No South Sudan Oil Exports Until at Least March

Sudanese oil workers inspect burnt out equipment at the field in Heglig on the border with the South. The conflict with the Republic of Sudan has further crippled the South Sudanese economy., a photo by Pan-African News Wire File Photos on Flickr.

January 03, 2013

No S. Sudan Oil Exports Until at Least March

by Reuters

South Sudan will delay resuming oil exports until at least mid-March even if the new African republic solves all security conflicts with Sudan at a presidential summit on Friday, Oil Minister Stephen Dhieu Dau said.

The comments, the first forecast since November, are a blow for both oil-reliant economies which have been in dispute since last January when South Sudan shut down its crude output of 350,000 barrels a day after failing to agree on export fees with Sudan.

Landlocked South Sudan had planned to resume exports through Sudan this month after the two sides signed several deals to end hostilities in September.

But Juba has delayed restarting its oil wells because the two states have failed to agree on how to secure their disputed border, a condition both say is necessary to resume oil exports.

Sudan's President Omar Hassan al-Bashir and South Sudan's Salva Kiir are scheduled to hold a summit in Ethiopia on Friday aimed at ending the deadlock.

South Sudan's oil minister said both countries had made preparations to restart piping oil to Sudan's export terminal at Port Sudan but it would take two months to hit markets.

"If the two presidents meet ...and the two ministries of petroleum in the two countries are given orders to resume the oil production, I can say that by mid-March the crude will be at Port Sudan," Dau said in a interview late on Wednesday.

"You have 90 days for the whole procedure from marketing to lifting and then collection of the proceeds," he said, adding that the government would not get any oil revenues until April.

Dau did not say when exports would resume but based on the previous plan of restarting production on Nov. 15 and the first exports hitting markets by January, South Sudan would only come close to its former output of 350,000 bpd in the second half of the year.

It had originally planned to have full output restored at its largest oilfields in Upper Nile state by March and at the smaller field in Unity state by May.

From a technical point of view the export facilities, processing plants and pipelines were ready, Dau said: "We are ready 100 percent now, the two sides."

Diplomats see no quick breakthrough at the presidential summit as both sides share a deep mistrust and have repeatedly failed to implement what they have signed.

Even if the presidents agreed to set up a demilitarized border zone, as agreed in September, withdrawing their armies would take time.

In another setback for international efforts to defuse tensions, South Sudan on Thursday accused the Sudanese army of having bombed its side on the border.

The African neighbors came close to war last April in the worst violence since South Sudan seceded from Sudan in July 2011.

That followed a 2005 peace deal which ended decades of civil war yet conflicts between the two countries persist. Apart from restarting oil exports they must also determine ownership of several disputed border areas.

Arbitration

Dau said Sudan and South Sudan had failed to end a dispute over how much Juba should pay for seizing northern-owned oil facilities in the south.

Both pledged in September agreements to find a solution within two months. But Dau said Sudan, which demands $1.8 billion for the former assets of its state firm Sudapet, had now opted to seek arbitration.

"We accepted, so the case now is before the International Centre for Investment Dispute Settlement in London," Dau said.

There was no immediate reaction from Sudan's oil ministry.

Dau added that South Sudan would hold new talks next week with Toyota Kenya over a feasibility study to build an alternative oil pipeline through Kenya. All current pipelines go through Sudan.

"We are confident that in the first half of 2013, we should actually have a clear position about the construction of the pipeline," Dau said.

Analysts are sceptical about government plans for such a pipeline because it would have to cross rough and violence-stricken territory and would only be viable pending significant new oil discoveries.