South Sudan 2026: oil restart, fiscal collapse, and post conflict risk

Why this matters now #

South Sudan is the most oil dependent state in the world that the global market has structurally decoupled from. The Dar Blend and Nile Blend streams, produced in Block 3 and 7 (Dar Petroleum Operating Company) and Blocks 1, 2, and 4 (Greater Pioneer Operating Company), travel a single 1,610 kilometer pipeline through Sudan to the Bashayer terminals near Port Sudan. The Sudanese Armed Forces and Rapid Support Forces war that erupted in April 2023 has now degraded the pipeline corridor across El Obeid, Khartoum, and the Red Sea state, and a force majeure was declared by the Sudanese Ministry of Energy and Petroleum in March 2024.

The fiscal consequence is not abstract. The IMF estimated in its 2024 Article IV that oil and oil related transfers accounted for over ninety percent of total government revenue and roughly sixty percent of GDP before the shock. World Bank macro poverty outlook tables show real GDP contracting by 26.4 percent in fiscal 2024 to 2025, the deepest single year contraction recorded in the post 2011 series. There is no diversified tax base to absorb the gap, the non oil revenue ratio is below five percent of GDP.

Currency collapse has compounded the revenue collapse. The Bank of South Sudan parallel rate has moved from roughly 130 per dollar in 2020 to above 4,500 per dollar by early 2026, headline inflation crossed one hundred percent year on year in mid 2024, and import prices for the wheat, sorghum, and fuel cargoes that Juba does not produce domestically have moved in lockstep. The SSP is no longer functioning as a unit of account in border markets like Nimule and Renk, where Ugandan shilling and Ethiopian birr clearing has substituted.

The 2026 restart, signaled by Petroleum Ministry communications and confirmed in S&P Global Commodity Insights reporting from January 2026, is therefore a contested fiscal lifeline rather than an investment opportunity. The political calendar, with elections now formally postponed to December 2026 under the August 2024 RTGoNU extension, runs into the same period during which Juba must decide whether to monetize restart cash flow against existing prepayment claims or attempt to rebuild a civilian wage bill that has been in arrears for most of the contract.

Production trajectory and pipeline single point of failure #

Pre independence peak production stood near 470,000 bpd in 2010 across the unified Sudanese fields. At 2011 secession South Sudan inherited roughly 350,000 bpd, about three quarters of the joint output. Output then collapsed twice. The first collapse, in January 2012, came from Juba's unilateral shutdown over transit fee disputes with Khartoum. The second, beginning December 2013, came from civil war damage to facilities in Unity state that has never been fully reversed.

By 2019, production had stabilized in a band of 170,000 to 180,000 bpd, with Dar Petroleum operated Blocks 3 and 7 in Upper Nile contributing roughly two thirds of total volumes and Greater Pioneer operated Blocks 1, 2, and 4 in Unity carrying the remainder. The 2024 force majeure on the Petrodar pipeline segment cut effective exports to roughly 60,000 bpd, with the Greater Nile Petroleum Operating Company line still moving Nile Blend at reduced flow rates.

The pipeline geography is the binding constraint. Both export streams converge on Bashayer Marine Terminal 1 and Bashayer Marine Terminal 2 on the Red Sea, north of Port Sudan, an area the SAF holds but which sits within drone range of RSF positions. Insurance market reporting through 2025 placed war risk premia on tanker calls at Bashayer at multiples of comparable Gulf of Aden lifting risk. There is no operational alternative. The proposed Lamu corridor through Kenya has not progressed beyond preliminary feasibility studies since 2012, and the Djibouti routing studied in 2013 was never engineered.

The 2026 restart therefore depends not on subsurface conditions but on three things in sequence: SAF capacity to clear residual sediment and corrosion in the pipeline after a near two year shut in, RSF restraint near the terminals, and a tariff settlement with Khartoum that revives the USD 9.10 per barrel Dar Blend transit fee structure agreed in 2012. Industry reporting through Q1 2026 indicates the first two are now plausible, the third is unresolved.

Fiscal anatomy: arrears, prepayment, and the cash that never arrives #

South Sudan's published fiscal accounts overstate available resources because they record gross oil revenue rather than the residual cash that reaches Treasury after pipeline tariffs, processing fees, cost oil entitlements, and prepayment offsets. The IMF Article IV staff report estimated in 2024 that net cash to government from each barrel of oil equivalent was running below USD 25 against a Brent reference above USD 80, after Sudan transit fees, Transitional Financial Arrangement payments, operator cost recovery, and amortization of prior prepayment debt.

Prepayment financing is the central feature of the fiscal architecture. Stabilex Solutions, an Afreximbank affiliate, has acted as primary financier since 2018, with reported facilities cumulatively above USD 2 billion collateralized against future oil deliveries. Afreximbank itself has provided additional balance sheet support, and Glencore retained legacy prepayment exposure that was largely settled before 2022. The structural effect is that a meaningful share of post 2024 oil receipts is already encumbered.

On the spending side, the Ministry of Finance and Economic Planning has accumulated salary arrears across the civilian bureaucracy and the SSPDF (formerly SPLA) running between ten and fourteen months as of late 2025, per UN Panel of Experts reporting and ICG analysis. The SSPDF wage bill is the binding political constraint, unpaid soldiers in Juba, Bor, and Bentiu have historically been the proximate trigger of localized violence and predatory taxation at checkpoints.

The IMF approved a Rapid Credit Facility disbursement of USD 112.7 million in June 2023, the second under the Food Shock Window framework, following a USD 174.2 million disbursement in March 2022 under the same instrument. The 2026 question is whether a follow on RCF or a Staff Monitored Program can be negotiated against the restart cash flow, and whether the authorities will accept the spending controls on extra budgetary outlays through the Office of the President that previous Article IV consultations have flagged.

Political economy: R-ARCSS, the 2026 election, and Kiir Machar dynamics #

The Revitalized Agreement on the Resolution of the Conflict in South Sudan, signed September 2018, established a power sharing framework between President Salva Kiir's SPLM and First Vice President Riek Machar's SPLM-IO, with provisions for unified security forces, a permanent constitution, and elections. The transitional period was originally scheduled to conclude in February 2023. It has now been extended three times, most recently in August 2024, pushing elections to December 2026.

The unified armed forces provision under R-ARCSS Chapter 2 remains substantially unimplemented. The Necessary Unified Forces target of 83,000 troops drawn from former SPLA, SPLA-IO, and other armed groups has reached only partial graduation, with persistent disagreements over command structure, deployment, and integration of the National Security Service. The Ceasefire and Transitional Security Arrangements Monitoring and Verification Mechanism has documented continued violations across Upper Nile, Jonglei, and Western Equatoria.

Kiir Machar tensions resurfaced sharply in February and March 2025 with the arrest of senior SPLM-IO figures and the temporary detention of Machar himself in Juba in March 2025, an episode that the IGAD ministerial council, the Joint Monitoring and Evaluation Commission, and the African Union Peace and Security Council all flagged as a near rupture of R-ARCSS. The trilateral diplomacy that followed, led by Kenya, Uganda, and IGAD, has so far prevented a return to 2013 or 2016 scale violence.

The election itself faces three structural constraints. There is no permanent constitution, the National Constitutional Amendment Committee process under R-ARCSS has not produced a finalized draft, and the National Elections Commission lacks both budget and operational reach across the ten states and three administrative areas. The Sudan war has displaced an additional 1.1 million people into South Sudan as of UNHCR mid 2025 returns and refugee data, complicating any voter registration.

Investor and trader exposure: the consortium math #

The upstream consortium structure inherited at independence has changed only at the margins. Dar Petroleum Operating Company, holding Blocks 3 and 7 (Adar Yale and Palogue fields), is operated under a joint venture led by China National Petroleum Corporation, with Petronas, ONGC Videsh, and Sinopec as significant partners and Nilepet, the South Sudanese state oil company, holding the local share. Greater Pioneer Operating Company, holding Blocks 1, 2, and 4 (Unity and Heglig area equivalents on the South Sudan side), is structured similarly with CNPC as lead operator and Petronas, ONGC Videsh, and Nilepet alongside.

The newer entrants are Tri-Ocean Energy and Trinity Energy. Tri-Ocean acquired Total's legacy Block B exploration interests in 2017, then participated in subsequent block reallocations. Trinity Energy, the largest South Sudanese owned oil trader, has been the principal local downstream player and has periodically appeared as a counterparty in prepayment structures. The Defense and Production blocks (DPO blocks), held in the name of security entities, are a recurring transparency concern flagged in EITI South Sudan validation and Sentry reporting.

Trading risk concentrates in three areas. First, payment risk on lifted cargoes given the prepayment overhang and the Bank of South Sudan's limited dollar liquidity, S&P Global and Argus reporting through 2024 and 2025 records repeated delays and disputed quality discounts on Dar Blend cargoes. Second, sanctions exposure on counterparties with documented links to South Sudanese security actors under OFAC SSPER designations and EU restrictive measures. Third, war risk and pipeline operability, the cost of insuring tanker calls at Bashayer remains elevated relative to comparable Red Sea and Gulf liftings.

M&A activity has been minimal since 2020, with Petronas signaling a strategic exit in 2023 that has not closed, and ONGC Videsh maintaining its position despite intermittent provisioning against the asset value. The 2026 restart, if sustained, will determine whether the existing consortium structure holds or whether further Chinese state consolidation becomes the equilibrium outcome.

Recommendations for sovereign creditors, oil traders, donors, and peacekeepers #

For sovereign creditors and the IMF: condition any new RCF tranche on a published reconciliation between gross oil revenue, Sudan transit obligations, prepayment amortization, and Treasury cash receipts on a quarterly basis. The 2024 Article IV staff report identifies the gap, the 2026 follow up should make the gap public. Pair this with a salary arrears clearance schedule for civilian bureaucracy and SSPDF that is independently verified, the political economy of the restart depends on it.

For oil traders and prepayment financiers: re price counterparty risk on cargo basis rather than annualized basis. The 2024 to 2025 disputes on Dar Blend quality discounts and demurrage at Bashayer are leading indicators of payment friction that historical prepayment structures did not stress test. Build in covenants for force majeure events triggered by Sudan war escalation, and price the pipeline reactivation tariff uncertainty explicitly rather than embedding it in a residual fee.

For humanitarian donors: the funding gap is the binding constraint. The OCHA 2025 Humanitarian Needs and Response Plan identifies 9.3 million people in need across South Sudan, against a funded share that ran below forty percent at midyear, the WFP pipeline has been forced into ration cuts of fifty percent or more across multiple counties. The Sudan refugee inflow concentrated in Renk, Maban, and Malakal counties imposes a marginal cost that traditional appeals cycles have not absorbed. Multi year flexible financing through the Country Based Pooled Fund and direct WFP allocations is the operational path.

For the peacekeeping framework: UNMISS mandate renewal in March 2026 should preserve civilian protection, force protection at Bentiu, Malakal, and Tamburra, and the human rights monitoring function. The R-ARCSS implementation question, however, sits with IGAD and the AU, not UNMISS. The trilateral architecture (Kenya, Uganda, Sudan when it can engage) that defused the March 2025 Machar detention is the realistic enforcement layer. International partners should resource that channel rather than expecting the UN Security Council to substitute for it.

Sources #

• IMF Article IV Consultation with South Sudan, Staff Report, June 2024
• IMF Press Release: South Sudan RCF Disbursement, June 2023
• World Bank South Sudan Macro Poverty Outlook, October 2025
• EITI South Sudan Country Page and Validation Reports
• UN Panel of Experts on South Sudan, Final Report S/2024/336
• International Crisis Group South Sudan analysis 2024 to 2025
• S&P Global Commodity Insights, South Sudan oil restart coverage, January 2026
• Reuters: South Sudan oil pipeline force majeure, March 2024
• IGAD Communique on R-ARCSS Extension, August 2024
• UNHCR South Sudan Operational Update and Sudan Emergency
• OCHA South Sudan Humanitarian Needs and Response Plan 2025
• WFP South Sudan Country Brief
• Bank of South Sudan macroeconomic statistics
• The Sentry: South Sudan financial flows reporting