KUALA LUMPUR (Aug 8): Malaysia’s national oil and gas company Petroliam Nasional Bhd, or Petronas, said it is withdrawing its operations from South Sudan.

“The decision was made following a two-year period of divestment initiatives in alignment with Petronas’ long-term investment strategy amid the changing industry environment and accelerated energy transition,” Petronas said in a statement.

A planned sale of its entire oil and gas business in South Sudan to Savannah Energy plc, a British energy company, for up to US$1.25 billion (RM5.61 billion) was scrapped as both parties could not complete the deal based on the envisioned terms.

“However, Savannah remains in active discussions with relevant parties around an alternative potential transaction” for acquisition of Petronas assets, Savannah said.

The withdrawal would mark the end of Petronas’ more than two decades venture in the East African country beset by one crisis after another that resulted in frequent shutdowns and disruptions to its operations there.  

The company also grappled with South Sudan’s secession from the Republic of Sudan in 2011 after decades of armed conflicts that killed more than two million people.

An ongoing civil war in South Sudan between two armed factions has seen over 14,000 people perish in the country, according to the United Nations’ estimates.

One of the conditions precedent for the deal is the written approval from the South Sudan's Ministry of Petroleum for the sale-and-purchase agreement, Petronas said in another statement later on Thursday.

In March 2024, the government of South Sudan decided against any approval for the agreement, Petronas said.

Savannah also said the deal was subject to conditions precedent, including receipt of in-country approvals, which despite "the extensive, combined and fully collaborative efforts of all parties”, were not met.

Nevertheless, Petronas maintained that the divestment was done in full compliance of all agreements and laws of South Sudan.

Petronas said it remains committed to the “portfolio rationalisation exercise and will continue to work with the host authority and relevant parties to find a mutually beneficial path forward” for the divestment of its ventures in South Sudan.

Petronas has never detailed its production in South Sudan. However, its assets in South Sudan produced an average gross 153,200 barrels of oil per day in 2021, according to Savannah, a small fraction of Petronas’ total production of 2.28 million barrels of oil equivalent per day in 2021.

Petronas also announced that it did not intend to participate in South Sudan’s first oil licensing round in 2011, citing challenging market conditions and that it is undertaking a strategic review of its assets to ensure that its portfolio remains resilient and commercially viable.

In December 2022, Petronas announced that it was selling its entire portfolio in South Sudan to Savannah. The assets comprise interests in 64 producing fields, with first production dating back to 1999.

If the deal had gone through, Savannah would have owned Petronas’ stake in three joint operating companies which operate Blocks 3 and 7 with 40% working interest, Blocks 1, 2 and 4 with 30% equity, and 33.9% in Block 5A in South Sudan.

Major partners in the joint operating companies include Chinese state-owned firms China National Petroleum Corp and China Petroleum and Chemical Corp, or Sinopec, as well as India’s Oil and Natural Gas Corp Ltd and Nile Petroleum Corp, South Sudan’s national oil company.

Petronas has shed some local and foreign assets. Most recently, Petronas completed the divestment of a 74% stake in Engen Ltd in South Africa in May and sold 25% equity in fertiliser unit Petronas Chemicals Fertiliser Sabah Sdn Bhd through Petronas Chemicals Group Bhd (KL:PCHEM) for RM1.25 billion in 2023.

In 2022, Petronas sold E&P O&M Services Sdn Bhd that provides frontline operations and maintenance services for all floating facilities in Malaysia.