As the former head of US security company Blackwater USA, Erik Prince thrived in war zones like Iraq and Afghanistan. South Sudan, the world’s newest nation, where violence erupted in December, is proving tougher.

Prohibitive costs, transportation difficulties, political instability and growing insecurity have rendered the former Navy Seal’s plan to build an oil refinery in the north of the country unfeasible for the time being, said Sean Rump, a partner at Prince’s Frontier Resource Group.

Talks this month with financiers failed to revive the project, which was to have been completed by December, he said.

“We believe in the future of South Sudan,” Mr Rump said. “If we thought it was going to be a failed state, we wouldn’t be here. But when will the trouble end and the refinery be built? We just don’t know.”

Fighting broke out in South Sudan after President Salva Kiir accused his former deputy, Riek Machar, of trying to stage a coup.

At least 10,000 people have been killed and a million people are estimated to have fled their homes in the ensuing conflict, while oil production that funds 98 per cent of the government’s budget has been cut by a third.

Attempts to call a truce have failed to gain traction, with government and rebel forces accusing each other of violating the agreements.

Frontier, a private equity firm based in Abu Dhabi, has a 12-year agreement with the South Sudanese government to build, own and then transfer to the state a 10,000-50,000 barrel per day refinery that will supply diesel to the domestic market. The landlocked nation currently imports all of its refined fuel.