By Paul Tethloach Dak
September 15, 2018 (SSNA) — Once upon a time was a man called ‘Chuol, the Impotent’ who was blessed with so much wealth whom he had acquired from the collection of dowries/cows of his sisters being married at a time?
This man was super rich, unfortunately, Chuol was missing one thing in life, and that is, he was an ‘impotent person’. That is to say, he couldn’t produce his only children though had married to many wives. For him, the only way to have children was through the help of his servants who were being employed at his cottage working as casual laborers. But by virtues of being the legal husband to these wives, the children who were produced by other men were all his, so he had lived happily after all:
This brought a conned adage back in the day that goes: “I am enjoying my life at the cottage of Chuol, the impotent” whenever one is taking the advantage of others.
Before 2005, Comprehensive Peace Agreement in Sudan (CPA), China was known even by the children of South Sudan as being one of the thorns on their buds. It used to supply weapons of all sort to Khartoum’s regime for the displacement of millions of people, killings, and destruction of properties. Her contribution to fuel the war through the search of oil is a trauma that people who had witnessed it are still suffering from that related hangover.
Apart from all the mentioned odds, China and other operating companies have been and still polluting the environment of South Sudan until to date and only God knows the adverse effect of this endemic in human health in the future. This comes as a result, of complaints by the host communities from the oil-producing states (Upper Nile and Unity State).
A Germany based International Non-profit Organization, ‘Sign of Hope’ has reported in its investigation that the water bodies from the above said communities are being contaminated by the traces of Lead and Barium with the salinity four times than the normal taste. According to Toxicologist, Professor Fritz Prangst; “These findings represent a threat to the population.” (1)
But this report and other health-related noises the communities have been making is yearning less response/attention from the Juba government. Reason being is, lacks regulations/laws in place in pertinent to the environment. A reasoning one couldn’t buy but tasteless! What is that rubber stamp parliament doing in Juba if not to enact and pass the needed laws? It’s really paining!
In petroleum, are so many contaminants produce along with it during production. This includes Gas, Water, Salts, and elements such as lead, Barium, Nickel, Vanadium etc.…These elements are cancerogenic to human health. Therefore, the international standards stipulated that all these contaminants must be properly removed from the produced water before disposal to the designated sites for this purpose, otherwise, are to be re-injected to the same reservoir where they were being produced at under sub-surface. Unless the government of the concerned country is so serious about this from the legal perspective, oil companies try to drag their feet and get away with this business from spending extra dollars in fulfillment.
This environmental warfare which China launches on the people of South Sudan seems to be taken for a joke so far by the leadership of the country is far from the vicinity of the epicenter (oilfields). But indirectly it’s a problem for all of us. Assumed, people are getting sick and dying from this oil related endemic; then this will eventually force the government of the day to overspend huge money for the improvement of Healthcare system to the affected population, and the end result, is a depletion by itself to the potential future reserve (money) in our financial system. In other words, better it corrects before too late.
Forum on China-Africa Cooperation (FOCAC) Summit:
The western media calls it ‘Rising Red Star (China)’, and without a doubt, China is indeed rising and booming. China is growing so exponentially in Africa taking over the continent from the West at an alarming rate. A true sense of fear by the developed nations!
Unlike, Western governments, China is a good partner to African leaders: Some of the positive views perceived are that:
- China is so cheap to deal with in terms of businesses, material Grades per say
- China doesn’t interfere in domestic politics whenever in your country
- All the money it poured in for investment whether this leader (dictator) will use them for self-benefits that is corruption or to committing atrocities, is ‘no of business to China’.
- China does support her business partner in crime from the wraths of sanctions at Security Council level
According to the UN Panel report about the on-going war in South Sudan, in July 2014 China sold a military consignment of weapons worth 20 Million USD to the government of Juba to displace and killed thousands of people from former Greater Upper Region. (2)
Also in contrary to the Security Councils’ doctrines, who is a member herself; China has recently defied the code of conduct of this organization by issuing a traveling visa to the Chief of General Staff for South Sudan, Army, General Jock Riak, who the UN blacklisted and sanctioned for war-related crimes and atrocities. (3)
From the fore discussions, one doesn’t need to be blindfolded to believe that China is for the goodness of Africa. In other words, China is a partner in crime!
Ethiopia as a Role Model of Dealing with China:
Unlike other Africa countries, South Sudan has a long way to go in terms of coping with China. Other countries take their times and sound business judgments to ink and rush to any type of deals whether is it with China or anyone else… Gone are the days when one can promise to keep your cow for you for ten years and got it back with all its offspring at a needed be:
For instance, in Ethiopia, the road network which included the City-Train was financed and built by China. Ethiopia had paid nothing in terms of dollars but a security assurance to the Chinese investors:-
The clauses on the agreement may read as:
- China will build all these roads with its own money. And once these roads are completed, the china will charge each and very vehicles passing on these Highway from point A to point B, road toll fees of 2USD/Car, for example. What is this mean is that, assumed if 200,000 vehicles passed through this road a day, then multiplying by two dollars per car is equal to ($400, 000USD) per a day. And multiply this by 365 days a year is equal to (146 Million USD).
From the above assumption, let’s say the whole project costs China One (1) Billion Dollars, so this will be paid off after 7 years, plus maybe extra two years will be added to chines to earn their profits, which will make the overall lifespan of this project 9 years. Whereas; after which, the whole project will be handover to the government of Ethiopia in form of tangible asset.
The lesson learned from this case study of Ethiopia is that the government of Ethiopia kills two birds at ago:
- Having its roads built for free by China
- Have infrastructure in place, which will enable its people and business running smoothly across the country with no hindrances
This is a way of doing smart business, and all it needs is a security assurance given to Chinese Investors that the country will be stable.
South Sudan Roads contract with China, and How it losses Future Revenues:
All African leaders went to attend the big feast has ever prepared by China. It’s called Forum on China and Africa Cooperation (FOCAC) Summit. During this summit a lot of side deals business and ideas were exchanged, thus culminating in so many contracts signed afterward. Each and every country tried its best through the work of expertise to cut its own chunk out of the pie. Indeed, a big elephant per say worth (60 Billion Dollars) pledged by China!
South Sudan had also tried its best lucks but only came back with a hefty debt instead; compared with what other countries earmarked.
This debt is nothing but a “Road Network Construction from Yei-Juba and Juba-Rumbek.” It’s a debt because the payment arrangement is that this project will be paid by the crude oil of South Sudan.
President Salva Kiir said it that: “He doesn’t trust his country’s men/women to have their hands on hard currencies (Dollars); because once they see dollars, their hands started shaking”. Of course, Corruption is a real disease among our elites, and the President could be right!
Now, whether the above statement from the leader of the country is the fact of the matter or there is a hidden underlying truth being untold; the pertinent questions become:
- Why bartering the crude oil in such a way, and how sure are we for the value of the crude of today being awarded to China after one year since this commodity (crude oil) kept fluctuating daily?
- Secondly, how long is this road network in terms of ground distance (km) to come to best project estimate?
- Thirdly, how much crude volume (Barrels) are worth exchanging for this project?
From the above questions, a lot of assumptions will be considered to cross-check the status of this project, and how feasible it’s for South Sudan. Empirical calculations will be tabulated for bringing together these assumptions into tables for better understanding and manipulate them into some level of reality. Many limitations are there and are acknowledged in advance, as this is not a research academic paper, but to shedding light on what is believed to be a general knowledge the writer has from the field of Petroleum of which expertise is:
In lieu of this, Juba government may have its own better justification and view, hence being the proprietor of the said project, so its concurrency or divergence from the writer’s perspective is at one’s discretion.
Crude Oil: is a petroleum product that is extracted from the subsurface by drilling after various exploration techniques are exhausted. Once located, it has been drilled out and bring to surface facilities for processing and further refined into useful components, thus, after which is sent to the global market to generate revenues. South Sudan is blessed with this resource which makes the economy of this country depends on it 98%. That being said, care must be taken on how to properly manage this resource from an environmental aspect, marketing, and its diversification to empower other related industries for the better end result.
Back to recently China-South Sudan contract of road networks; let’s assumed with a good educational guest for number’s sake that this road network is about 600km long in total.
Now, borrowing some figures from the past experience/projects in the region particularly Ethiopia and the world bank of how much a one (1 km) distant is a cost to construct. The finding is that a 1 km road distance worth 500,000-700,000USD. (4)
Let’s take 700,000 (USD) as the agreed figure per kilometer for this South Sudan Road Network. Therefore, the overall six hundred kilometers (600km) road network worth is estimated to be (420 Million USD) to complete. That is multiplying 700,000USD/km by 600km, with the kilometer crossing themselves out.
Coming back to how much this figure is worth in terms of crude being exchanged by the government while considering the current global barrel price of 70 USD/barrel. This will give you a total volume of barrels equivalent to (6,000,000bbl). The estimated volume of crude is reached by calculating as; 420,000,000USD divided by 70USD/per a barrel, with the dollars crossing itself out, thus leave us to (6,000,000bbl). In a nutshell; this is the volume of oil crude China will bank from the crude be it now or in the future to pay this debt. Once again, the figures are for opinion purposes only and may be far from the actual, whereas the contract and its terms are properly spelled.
Now having addressed the distance of the roads and the empirical dollar value of this project, then the thorny question remained being asked is, it feasible to undertake this project at a time when the oil value is at its lowest price at 70USD per a barrel?
As stated above, crude oil is a volatile commodity with its price fluctuates daily. The global price may be at the lowest point today but could jump higher to the sky in a matter of days. That is why countries with better-diversified economies halt their oil production at this low peak season and tend to adjust their capital budgets through different financial systems. Factors such as geopolitical wrangling, sanctions, routes of supply to the market, demands, and others are the major attributes to the increase or decrease of the price.
It’s not far from the reality that the oil price is going to jump higher in some few coming years with the on-going tough sanction being imposed on Iran by USA government (5), and the blocking of Trans-Mountain pipeline of Alberta, Canada to shipping its crude to the world market (6), and other big plays out there.
As the saying goes: ‘A picture speaks thousands of words”. The table (1) below explains better how 6,000,000 barrels (420,000,000USD) that have been awarded to China for building a 600km road network in South Sudan, worth 720,000,000 of dollars after one year in case the price of oil jumps to 120USD per barrel.
| Crude volume/barrels to be paid to China | Today’s crude value at Global Market=70SUD/bbl | Crude’s value after one year’s projection=120USD/bbl | Amount of money lost to China ($) |
| 6,000,000bbl | 420,000,000USD | 720,000,000USD | 320,000,000USD |
Table (1): Today’s oil value (price/bbl) comparative analysis after one year, in case price, jumps higher
Recommendation:
From the discussions above; it is clear that crude oil is not a viable medium for constructing roads, hence its value may increase after a year. Table (1) above shows that a crude that worth Four (4) million dollars today may worth Seven (7) million dollars after a year or two. A common sense that doesn’t produce the crude at lost value.
The best alternative solution for the Government of South Sudan was to secure a loan from China herself. And if the fear is all about corruption as was indicated by president Kiir, then for sure leave it to China to complete this road project but not supplying China with the raw crude oil. Better borrow the money and pay it back with an agreeable interest!
Another area: The government of South Sudan should consider the construction of a refinery. A raw crude oil is nothing and not that much attractive to generate enough money unless it’s being refined and become a value-added. Once refined, different fuel grades such as Gasoline, Diesel, Kerosene, Naphtha, Jet fuel and more useful by-products are separated out.
South Sudan is located in a region whereas its neighboring countries (Ethiopia, Kenya, Uganda, and DRC) happened to import their domestic fuels from outside region. A business that cost these countries billions of dollars. South Sudan can grab and utilize this market being the closest next door sister by introducing a Mega-and an integrated refinery. All it needs to do is, to stop the war and provides a conducive marketing environment.
Once refined, other distilled by-products such as Methane, Ethane, Propane and Butane are processed which are also source of making tonnes of dollars with buyers using them as sources of heating fuels, cooking fuels at homes, fertilizers and most importantly sent as feedstock for Petrochemical plants; whereas, clothes, shoes, home glasses, bulletproof glasses , medicines, detergents, toothpastes, and many more.
The writer is a concerned South Sudanese life in Canada and can be reached through [email protected].
References:
1: Sign of Hope, NGO: (https://www.dw.com/en/ngo-blames-water-pollution-in-ssudan-on-oil-company/a-38906882)
2: UN Panel Report: (https://thediplomat.com/2015/08/un-report-china-sold-20-million-in-arms-and-ammunition-to-south-sudan/)
3: South Sudan, General Chief of Staff on Visit to China: (http://www.sudantribune.com/spip.php?article66068)
4: Average Road Construction per Km: (https://addisfortune.net/articles/era-to-inaugurate-69km-road-at-one-billion-birr-cost/)
5: USA-Iranian Politics: (https://www.cfr.org/blog/complicated-geopolitics-us-oil-sanctions-iran)
6: Alberta, Trans-Mountain Pipeline, Canada: (https://www.theglobeandmail.com/politics/article-trans-mountain-kinder-morgan-pipeline-bc-alberta-explainer/)