Sudan's undeveloped oil potential may be back on the radar screen for Western firms after the Sudanese government and main rebel group reached an agreement that could end a 19-year-civil war, industry experts say.
But until a full peace deal is signed and implemented, they say Sudan is likely to stay dominated by Asian and East European firms which appear less sensitive to criticism by Western-based human rights groups amid the fighting in oil-rich areas.
"I think people are sitting up and paying attention right now. It will be a while before there is any real action," said Ian Lundin, chairman of Sweden's Lundin Petroleum, which suspended activity in Sudan in January due to fighting.
"We have made it clear that we need a cessation of hostilities for us to go back in there. That has to be established and we have to be able to show that it is permanent," he told Reuters by telephone from his Geneva office.
The peace agreement between the government and rebel Sudan People's Liberation Movement announced a week ago was hailed as a breakthrough on some key differences, but is unlikely to bring a ceasefire until a comprehensive deal is reached.
Broadly, the war pits Sudan's Islamic government in the north against rebels seeking more autonomy for the mainly Christian or animist south, where most of the oil is found.
Lundin is leading exploration of Block 5A in southern Sudan with Malaysia's Petronas, Austria's OMV and Sudan's Sudapet. The site is in a key hydrocarbon area of Africa's largest country but also in the conflict zone.
Sudan currently produces about 250,000 barrels per day (bpd) with plans to ramp up output to 500,000 bpd by 2005.
Oil firms working in Sudan face vociferous criticism from human rights groups which say oil revenues are used by the government to fuel the war effort in the south, while rebels have said oil installations are legitimate targets for attack.
"Of course, we are sensitive to criticism. All the Western public companies are sensitive to that type of criticism," Lundin said but defended his company's presence, saying the funds supported development of the poor country and oil firms helped monitor any human rights abuses.
OMV, which has said it is not willing to return if human rights were being violated, told Reuters it would welcome a peace deal but would wait for the results of its own assessment of the situation before deciding whether to resume operations.
"We have spoken with a number of experts, including a number of NGOs, and are about to put their findings on paper and make it available," board member Helmut Langanger said in Austria.
Alongside security worries and human rights criticism, major Western oil firms are also wary of US sanctions on Sudan.
"I don't believe a Western company right now is going to run out there and start spending any significant money until they see exactly where this peace process is going to go," said Mike Rodgers, senior director of the Petroleum Finance Company.
Meanwhile, production has continued from the main Heglig and Unity fields, where about 230,000 bpd are produced by the Greater Nile Petroleum Operating Co (GNPOC) which includes China National Petroleum Corp, Petronas and Sudapet.
Canada's Talisman Energy Inc has a 25 per cent stake in GNPOC but is expected to pull out after a barrage of criticism. India's state-owned Oil and Natural Gas Corp is a favourite to take the stake if it does exit.
Elsewhere, French firm TotalFinaElf's block is inactive, but Russian-Belarus firm Slavneft earlier in July signed a joint venture deal to develop an oilfield. Russia's state firm Rosneft is also reported to be negotiating a deal.
"It's an opportunity for non-Western companies to gain access to more Sudanese blocks," said one London-based analyst.
Sudan's future attractiveness will depend on the financial conditions and size of blocks on offer because many fields are small so blocks have to cover a wide area, analysts said.
In the peace talks, sensitive discussions about how the parties will divide up the country's oil resources will also be watched closely by energy firms, they added.
Estimates about Sudan's reserves vary, although several experts put proven reserves at around one billion barrels. But they also say that because there has been limited exploration the country's total reserves could be 10 times that amount.
But Rodgers said exploration needed peace. "Whether or not Sudan is a country with billion barrels of oil or several billion, at this point, is really going to hinge on whether or not the parties can agree to stop the hostilities," he said.