Publication - Working Paper
Oil is the lifeline of the South Sudan economy now and over the medium term. It accounted for about half of the country’s GDP, and most of the country’s exports (about 97 %) and government’s revenue (about 98 %) in the period 2008-2011. Oil production of 360 thousand barrels per day in 2011 resulted in high export earnings, high government revenues and an income per capita level of a lower middle-income country.
Given the current dominance of oil, and the relative underdevelopment of non-oil sectors; the functioning of the oil sector represents a key priority for government. Furthermore, since production and consequently revenues are forecast to cease by the 2030s, the future trajectory of the oil sector represents a critical challenge in the development of this new nation.
A key question for South Sudan going forward is whether the oil production can be increased and extended beyond the projections presented in the South Sudan Development Plan (2011). The most direct way to achieve this would be to increase the recovery rate from existing fields.
The second way to increase oil production in the longer run would be to discover new oil. Current exploration activity remains low and actions to encourage increased search activity pose an important challenge for the government (Shankleman, 2011). Both these steps are likely to require increased investment by international companies and therefore an important policy question is whether government actions can induce this increased investment.