CIAO DATE: 08/2011
July 2011
United States Institute of Peace
Oil started being produced in Sudan in the 1990s and has become the mainstay of the economies of the north and south. Most, but not all, of the oilfields are in South Sudan, but the export pipelines, Red Sea export terminal, and refineries are in the north. Agreement to share control over oil resources and revenues was a central part of the 2005 Comprehensive Peace Agreement, but up to the eve of South Sudan’s secession, north and south had not resolved how to divide the industry or its revenues. The Republic of South Sudan starts independence facing huge challenges in using its oil wealth to jump-start development in the country, where over 50 percent of its people live below the poverty line and over 80 percent are illiterate. Without new investment to increase output, or successful exploration that finds additional resources, South Sudan faces declining oil production from 2015—too little time under any circumstances to diversify the economy and develop alternative sources of government revenue. As the most oil-dependent state in the world, the government of South Sudan faces the certainty that its income will fluctuate from year to year with global oil prices, a circumstance known to make sound macroeconomic management difficult.
Resource link: Oil and State Building in South Sudan [PDF] - 555K