Oil row grows as South Sudan halts production

Officials in Juba say they will not resume oil production until they reach a comprehensive agreement with Khartoum.

The oil dispute between Sudan and South Sudan seemed to reach an impasse on Monday, as the southern government said it would not restart stalled oil production until the two sides reach agreement on a host of long-standing issues.

South Sudan shut down its oil facilities on Saturday to protest against the Sudanese government’s decision to block oil tankers from leaving Port Sudan.

Khartoum held the tankers because of an ongoing dispute over the transit fees which the south pays to ship its oil through Sudan.

Now the dispute seems to have widened. Barnaba Manial Benjamin, the minister of information in Juba, told Al Jazeera the oil facilities will remain offline until both countries agree on border security and the status of the disputed Abyei region.

“There must be a comprehensive solution to this problem so we don’t have another crisis which results from Khartoum acting unilaterally,” Benjamin said. “The restarting of the oil fields is not really the issue.”

South Sudan seceded from the north last summer under the terms of a 2005 peace agreement which ended a decades-long civil war.

Oil has been a major source of tension since the split.

‘First step’

Landlocked South Sudan relies on northern ports to export its oil, and the two sides have spent months negotiating a transit fee.

Their positions could not have been farther apart: Khartoum wanted a fee of $36 per barrel, while Juba offered roughly $1 per barrel.

Sudan seized the tankers earlier this month to make up for what it called unpaid fees.

Analysts say Sudan has already sold at least one of the shipments; it released the remaining cargoes over the weekend, and said it wanted to resume dialogue with the south.

“Our president directed our minister of petroleum to release these two boats; this is to show our goodwill,” said Abdelwahad el-Sawi, an adviser to Omar al-Bashir, Sudan’s president, speaking from the sidelines of the African Union summit in Addis Ababa.

Analysts say several other tankers are still waiting in Port Sudan, costing their owners tens of thousands of dollars per day.

“This is the first step, then we sign the agreement, then we can move forward. But [for] everybody to be entrenched in his position, this will lead to nowhere.”

New pipeline

The oil revenues are crucial for both states. South Sudan is the most oil-dependent country on the planet, with about 98 per cent of government revenues coming from the petroleum sector.

Khartoum, too, derives most of its budget from the oil sector.

Benjamin said the oil shutdown could be a long one, and said the South Sudanese government has enough reserves to last two years.

His claim could not be independently verified, but in August the governor of South Sudan’s central bank said the country’s hard currency reserves would only last “several months,” suggesting that the government’s financial position is not as strong as Benjamin suggests.

South Sudan is building its own oil refinery, which Benjamin said could go online within four months, and is also planning a new pipeline which would bypass Sudan. The latter project will likely take years to complete.

The 2005 peace agreement did not resolve the status of Abyei, a formerly oil-rich, and still highly fertile, region on the border between the two countries.

The region was supposed to hold a referendum to decide which state it would join, but the vote has yet to take place.

The Sudanese government sent troops to Abyei in May, and has said it will not remove those forces until a UN mission arrives later this year.

Source : Al Jazeera

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