Geopolitical Volatility in Sudan and South Sudan: Implications for Regional Energy Markets

The ongoing civil conflict in Sudan and its spillover into South Sudan have created a volatile environment for regional energy markets. The two nations’ shared oil infrastructure—particularly the pipeline transporting South Sudan’s crude through Sudan to the Red Sea—has become a flashpoint for geopolitical risk. Recent developments highlight the precarious balance between economic recovery and the threat of renewed instability, raising critical questions for investors assessing the region’s energy sector.

A Delicate Infrastructure Recovery

In early 2025, South Sudan resumed oil exports after repairs to a pipeline damaged by an airstrike in 2024 [2]. This restoration, facilitated by negotiations involving Sudan’s government, the Rapid Support Forces (RSF), and international oil companies like China National Petroleum Corp, initially signaled hope for economic stabilization. South Sudan’s oil production, which had plummeted to 90,000 barrels per day in February 2025, now accounts for over 90% of its government revenue [1]. However, this progress is overshadowed by persistent threats. Drone attacks on Heglig’s airport and critical pump stations in Port Sudan have forced oil companies like PETCO and 2B OPCO to prepare for potential shutdowns in Unity State [1]. Sudan’s army has warned that continued attacks could lead to a complete halt of South Sudan’s oil exports, severing a lifeline for both economies [4].

Economic and Investment Risks

The interdependence of Sudan and South Sudan’s energy systems amplifies the stakes. South Sudan’s economy, already reeling from a 24.5% GDP contraction in 2024, is projected to grow by 17.0% in 2025 if oil exports remain stable [3]. Yet this optimism is fragile. A shutdown of the pipeline would deprive South Sudan of its primary foreign exchange, exacerbating fiscal distress and currency collapse [2]. For Sudan, the loss of transit fees—estimated at $1.5 billion annually—would deepen its economic crisis, already marked by a 24,000-barrel-per-day oil production decline due to damaged refineries [4].

Investors face compounding risks: infrastructure vulnerability, political instability, and the lack of international intervention. The al-Jaili refinery, a key Sudanese asset, remains non-operational, further straining regional energy security [4]. Meanwhile, South Sudan’s oil-backed debts to creditors like Qatar’s QNB and Afreximbank loom large, with defaults likely if exports falter [3].

Strategic Considerations for Investors

The region’s energy markets demand a nuanced risk assessment. While the resumption of oil flows offers short-term gains, long-term investments must account for:
1. Geopolitical Escalation: Continued fighting between Sudan’s army and RSF could disrupt operations at any stage of the supply chain.
2. Infrastructure Resilience: The pipeline’s repeated damage underscores the need for diversified export routes or alternative energy investments.
3. Credit Risk: South Sudan’s debt obligations, tied to volatile oil revenues, pose liquidity challenges for foreign stakeholders.

International oil companies operating in the region, such as Sinopec and Vitol, are already recalibrating strategies. Their contingency plans for infrastructure shutdowns reflect a broader industry caution [1]. For institutional investors, hedging against political risk and diversifying regional energy portfolios may mitigate exposure to this volatile corridor.

Conclusion

The Sudan–South Sudan energy corridor remains a linchpin for regional stability but is increasingly a liability. While 2025’s pipeline repairs have averted immediate collapse, the underlying conflict and infrastructure fragility persist. Investors must weigh the potential for economic recovery against the ever-present threat of renewed violence. In this context, strategic patience and adaptive risk management are not just advisable—they are imperative.

**Source:[1] South Sudan oil faces shutdown threat [https://www.radiotamazuj.org/en/news/article/south-sudan-oil-faces-shutdown-threat][2] South Sudan Restarts Oil Exports Via Sudan After Pipeline Repairs [https://www.pipeline-journal.net/news/south-sudan-restarts-oil-exports-sudan-after-pipeline-repairs][3] Creditors circle South Sudan over oil-backed debts [https://www.gtreview.com/news/africa/creditors-circle-south-sudan-over-oil-backed-debts/][4] Sudan War Shatters Infrastructure, Costly Rebuild Needed [https://www.reuters.com/world/africa/sudan-war-shatters-infrastructure-costly-rebuild-needed-2025-05-28/]