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Sudan denies halting South Sudan oil exports as China condemns move

November 29, 2011 (KHARTOUM) – The Sudanese government on Tuesday appeared to reverse a decision it announced yesterday by which oil exports from South Sudan passing through the north’s pipelines would come to a halt.

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FILE - Chinese President Hu Jintao (R) joins Sudan’s leader Omer Hassan al-Bashir (L) as they attend a signing ceremony at the Great Hall of the People in Beijing on June 29, 2011 (AFP)

The foreign ministry spokesperson Al-Obaid Marawih told reporters in Khartoum that South Sudan’s will still be able to export its oil through its territories until both countries reach an agreement on fees that should be assessed for using the pipelines and refineries.

Marawih also denied any intention to block exports of oil from Sudan’s southern neighbor.

Yesterday the Sudanese state minister of petroleum Ali Ahmed Osman announced that Khartoum will no longer allow South Sudan to transfer its oil all the way to Port Sudan on the Red Sea until it clears its financial arrears.

Osman claimed that South Sudan owes $727 million on four shipments of oil released and transferred through the oil installations in the north.

The foreign ministry spokesperson today said that his country is determined to get a percentage of South Sudan’s oil exports even if no agreement has been reached on transit fees but without forcibly sealing off the pipelines.

"It is possible later to reach an account settlement regarding the dues and obligations [of each side]," he said.

Last July South Sudan became the world’s newest country after voting for independence in a January vote, taking with it three-quarters of the former united country’s roughly 500,000 barrels per day of oil production.

The two countries are negotiating the oil issue in Ethiopia.

According to the foreign ministry three options were tabled in Addis Ababa by the African Union mediation team led by former South African president Thabo Mbeki including that each side would assist the other economically.

Mbeki on his end suggested that a compromise by which Khartoum gets a percentage of annual oil exports that would include the transit fees to help Sudan overcome the current economic crisis. In return for that Sudan would facilitate border trade and open ports for the flow of goods to South Sudan.

Sudan proposed that the south pay $10.5 billion during the next five years but Mbeki’s team and the International Monetary Fund (IMF) put the figure at $7.4 billion. Neither of the numbers was agreed on.

According to Marawih, Sudan informed Mbeki that it cannot keep exporting south’s oil indefinitely without any financial return.

China made a rare intervention today on the new development with its ambassador in Khartoum slamming news of blocking South Sudan’s oil exports.

The Chinese ambassador in Sudan Luo Xiaoguang described Khartoum’s decision as “very serious and unjustified”.

Xiaoguang further told the pro-government al-Rayaam newspaper that there is no reason to stop the exporting of oil as long as there are negotiations now underway between the two countries in Addis Ababa.

He expressed hope that Sudan would reconsider its decision and called on the Government of Southern Sudan to engage in serious dialogue to reach agreement on outstanding issues particularly the oil dossier.

The Chinese foreign ministry echoed its envoy’s statements.

“Maintaining normal production of oil is important to both South Sudan and Sudan,” Chinese Foreign Ministry spokesman Hong Lei said.

“We hope North and South Sudan can stay rational, show restraint, and resolve relevant problems through neighborly pragmatism and friendly talks” he added.

China depends for nearly five percent of its oil imports on South Sudan, a new country long suspicious of Beijing’s ties with Khartoum.

The state-run China National Petroleum Corporation (CNPC) has pumped billions of dollars into developing oilfields in Sudan, 80 percent of which lie in the south.

A South Sudan oil official said yesterday that a 600,000 barrel oil shipment sold by South Sudan to China’s Unipec did not load as scheduled on Monday because of Sudan’s decision.

A 1 million barrel oil shipment sold to trading house Vitol is due to load on Tuesday but will not "unless there is a change of mind today," Macar Aciek Ader, undersecretary at South Sudan’s ministry of petroleum and mining, told Reuters.

"We were supposed to load 600,000 barrels today, but it didn’t load," he said by telephone, adding the buyer was Unipec, trading arm of China’s top refiner Sinopec Corp.


In Juba an official said that South Sudan will continue to look for alternative pipeline to export its oil.

“We do not see a future in the oil infrastructure of the north. Our oil must have access to international markets. We should not be punished because we decided to secede," Stephen Dhieu Dau, the South Sudanese oil minister told Reuters by telephone from the Ethiopian capital.

Minister Dau reportedly added his country had offered Sudan a $5.4 billion transitional financial package for the next five years to help close a $7.8 billion fiscal deficit caused by the split of the country in July, in line with a figure he said was calculated by the IMF.

"We have offered to pay $2.6 billion over five years and forgiveness of arrears of $2.6 billion, for a deal in which we would not pay transit fees," he said.

"This is the package of financial assistance we are offering to Khartoum, and while this is happening we were surprised by this unilateral decision [to halt shipments of oil]. This unilateral action taken by Khartoum will have negative impact on all of Sudan’s oil interests” Dau added.

He said the alternative would be to pay a transit fee which would not be more than $0.75 per barrel.

Reacting to the statement by the Sudanese government, Sudan Tribune reached out to voices from members of the public in South Sudan capital Juba on Tuesday and caught up with both ordinary and public figures.

“We are not surprised. This is indeed a known behavior of the Khartoum. It is a political decision which our government and people should take seriously. It is a not a one man’s decision. It is a decision taken by the whole government of the National Congress Party”, Garang Mawien Dut, a member of the South Sudan’s ruling party, the Sudan People’s Liberation Movement (SPLM) told Sudan Tribune on Tuesday at South Sudan Hotel.

Dut claimed the decision to stop oil shipments was tactically done by the Sudanese government to put on South Sudanese government to concede in the ongoing discussions which resumed last week in the Ethiopian capital of Addis Ababa on post independence issues.

The official added the decision taken by Khartoum was only affecting bilateral ties but also the lives of the ordinary people because want to unite the south with North by all means because it has of oil wells.

“Building a new pipeline is contingent upon the following conditions or factors: 1) The quantity and quality of the old and new oil deposits on the ground in South Sudan 2) Estimated cost for remaining oil deposits 3) Environmental suitability and feasibility of building pipelines from Unity State and Upper Nile to Kenya 4) Availability of skilled workers”.

“These factors, he said, have to be closely examined to determine whether South Sudan is better off building new pipelines or paying plausible transit fees to the Sudan because Building new pipelines is not economically feasible at this time given that we do not have abundant reserves and our crude oil is not of high quality”.

Ater K. Thiep, a member of Warrap State Legislative Assembly in a separate interview added that another factor which may make a potential engineering firm hesitant about taking any risk undertaking such expensive project would a political understanding between the companies and the government of south Sudan.

“We have a lot of competing priorities now for our government which requires capital. This is why Khartoum is stuck on the demand to share the oil with us because they know our alternative pipeline would be costly, he adds.

The legislator said there are available three options 1) Pay Khartoum the transit fees it is demanding; 2) Sell our oil to the Chinese firm at lower price and ask them to ship it as theirs; 3) Refuse to do any of the above and borrow huge money from the international monetary institutions in return of paying high interests as South Sudan continues explore the feasibility of building pipelines or railways.


This Article can be found on the South Tribune website: www.sudantribune.com

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