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Story Publication logo February 11, 2011

Looming Challenge for Southern Sudan: Regulating Oil Companies


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"Sudan in Transition” brings in-depth coverage of the cultural, political, economic and legal...

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Image by Rebecca Hamilton, Sudan, 2011.

At an oil field in southern Sudan's oil-rich Unity state, a tar-colored sludge flowed out of the back of a truck into a man-made pool.

A mile down the road, the flags of China, Malaysia, India and Sudan - the nationalities of the companies operating the field - fluttered in the breeze.

The state Environment Ministry fears that when it rains, the pool overflows and contaminates groundwater. "But we are only a new ministry, so it is hard for us to be sure," said James Gatluak, the ministry's director general, adding that he has no budget and a staff of two.

As a land ravaged by decades of war prepares to become an independent nation this summer, many southern Sudanese are pinning their hopes for prosperity on oil. Sudan is the third-largest oil-producing country in sub-Saharan Africa, and 80 percent of the oil lies in the south.

But regulating the industry will be among the new government's biggest challenges, experts say, raising questions about whether the oil deposits in one of the world's poorest regions will benefit the people who live there.

Since the 2005 peace agreement that ended the civil war with the north, the semiautonomous southern government has received more than $8 billion for its share of oil revenue. But only when the region officially becomes independent in July will southern officials begin dealing directly with the companies operating here.

The details of how these contracts will be handled are still under discussion, but the state minister for the environment, William Garjang Gieng, said independence will give his fledgling ministry great leverage over the industry.

Rees Warne, a natural resources expert with Catholic Relief Services, which works in Sudan, warned that disparities "in power, knowledge and experience" between oil companies and new governments make it difficult to monitor and enforce environmental standards.

'The water is not okay'

Oil has long been synonymous with death and displacement in Unity state, which includes some of the region's richest oil fields.

In the 1990s, militias backed by the Sudanese government in Khartoum worked to clear southern land for oil exploration, carrying out campaigns of violence to displace people here.

"Those in the north wanted to push people away from where the oil was and they didn't care what happened to them," Gieng said.

Today, oil represents a different set of problems here.

"We don't know anything about this oil business. But the water is not okay for us," said Nyakuona Kuol, an elderly woman who lives in Kilo 30, a village on the edge of the Unity oil field.

It is a complaint Gieng has heard before. "Most of the people who are staying near to oil companies have problems with oil contamination of their water," he said.

When Gieng became the state's environment minister last July, he traveled to Khartoum to meet the companies operating in his area. He said the consortium promised to improve the system for dealing with the oily-water byproduct produced at the Unity oilfield but would not commit to a timeline.

"Communication is always very nice, but implementation is a difficult thing," he said.

In an e-mailed response to questions about the Unity oil field, the consortium's spokesman, K. Pugazhenthi, said that "the plan now is to recover the oil and restore the area within two years."

The company, he said, is "keen to apply the highest standards . . . in order to eliminate and minimize the harm to the environment" and has "put a lot of efforts" into serving local communities.

In Kilo 30, residents said the consortium sold them used oil barrels for about $15 each and regularly fills them with free clean water.

The only problem, said Ali Haina, a soldier whose family lives in Kilo 30, is that "sometimes they don't come" and the people must drink the groundwater.

Lessons in regulation

American oil companies have been barred from operating in Sudan since 1997, when terrorism-related sanctions were imposed on the country. Some southern officials say they hope that the Americans will return once the south becomes independent.

"We want U.S. companies to come because we want the latest technologies in the oil industry in order to maximize our profits," southern Sudan's vice president, Riek Machar, said after voting in the south's secession referendum last month.

Many southern officials say U.S. laws and advocacy groups will ensure that American companies pay greater attention to the environment and other concerns than state-owned Chinese companies do.

But Angelina Teny, a Unity state politician who heads a committee responsible for deciding how existing oil contracts will be dealt with after independence, said the south must take the lead in regulating the industry.

"It's not possible to get rid of the current contracts, and we wouldn't want to because investment is important and we need to set an example" she said. "So the issue is how we, as a government, regulate the industry."

Egbert Wesselink, an expert with the European Coalition on Oil in the Sudan, said the outlook is bleak, if the one experience the southern government has had dealing directly with an oil company is any indication.

In a contract signed with a Moldovan oil company after the 2005 peace agreement, the southern government "didn't impose any meaningful environmental or social norms or standards and didn't monitor [the company's] performance in this area."

But Wesselink said the government now knows it needs to develop the expertise to do better in the future, and southern officials recently signed a five-year contract with the Norwegian government to help train them.

"Oil can stop at any time," Gieng said, "but the soil, the water - this needs to last forever."





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