Control of Sudan's oil a big issue in January vote

[December 23, 2010]  PALOICH, Sudan (AP) -- The pipelines run through the north. Most of the oil is in the south. That may explain why Akuoc Ten Diing and five other Southern Sudanese officials were treated to a 10-day, all-expense paid tour of China's domestic oil industry this fall.

They were guided by female interpreters and dined on lavish meals. "They wanted to make new relations with us," Diing said. "Before they were dealing directly with Khartoum."

Southern Sudan holds an independence referendum in January that is likely to see Africa's largest country split in two. The oil in the south, which has been controlled from the northern capital of Khartoum, will instead be controlled by the southern capital of Juba.

China looks to be straddling the middle, and has been seeking strong relations with officials in both Sudan's north and south.

The Petrodar plant in Paloich, a town in middle Sudan near the north-south border, is an array of silver water tanks, towering rigs, and high-tension power lines where Chinese supervisors and Sudanese laborers wear bright red and blue uniforms.

The expanse of technology seems out of place in this sun-scorched part of Upper Nile state, an oil-rich but impoverished region where locals live in mud huts.

Sudan is sub-Saharan Africa's third-largest oil producer, behind Nigeria and Angola. It produced 490,000 barrels of oil a day last year, a 50 percent increase from 2006.

China's interest here is high. The China Petroleum Corporation owns 41 percent of Petrodar, and a second Chinese company owns 6 percent. Sudan's government owns 8 percent.

Oil is big money in Southern Sudan, which stands to rake in $4.4 billion in oil revenues in 2010. That's almost 98 percent of the region's revenues. The government will bring in only $100 million through other sources.

The oil industry is seen as a potential flashpoint between the north and south, but it may also serve to tie the two together. Earlier this month, the ministers for oil and defense from both north and south met in Sudan's oil-producing middle and agreed that joint security forces will guard installations before and after the Jan. 9 referendum.

The fact that oil companies like Petrodar paid billions of dollars to start exporting southern oil through a nearly 900-mile (1,400-kilometer) pipeline to north Sudan's Red Sea port means that these Khartoum-friendly companies will continue to have leverage over the south's main source of revenue, according to the European Coalition of Oil in Sudan.

But China has acted wisely in its relations with both north and south since the two ended a civil war in 2005, said oil expert Dan Large, research director at the School of Oriental and African Studies' Africa-Asia Center in London.

The Chinese government has essentially refashioned its bilaterial ties with Sudan "into triangular relations between Beijing, Khartoum and now Juba so that it now has independent, if overlapping, relations with both," Large said.

The Chinese Consul General in Juba, Li Zhiguo, told The Associated Press that the shared interests of Khartoum and Juba in building two cooperative states after southern secession makes Beijing certain that they can maintain close ties with both governments.

"We are confident in the cooperation with both sides based on equality and win-win," he said.

In the Adar Yale and Paloich oil fields in Upper Nile state, production has not yet reached its peak. Iraqi engineers -- Petrodar employees -- are drilling 11 new wells. An AP reporter visited the Petrodar facility in Paloich with Diing, the Melut County commissioner and the top local official in Sudan's most productive oil region.

Wang Jie, a Petrodar employee in charge of production, and Hago Bakhiel, the northern Sudanese field manager in charge of security, warmly welcomed Diing, who arrived with an escort of more than 40 heavily armed men.

The trip included a buffet lunch of rotisserie chicken, grapes from Cairo and sweet Middle Eastern pastries flown in to the company's airstrip, a top-of-the-line luxury in a region where half the population relies on food aid.

Outside the facility the scene is grim. Thick black sludge tops a 3-mile-long (5-kilometer-long) pit filled with processed water, a byproduct of the pumping process that contains cyanide and arsenic. Diing shook his head in disgust when passing by. Several hundred feet away, Diing's constituents -- subsistence farmers wearing dirty, ragged clothes -- live in mud huts.

"Is this the way you should treat the country?" Diing rhetorically asked.

Diing says he plans to improve his people's lives after southern independence. That will involve negotiating better regulations and compensation with the oil companies who inked deals with the Khartoum government during Sudan's two-decade-plus civil war that left 2 million people dead.

Earlier at his house -- in a town mostly without electricity or running water -- Diing raved about his October visit to Shanghai and Beijing. He showed photos of apartment buildings constructed for communities forced off their land in the Shengli oil field in Shandong Province. Diing hopes the oil companies might build the same for his people here.

The run-up to the south's independence vote has seen a growth in diplomatic and business relations between Southern Sudan and China, which opened a consulate in Juba in 2008. In October, a delegation of Chinese government leaders visited Juba, and multiple Southern Sudanese government ministers have been to Beijing in recent months.

Whether the south's fledging ministry of energy and mining and local officials like Diing will be able to win more beneficial arrangements remains to be seen. Juba University professor Leben Moro said oil companies have done little to benefit villagers.

"There really has been a major shift in the way the Chinese have been dealing with southerners," said Moro, who specializes in company-community relations in oil-producing areas. "Now the Chinese want to say 'We are really here, not only for our own good but also for your own good.'"

[Associated Press; By MAGGIE FICK]

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