SUDAN: JOINT TECHNICAL COMMITTEE ON OIL REVENUES

C O N F I D E N T I A L SECTION 01 OF 02 KHARTOUM 001957

SIPDIS

SIPDIS

DEPT FOR AF/SPG, EB/IFD/OMA, AND INR/B

E.O. 12958: DECL: 08/16/2011
TAGS: EAID EFIN EPET PGOV PREL PINR SU
SUBJECT: SUDAN: JOINT TECHNICAL COMMITTEE ON OIL REVENUES
OPERATING (C-AL6-00320)

REF: KHARTOUM 01921

Classified By: P/E Chief E. Whitaker, Reason: Section 1.4 (b) and (d)


1. (U) Summary: As mandated by the CPA, the Joint Committee
on Control, Monitoring, and Calculation of Net Oil Revenues
has been created and is functioning. This joint committee is
intended to work under the supervision of the National
Petroleum Commission (NPC). While the NPC has yet to
establish itself as a fully functioning entity, the Joint
Committee on Oil Revenues has nevertheless commenced its
work, which includes the task of monitoring the transfer of
oil revenue to the Government of Southern Sudan. End Summary.

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Joint Technical Committee Up and Runnning
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2. (C) Pol/Econ Officer and FSN Econ/Commercial Specialist
met on August 9 with Yousif Ramadan Mohammed El Hassan,
member of the Joint Committee on Control, Monitoring, and
Calculation of Net Oil Revenues (aka the Joint Technical
Committee). The committee has ten members, five from the
North and five from the South. Ramadan, an SPLM member from
the South, explained that the committee was established by
decree in February 2005, that he was confirmed in his
appointment in December 2005, and that the committee has been
meeting on a monthly basis since March 2006. The committee
has established a secretariat. The members have visited
various installations around the country, including producing
oil fields, pipelines, and port facilities. Members of the
committee have also received training, including a one-week
session in Norway arranged by the Norwegian government.
Ramadan was enthusiastic about the training and site visits,
noting that he has learned a lot of technical jargon (e.g.,
terms such as upstream and downstream). He confirmed that a
meeting of the committee is scheduled for the end of August
for the purpose of discussing the July production figures.


3. (C) According to the decree by which it was created, the
Joint Technical Committee has five duties:

-- Establish a monitoring system for daily oil production all
over Sudan;

-- Agree on the annual normative price;

-- Establish a system for account and monitoring net oil
revenues;

-- Account for the actual share of the Government of Southern
Sudan and the governments of the producting states and ensure
transfer of the shares; and

-- Agree on a mechanism for monitoring the Oil Revenue
Stability Account.


4. (C) Pol/Econ Officer asked what happens when the committee
cannot reach agreement. Ramadan replied that, so far, this
has not happened, but in the event of a deadlock, the issue
would be referred to the National Petroleum Commission (NPC).
He noted that while the NPC has met twice, it is not really
functioning yet. When asked what the normative price
(benchmark for national budget planning purposes) is likely
to be for the coming year, Ramadan replied that he thought it
might remain at $45 a barrel, the same as this year's level.

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Production Below Planned Levels
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5. (C) When asked about production figures for the year so
far, Ramadan said that production, now at about 300,000 bpd,
has fallen short of planned levels. Around 200,000 bpd from
Petrodar consortium's Adar-Yale field (Blocks 3 and 7) has
not come on stream as anticipated. He attributed the delay
to "problems with the Malaysians," stating they had fallen
behind schedule, but would not elaborate further. (Comment:
other contacts have told us the pipeline is complete, but the
delay is due to slow construction of the oil loading
facilities at Port Sudan. End comment.) Ramadan was
somewhat critical of the Malaysians, noting that, "at least
the Chinese execute their contracts on time." However,
Ramadan said he is optimistic that the production from Blocks
3 and 7 will start flowing at 130,000 barrels per day by the
end of August and reach 200,000 bpd by December. This would
bring production to about 500,000 bpd by the end of the year.
(Comment: other industry contacts are less optimistic in
their projections. End comment.)


KHARTOUM 00001957 002 OF 002



6. (C) When asked if the Joint Committee conducts any
inspections, verifications, or audits of production and
revenues, Ramadan replied that the committee simply accepts
the figures provided by the Ministry of Energy and Mining.
He said the committee might conduct an audit at the end of
the year. When asked if forward sales of petroleum were
being considered or conducted, Ramadan initially seemed
confused by the question, but replied that all production is
sold on the spot market. He noted that Sudan's Nile Blend is
sold at a discount of "4 or 5 dollars" per barrel to the
world benchmark (Brent crude) price.


7. (U) Note: Reftel provides production and revenue figures
drawn from notices printed in the local press. These figures
are the same as those for which the Joint Technical Committee
has signed. End note.


8. (U) Bio note: Ramadan is from the town of Wau. His
grandfather came from the north of Sudan, while his mother's
family are southerners. He regards himself as a southerner.
He is an accountant and worked for several years in Nigeria.
HUME