Newsletter No. 9
June 9, 2005

 

JAPANESE NGO WINS OIL RIGHTS IN SUDAN

A very unusual story has been reported by the Mainichi Shinbun. A Japanese NGO-related company has been granted an oil concession in eastern Sudan. This is Japan’s first foreign oil concession since the Arabian Oil Company lost the concession for the Khafji oil field in 2000.

On May 19th, a contract was signed by the government of Sudan and the Tokyo-based Systems International Group (SIG), a medical equipment company. SIG has only been in existence since April, having been established by a Japanese NGO called Reliance. The deal gives SIG a concession for a period of 25 years in a region south of Khartoum along the Ethiopian border. SIG paid about $100 mil. to receive the concession.

There are several unusual features to the deal. First of all, the NGO Reliance has been active in supplying humanitarian aid to Sudan since the late 1990s. Secondly, SIG plans to take any profits from the oil business and put them back into humanitarian relief.

However, there is reason to be concerned that SIG may not fare so well in this deal. First of all, although the oil concession is thought to be rich, some doubts remain. Secondly, SIG has no experience in the oil business. Thirdly, an expensive pipeline will have to be built in order to transport the oil from such a remote area. Finally, one should probably factor in that Sudan’s neighborhood is not exactly the most stable region in the world, and political difficulties are certainly conceivable.

Still, the agreement has already been signed. It will be interesting to watch and see what happens.