South Sudan in Talks with Khartoum Over New Oil Fees, Says Official

July 21, 2022 (JUBA) – South Sudan is currently in talks with Sudan over new oil fees after completing a payment of $3.03 billion to its northern neighbour under the Transitional Financial Arrangement (TFA), an official disclosed.

The TFA was part of the Agreement on Oil and Related Economic Matters (AOREM) signed between the two countries following South Sudan’s independence.

The agreement was signed on September 27, 2012, between the governments of Juba and Khartoum, setting out the terms governing the transit, transportation and processing of oil originating from South Sudan.

“The payment for the Transitional Financial Arrangement package to Sudan has been completed a long time ago. This is the commitment made by the leadership and the country to ensure we settle it. It is something we have done and we should be recognized because we demonstrated our commitment despite the challenges we faced,” Awou Daniel Chuang, a technical adviser in the Ministry of Petroleum told Sudan Tribune Thursday.

Chuang, however, acknowledged that South Sudan’s economy has been badly affected by oil production because some of its oil wells have been inundated by water, putting a huge burden on the country’s economy.

“Besides the cost of production, we also have to pay the transit fees. So, the ministry, our strategy is to look at areas where costs can be reduced. We are creating a good logistics network to help reduce production costs, while also trying to increase local content. Some functions now being done by foreigners must be performed by locals,” explained the official.

He added, “This will also help reduce costs and help improve the economy, benefiting not only the oil sector but also other sectors”.

The Petroleum ministry official described as “good” and “cooperative” the current relations between both nations on matters of common interests.

“We are currently on very good terms with Sudan. We pay Sudan fees, or tariffs as set out in the agreement. This process has been progressing very well to date. But we did have some problems with the previous administration. Things have improved since the change of government and generally a better understanding and improved relations”, he said.

The AOREM expired in March 2022 with South Sudan having satisfied its obligation by 28 February 2022. Sudan had expressed an interest in negotiating a new AOREM between the two countries, but this was challenged by the current political situation in Sudan.

Currently, Sudan is owing South Sudan $136 million, with Khartoum proposing to use the funds to repair a damaged oil pipeline that carries South Sudan’s oil to Port Sudan for refining and export.

Chuang said South Sudan currently pays neighbouring Sudan transportation fees, a processing fee as well a transit fee.

“We have now finished paying Transitional Financial Arrangement to Sudan. Our plan as the ministry was to clear the TFA first, then we will address tariff renegotiations. It is in our interest to negotiate better terms because the circumstances under which this agreement was initially made have changed,” he further explained.

South Sudan relies on Sudan to export its crude oil through Khartoum to the Red Sea.

Revenues from oil resources account for over 90% of South Sudan’s annual budget.

(ST)