South Sudan Crude ‘Not Fit’ for Sri Lanka Refinery

(COLOMBO) – Sri Lanka’s renewed interest in sourcing crude oil from South Sudan is facing a  number of serious obstacles, including international sanctions, weak infrastructure, and technical incompatibility, according to Kana Kananathan, Sri Lanka’s former ambassador to South Sudan.

Speaking in Colombo, Kananathan advised Sri Lanka’s energy authorities to proceed with caution, stressing that the risks outweigh the potential benefits.

He pointed to ongoing US sanctions on South Sudan’s oil sector, which severely limit international trade and financial transactions involving South Sudanese crude oil.

Since 2018, the United States has sanctioned at least 15 oil linked entities in South Sudan, including the national oil company, Nilepet.

These sanctions aim to prevent oil revenues from fuelling internal conflict. Any country seeking to trade in South Sudanese crude must first obtain a US export license, which can be a lengthy and uncertain process. Transactions made in US dollars, the global standard for oil, are particularly affected by these restrictions.

Kananathan noted that these legal risks have pushed most major oil traders to avoid dealing with South Sudan, unless the crude is offered at heavily discounted prices to compensate for the added complications.

Beyond the legal challenges, South Sudan’s geographical and logistical limitations further undermine the case for imports. The country is landlocked, and all its crude oil exports must travel through a single pipeline to Port Sudan on the Red Sea.

That route is vulnerable to frequent disruptions due to regional conflict, technical failures, and armed unrest, particularly amid the wider Red Sea tensions involving Houthi militants.

Kananathan warned that this unpredictability would place further stress on Sri Lanka’s already limited energy reserves.

“We depend on reliable and stable supplies. South Sudan cannot offer that under current circumstances,” he said.

Even if Sri Lanka managed to secure crude shipments from South Sudan, transporting the oil would be costly and risky. Routes to Port Sudan pass through conflict zones, and regional infrastructure is inadequate. These factors inflate shipping expenses and increase the risk of delays or disruptions.

South Sudan exports two types of crude oil: Nile Blend, a semi-sweet crude, and Dar Blend, a heavier and more acidic grade. Of the two, Dar Blend poses major challenges for refineries that are not equipped to handle high acid levels. With a Total Acid Number (TAN) of 2.1 to 2.4, it can cause severe corrosion in conventional refinery equipment.

Sri Lanka’s only operating refinery , the 50,000 barrel per day Sapugaskanda Refinery  is currently configured to process light to medium sweet crudes. Processing Dar Blend would require major technical upgrades. These would include installing corrosion resistant piping and materials, fitting advanced blending and desulphurisation systems, and enhancing heating units to manage the crude’s heavier characteristics.

Estimated Additional Refinery Upgrade Needs:

Kananathan pointed out that these upgrades would likely cancel out any cost advantage gained from lower crude prices. With global oil markets still volatile and Sri Lanka’s foreign reserves under pressure, this approach offers limited financial benefit.

He instead recommended that Sri Lanka focus on sourcing crude from countries with stable political environments and compatible crude grades. Nigeria’s Bonny Light and Saudi Arabia’s Arab Light were cited as examples of reliable options.

South Sudan’s oil, he argued, is unsuitable for Sri Lanka on multiple fronts including legal, technical, and commercial. Sanctions restrict access, supply chains remain unreliable, and the crude itself is not compatible with Sri Lanka’s refinery infrastructure.

Instead, he urged Sri Lanka to invest in long term energy security. This includes modernising the refining sector through projects like the proposed Hambantota refinery, which would increase the country’s capacity to process a wider range of crude grades in future.

“Our energy strategy must be built on dependability and foresight,” he said, “not on high-risk, low return deals.”

South Sudan, which currently produces around 140,000 barrels per day, continues to seek new markets for its crude amidst mounting pressure from sanctions and domestic instability.

However, for countries like Sri Lanka, the cost of engaging with such a fragile oil sector may be far greater than any perceived savings.