Distributions of Sudan's Oil Revenue

UNCLAS SECTION 01 OF 02 KHARTOUM 001919

SIPDIS

SIPDIS

DEPT FOR AF/SPG, AF/EPS, EB/IFD, AND EB/ESC
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID

E.O. 12958: N/A
TAGS: PREL PGOV EFIN EPET ECON EAID SU
SUBJECT: Distributions of Sudan's Oil Revenue


1. Summary: Net revenue accruing to Sudan from oil production for
the first five months of 2006 totaled $1,086.9 million. Of this
total, $685.3 million was allocated to the North and $391.6 million
to the GOSS. In addition, $234.1 million was transferred to the Oil
Revenue Stabilization Account and $28.4 million to state
governments. Revenues are expected to continue at the same or
slightly higher levels through the end of 2006. Distributions to
the GOSS are projected conservatively at between $60 - 70 million
per month for the next several months, according to Central Bank
sources. End Summary.

Overall Oil Revenues
--------------


2. In early August, the Petroleum Unit of the Ministry of Finance
and National Economy released figures on government oil revenues.
The figures show details for the month of May as well as totals for
the year to date. The net revenue accruing to the government for
the January through May time period totaled $1,086.9 million
dollars. Of this amount, $553 million was from export revenues and
$533.9 million from sales to local refineries.

Distribution to GOSS
--------------


3. The published figures show $391 million in oil revenue
transferred to the Government of Southern Sudan (GoSS) from January
through May. This is a sum of the revenues from exports and crude
going to local refineries, with the following breakdown:

Month Export Revenue Local Sales Total

Jan 39.2 33.2 72.4
Feb 29.2 32.2 61.4
March 37.5 40.4 77.9
April 48.2 38.6 86.8
May 45.5 47.6 93.1
Total 199.6 192.0 391.6

In addition to the above amounts, direct transfers of $28.4 million
were made to the oil-producing states of South Kordofan and Unity.
Transfers made from the Oil Revenue Stabilization Fund (ORSA) are
not included in the above total.

May 2006 Production and Revenue
--------------


4. According to information provided by the Ministry, total oil
production for May was 7,386,000 barrels, or about 240,000 barrels
per day (Note: this is considerably below the production level of
450,000 bpd projected at the beginning of the year. Septel will
provide additional information. End note.) Of this amount,
5,272,000 barrels (71.38 percent) was from wells in the South.
Total production is divided between producing companies and the
government. Exports of government oil totaled 3,351,717 barrels and
generated revenue of $224.6 million. Local refineries took
2,201,000 barrels of government oil. Any amount received above $45
per barrel on exports of government oil is transferred to the Oil
Revenue Stabilization Account (ORSA); for May this amount was $73.7
million.

Formula for Dividing Proceeds
--------------


5. Division of the income from oil follows a defined process.
First, petroleum produced in Sudan is divided between producing
companies and the Government, per production sharing agreements,
with about 60 percent going to the government. Under provisions of
the Interim National Constitution, the government's share is
distributed among the Government of National Unity, the GoSS, and
several state governments. The constitution lays out a mechanism
under which net revenues are defined as the sum of government oil
exports and sales of government oil to local refineries, less
management and transportation fees. Two percent of net revenue is
allocated to the oil producing states in proportion to the output
produced in each state. Proceeds from exports are deposited in the
Bank of Sudan, and any amount in excess of the benchmark (currently
$45 per barrel) is transferred to the ORSA. After the payment to
the ORSA and to the oil producing states, fifty percent of net oil
revenue derived from wells in Southern Sudan is allocated to the
GoSS and fifty percent to the Government of National Unity and
states in Northern Sudan. Proceeds from local sales of crude to
refineries are distributed to the North and the GoSS, again using
the formula of a fifty/fifty split between the North and South of
net oil revenue derived from wells in Southern Sudan.

Revenue to Continue at Similar Level
--------------


6. In a recent conversation with a source at the Central Bank of

KHARTOUM 00001919 002 OF 002


Sudan, poloff was told that the projections are for monthly
transfers of oil revenues to the GoSS to continue through the end of
the year in the range of $60 to $70 million, which is roughly the
level of the first five months of the year.

HUME