Geopolitical Analysis & Forecasting

An Interview with Statesman Resources on Sudan's Block 14

Lee Higdon

Natural Resource map of Northeast Africa

Geopoliticalmonitor.com

As part of our series on the development of the Sudanese oil sector, Geopoliticalmonitor.com recently interviewed Glenn Whiddon, CEO of Vancouver-based Statesman Resources Limited, a conventional onshore oil and gas exploration company focused on the African continent, and particularly Sudan’s Block 14, a 100,000 km2 oil exploration area in the northwest corner of the country, bordering both Egypt and Libya.

In early 2010, Statesman began evaluating opportunities in Sudan, holding meetings with the Ministry of Petroleum, the Sudanese Petroleum Corporation and Sudapet, The Sudan National Petroleum Corporation.  In 2012, Statesman chose to participate in a competitive international tender—held by the Ministry of Petroleum—for a number of prospective exploration blocks in Sudan.

Statesman was successful in the tender for Block 14, which resulted in the execution of an Exploration and Production Sharing Agreement (“EPSA”) on July 3, 2012, between the Government of the Republic of Sudan, Sudapet, Statesman Resources and a minority partner.

Block 14 was previously explored by PetroSA (South Africa’s National Oil Company), which invested nearly US $20 million on acquiring seismic data, geochemical data, and gravity and magnetic data.

Since being awarded Block 14, Statesman has undertaken extensive technical studies of this data, which has led to the completion of an independent expert’s report by Senergy which has identified a prospective resource of 1.5 billion barrels.

Mr. Whiddon has extensive experience in equity capital markets and corporate advisory with a specific focus on the natural resources sector.  He is the co-founder of Hemisphere Investment partners and is currently Non-Executive chairman of ZYL Limited (ASX: ZYL), Non-Executive Chairman of Terranova Minerals NL (ASX: TNV) and a Director of Agri Energy (ASX: AAE).  He previously worked for the Bank of New York in Sydney, Melbourne, Geneva and Moscow.

GPM: Where do you see the oil industry in Sudan ten years from now?

Whiddon: I expect that Sudan will be trading freely with the world and enjoying unprecedented economic growth and human capital development. Sudan is rich in oil, gold and certain agricultural products, and it is only international politics that is preventing the development of the country.  The oil industry will play a vital role in Sudan’s future, not just onshore but also offshore, where a large area of the Red Sea is only lightly explored at present and which could be the site of huge reserves of gas for LNG projects.  Major international companies will return to Sudan and spend billions in exploration, development and production facilities.

GPM: How important is it that Sudan and the West, particularly the United States, resolve their differences, and do you think that oil exploration and its corresponding foreign direct investment in Sudan could help facilitate a thawing of relations on that front?

Whiddon: The current sanctions against Sudan have severely limited the number of participants and amount of foreign direct investment in Sudan.  Removing the sanctions would make a material difference to the growth of the domestic economy and bring stability to the economy and prosperity to the country and the people.   Given what we have witnessed between the US and Iran in recent days (in relation to the Iranian nuclear program), we believe the removing of sanctions would have a very significant impact on Sudan’s relationship with the West.

GPM: How beneficial would it be for the West to adopt a new perspective regarding Sudan as a relatively stable regional player in light of the recent political unrest and instability in Libya and Egypt?

Whiddon: Very beneficial for the West, both economically and politically. The effect of US sanctions has been to push Sudan towards Iran and Asia for trade, economic development, and security. An ‘open arms’ policy would bring Sudan closer to the West politically and economically, and enable the West to influence Sudan over human rights and other humanitarian issues.

GPM: Do you agree that Sudan has been vastly under-explored for oil and gas?

Whiddon: Vastly, no.  But underexplored, yes.  It is not simply a question of how many wells or how many undrilled areas [remain]. Much of Sudan is comprised of rocks that are not prospective for oil and gas, but there are areas like the northwest corner of the country where the geology is prospective, and that is where Statesman is exploring.  In global terms, it is now quite rare to be able to access a block of this size (Block 14 is 100,000km2) that has never been explored with the drill bit.  Given the prospective sediments, and the clear production analogues we see in Libya, we do believe there will be exploration breakthroughs in Sudan in the coming years.

GPM: Does Block 14 represent a shift toward exploration in Sudan’s north as a result of South Sudan’s retention of fields formerly under Khartoum’s control?

Whiddon: Yes.  The central government is very keen to find oil in the north of the country and replace the reserves and production that has been transferred to the South. The technical work to date by Sudapet and Statesman has demonstrated the prospectivity that exists for significant size discoveries along the borders with Chad, Egypt and Libya.

GPM: What advantages does Sudan’s refining capacity and general oil/gas infrastructure offer, if any?

Whiddon: Sudan’s refineries were built to handle the three different grades of oil that have been discovered in the south of the country, and this should ensure that oil from Statesman’s Block 14 can be processed in domestic refineries, if required.

GPM: What is the likely quality of the crude in Block 14 and what fuel products will it mainly be used to produce?

Whiddon: The nearest production analogy for Block 14 is the Murzuq Basin in Libya, where the crude is normal to light oil and easily transportable by pipeline or truck. In other parts of Sudan, the oil is heavy and high in sulphur, but the geology there is different than Block 14’s.

GPM: How will the oil be transported?

Whiddon: The preferred scenario is that the crude will be transported by pipeline to the Red Sea coast, where there are two large terminals handling the export of Sudanese oil.  However, field size and economics will ultimately play a significant factor in the final decision.

GPM: Will Statesman likely expand operations in Sudan upon successful production from Block 14?

Whiddon: Block 14 is approximately 100,000 km2 in size and contains two basins: the Kufra Basin, extending south from Libya and continuing into Chad and Sudan; and the Mesaha Basin, running north-south from Egypt.  As such, Statesman believes that Block 14 has significant upside potential and will be keeping the company busy for many years to come.

GPM: What are some of the challenges that the Sudanese government faces in promoting and developing the domestic oil/gas industry?

Whiddon: The main challenge is the U.S. sanctions.  These sanctions have achieved their goal of limiting foreign investment in the sector.  However, they have not dissuaded world class companies such as Petronas, CNPC, ONGC, CNPCI and Pertamina from investing in Sudan.  A number of Russian companies are also seriously evaluating opportunities at the moment.

GPM: How does doing business in Sudan compare with the rest of the African region?

Whiddon: Statesman’s Board and management has dealt extensively with many African countries, with each country possessing its own unique challenges and issues.   We have found doing business in Sudan to be extremely professional and industry competitive.  The knowledge and experience of the various officials in the government and Sudapet is extensive.  The Exploration and Production Sharing Agreement was up to industry standards, and the Ministry and Sudapet have been extremely professional and helpful in all our dealings together.

Furthermore, we have had Western staff based in Khartoum during our tenure in Sudan—they have found the city safe and the Sudanese people friendly, trustworthy and respectful.

Our experience in Sudan has been a positive one—albeit hampered by Western sanctions, but one we are determined to continue.

Lee Higdon is a contributor to Geopoliticalmonitor.com

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Tags: African Oil

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