EXECUTIVE SUMMARY
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United Nations operations in Sudan – both current humanitarian operations in the Darfurs and future peacekeeping and expanded humanitarian operations in the south - will require fuels support far in excess of that available through Sudan’s domestic refining industry. Substantial overland imports from neighbouring countries are not practicable. This presents the Organisation with a major challenge. Not only must it import large quantities of mostly aviation fuel by sea through Port Sudan whilst ensuring the requirements for successful mission accomplishment in the far west and south of Sudan, but it must also avoid introducing price instability within the Sudan fuels market that can harm sustainable growth in the country.

Although Sudan has developed over the past five years into an important mid-level oil producer and exporter, its current and planned domestic refining capacity is geared only towards meeting current and future local needs for fuels, with a slight surplus of gasoline for export. That refining capacity cannot be increased quickly enough to respond to the UN’s needs, nor would it be wise to do so; given the temporary nature of the UN’s presence in the country, Sudan would be left with costly and unused excess refining capacity.

Content:

• REQUIREMENTS:
• CONTRACTING ARRANGEMENTS:
• DISTRIBUTION and SUPPLY:
• RECOMMENDATIONS:
• Short-term: immediate through to end of October 2004
• Medium-term: November 2004 through to February 2005
• Long-term: Beyond early 2005, into early 2006

REQUIREMENTS:

The two major fuel requirements for the UN and humanitarian community are aviation fuel and diesel. The needs of the current humanitarian mission to the Darfurs with a very limited African Union military element totals about 10 million litres of Jet A-1 aviation fuels and two million litres of diesel per month. This is currently supplied through a combination of locally refined product from Khartoum’s Jaili Refinery, the El Obeid Refinery, and imports through Port Sudan by the main contractor, Shell, in conjunction with the Government’s Sudanese Petroleum Company. Additionally, WFP’s local contractor, Matthew Petroleum (Sudan), buys local product to supplement the imports. The fuels are transported over distances of up to 1600 km to users in the field.

The UN’s peak aviation fuels requirement is equivalent to about half of the country’s total output of Jet A-1. The diesel is less contentious, with needs met by local production and imports on a much lesser scale.

Requirements will increase significantly once the peace agreement with the south is implemented. With overall UN peak monthly requirements expected to be in the region of 20 million litres for aviation fuel and six million litres for diesel against Sudan’s average monthly production of about 18 and 168 million litres respectively, we strongly recommend that all major fuel requirements for the UN are imported. Sudan’s own fuels production should be reserved for its domestic transport, power generation, agricultural and other needs. Planned increases in that production should serve much-needed economic growth in the country and not the UN’s demands.

CONTRACTING ARRANGEMENTS:

The task of importing such large quantities of fuel and distributing them to where they are needed, in some of the most remote parts of the country, requires careful centralised management, planning and prioritisation, attention to detail, and robust execution. It demands a transparent and effective tendering process and a high level of co-operation between the Government of Sudan, commercial entities within the local fuels industry, and the UN agencies and associated organisations. We therefore recommend the establishment of a Joint Fuel User Group, chaired by a senior representative of the Minister of Energy and Mines, with the deputy chair (or co-chair) a senior representative of  the UN.

We further recommend that these imports be implemented under a single, integrated fuels contract, focussed initially on the current and pressing needs of the Darfurs humanitarian operations, but covering the later needs of the peacekeeping operations and increased UN humanitarian operations in the south, the ICRC and other humanitarian players. Such an integrated arrangement will avoid different parts of the UN family competing against each other with commercial suppliers for the same resources, thus driving up prices and possibly creating an uncontrolled market. The size of the single contract – estimated at in excess of US$100 million annually for Jet A-1 aviation fuel alone - will also allow the supplier to realise economies of scale unavailable in several smaller contracts and to pass these savings on to the UN family.

Furthermore, using several smaller contracts may render it uneconomical for individual suppliers to install facilities to service the UN. The throughput of a large contract would help to justify infrastructure investment by the supplier, thus relieving the UN of the need to construct, manage and later decommission its own facilities.

We recommend that the contract is managed on behalf of the entire UN family by one UN entity specifically responsible for the job and charged with taking into account and if necessary reconciling the specific requirements for both the humanitarian and peacekeeping functions of the UN.  

DISTRIBUTION and SUPPLY:

Even with imports, the vast distances between the import point at Port Sudan and the users, together with the parlous state of the transport infrastructure, renders sustained and reliable direct supply impossible. We therefore recommend that 30 days strategic storage is established and run commercially within easy access of the key towns of El Obeid, Kosti and Kadugli in the States of Northern Kordofan, White Nile and Southern Kordofan respectively. Large road tankers can efficiently move bulk quantities on good all-weather roads to these locations; smaller, more robust tankers can then take the fuel forward to operational locations. Such a system, combined with smaller 7-day or more buffer stocks in the field, will allow supply or demand fluctuations to be readily absorbed. The strategic stocks should be held on a prepaid basis so that ownership is undisputed and the supplies appropriated by the authorities in time of crisis.

At present, the transport infrastructure necessary to supply the needs of the anticipated peacekeeping operations and expanded humanitarian mission in the south does not exist. However, if the market is made aware of the size and nature of the need in good time, experience from previous large importation operations suggests that it will be able to respond adequately to the requirements with imported road fuel tankers.

RECOMMENDATIONS:

This is a dynamic and very large operation, quite possibly of several years duration, with the immediate needs of the Darfurs driving the requirements. Our major recommendations are therefore phased accordingly:

Short-term: immediate through to end of October 2004

• World Food Programme, the major user of fuels at present, to engage a second fuels contractor at El Fasher and Nyala, the respective capitals of Northern and Southern Darfur, so as to immediately boost operational capacity. This should be a short-term, stop-gap solution;
• The UN to initiate a Joint Fuel User Group with the Ministry of Energy and Mines, other concerned Sudanese Government Ministries and authorities, the UN humanitarian agencies and other humanitarian actors, and the Department of Peacekeeping Operations;
• The UN entity so tasked with fuel management (herein after referred to as “UN”) to formalise the fuels requirement (utilising existing tenders as a starting point), factor in the requirements of all UN agencies, issue a Statement of Requirements, and commence the tender process.

Medium-term: November 2004 through to February 2005

• UN to appoint a contractor, or consortia of contractors;
• UN to establish a 24-hour operations centre with the successful contractor or consortium;
• The WFP, ICRC and other existing fuels supply contracts to be merged and integrated with the new, single contract;
• A Memorandum of Understanding be agreed between the UN and the Ministry of Energy and Mines, Special Operations Group, covering the direct  importation of fuels by the contractor or consortia for UN and associated use;
• All contractors’ installations be inspected and formally classified by qualified, accredited inspectors to certify them suitable for aviation fuel usage.

Long-term: Beyond early 2005, into early 2006

Negotiations be conducted with the Ministry of Energy and Mines on the possibility of reversing the current benzene (gasoline) export pipeline from Khartoum to Port Sudan (formerly an import pipeline) to import aviation fuel and diesel and carry it from Port Sudan to Khartoum, once the second product export pipeline from Khartoum to Port Sudan, currently under construction, is completed