for oil and gas exploration in 2018, according to statements delivered in last December by Salah Wehbe, an advisor to the oil ministry. Previously, on several occasions, the oil ministry announced that it reached understandings with global oil companies, including from the United States and Europe, to resume operations in Sudan.
The second area is diversification of the energy mix, where Sudan adopted a plan to generate electricity from various sources, including traditional thermal plans, in addition to building nuclear and renewable energy plants to double the aggregate generation capacity to 5400 megawatts by 2020. This would allow expansion of the national grid to states such as Darfur, South Kordofan and West Kordofan.
In the short term, Sudan plans to build two thermal plants in the Garri Free Zone and Port Sudan, which includes the main port and the free trade zone on the Red Sea, with a capacity of 850 megawatts and in partnership with Germany’s Siemens.
Additionally, Sudan is counting on the implementation of several energy projects to increase power production capacity, especially in light of the country’s huge solar and wind energy resources. These include a project to build the first wind energy farm with a capacity of 1400 megawatts, following an agreement signed between the Ministry of Water Resources, Irrigation and Electricity, Africa Renewable Energy Company and Denmark's Vestas. It also plans to build a solar power plant with a capacity of up to 400 megawatts, as stated by the minister of investment, Mubarak Fadel, following talks between the government and Norway’s Scatec Solar.
Regarding nuclear energy, the government made the first steps towards nuclear power plants by signing an agreement with Russia’s Rosatom, on developing a project to build a nuclear plant in Sudan, on the fringe of a meeting of the Joint Sudanese-Russian committee, held in Khartoum last December.
However, this does not negate the fact that to carry out various energy projects, Sudan needs large investments that it may not be able to provide alone due to the severe hard currency shortage. Because of this, it appears to be in need of foreign financial support from its regional and international partners. This would hinge on its movement towards adopting a contingency program to achieve economic and monetary stability, while at the same time continuing efforts to reach peaceful settlement to existing conflicts in various parts of the country.
