Sudan war mirrors region's oil conflicts

April 18, 2012 at 12:36 PM
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KHARTOUM, Sudan, April 18 (UPI) -- The brewing war between Sudan and the fledgling state of South Sudan is a battle for oil and there are other potential conflicts in the Middle East and Africa that could signal supply disruption whatever happens in the U.S.-Iran face-off in the Persian Gulf.

Libya, one of North Africa's main producers, seems to heading for a new civil war only six months after Moammar Gadhafi's regime was overthrown with rival militias struggling for control of the country's oil riches.

But, more importantly, there's a growing power struggle in Iraq, a key oil producer that seeks to challenge Saudi Arabia's primacy in the oil business.

Sudan, which ruled the south until it gained independence under a 2005 agreement that ended several decades of civil war, has seized the Heglig oilfield in the disputed border zone with the new state.

South Sudan, even though its forces are outgunned and outnumbered by the Khartoum regime in the north, has vowed to retake the field "whatever the cost."

Most of Sudan's oil reserves, 6.6 billion barrels, lie in the landlocked south, while the north controls export pipelines to the Red Sea.

The conflict has been simmering since the south's independence, with Khartoum fuming because it lost the bulk of its revenues.

While the global oil supply is barely dented by the loss of South Sudan's output of 350,000 barrels per day, upheavals there, Libya and Yemen have cut around 1 million bpd from the global supply.

With global spare production capacity already largely committed as Iran's exports shrink because of sanctions, events in countries like Sudan, Yemen, Libya and especially Iraq assume a greater importance.

Oil is at the core of a swelling feud between the Baghdad government and Iraq's independence-minded Kurds amid growing provincial demands for autonomy, including the Shiite-dominated oil-rich south.

In the main, the various political disputes wracking Iraq have "generated little more than stalemate," says the International Crisis Group, a Brussels think tank.

"This stalemate is most consequential in the realm of oil and gas development, which will generate an estimated $1 trillion in revenue in the coming decade," it observed.

The semi-autonomous Kurds in their northern enclave claim the Kirkuk oil fields, which contain around one-third of Iraq's known reserves of 143.1 billion barrels. The enclave itself sits on 45 billion barrels of oil.

The Kurdish Regional government has also defied Baghdad, which insists it's the sole authority in energy matters and signed exploration contracts with 40 foreign oil companies, most of them small wildcatters.

But the conflict escalated in October when Exxon Mobil of the United States, the world's biggest oil company, signed an exploration deal with the KRG.

This was a serious upset for the central government and a major boost for the KRG. It also bolstered demands by other regions for greater autonomy.

The most important is Basra province, which sits on two-thirds of Iraq's reserves.

If it broke away as the Kurds, who fought the Baghdad regime for decades until the 2003 U.S. invasion, seem intent on doing eventually, Iraq would effectively disintegrate.

That would open the door to a new scramble by Big Oil for access to the vast untapped reserves industry analysts say lie there. Estimates go as high as 150 billion barrels.

Exxon Mobil's breakaway from Baghdad's low-paying contract system under which a dozen international consortia has been developing the rich southern fields since 2009, to the higher paying prospects of Kurdistan may encourage other majors to follow suit.

"The autonomous Kurdistan region … is becoming more attractive because it avoids the ornery -- and costly -- officialdom of the Baghdad regime for development of the south," observed analyst John Glaser of the Web site.

Libya has Africa's largest oil reserves, 44 billion barrels. There are moves by the eastern region, which has three-quarters of the country's oil reserves, for regional autonomy with Benghazi as its capital.

Similar demands have come from the southern Fezzan region, another key oil-producing zone.

The National Transitional Council is weak, without a strong military force because the feuding regional militias refuse to join a national army.

One of the eastern leaders, Bubaker Buera, said Benghazi could use the oil weapon to press its demands. If the NTC in Tripoli refused to meet those demands, "we may be forced to stop the oil flow," he warned.

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