Malaysian oil and gas giant Petroliam Nasional Bhd. (PETRONAS) has filed a lawsuit against South Sudan, accusing the government of obstructing the sale of its assets, valued at $1.25 billion, and instead seizing control of its operations.
In early August, South Sudan’s state-owned Nile Petroleum Corp. took control of PETRONAS’ oil fields and assets, effectively reclaiming the Malaysian company’s investment. The state-run firm announced plans to find a new partner to continue operations.
“Petronas International Corp. has initiated arbitration proceedings at the International Centre for Settlement of Investment Disputes regarding the divestment of its operations in the Republic of South Sudan,” said PETRONAS in response to inquiries.
The company declined further comment due to the ongoing arbitration with the World Bank agency.
Bloomberg reports that South Sudan’s petroleum ministry has not responded to multiple requests for comment.
PETRONAS announced its decision to exit South Sudan on August 8, ending nearly three decades of involvement in the region, which began before South Sudan gained independence in 2011. The company had been in talks with UK-based oil and gas firm Savannah Energy Plc regarding the sale of its assets.
The Malaysian firm scaled back its investment in South Sudan due to rising costs associated with a damaged pipeline that transports two-thirds of the country’s crude oil through neighboring Sudan, which has been embroiled in conflict for over a year.
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The pipeline was damaged after a diesel shortage caused the crude oil to thicken and rupture the conduit.
In a letter dated August 5, Chol Deng Thon Abel, an undersecretary at South Sudan’s petroleum ministry, accused PETRONAS of violating national laws by failing to conduct an environmental audit and pay for damages.
The letter, obtained by Bloomberg, also claimed that PETRONAS issued an ultimatum for South Sudan to designate an entity to purchase its assets.
PETRONAS denied these allegations, with Azahari Shuid, a senior general manager at the company, describing the government’s actions as “arbitrary, unreasonable, and unlawful” in response to the ministry’s letter.
PETRONAS began extracting crude oil in the region in 1997 as part of a consortium led by Swedish firm Lundin Oil AB.
