South Sudan to Shut Down Oil Production

January 26, 2012

South Sudan said on Friday it was preparing to gradually shut down oil production within two weeks after Sudan said it had started seizing southern oil to compensate for what it said were unpaid transit fees.

Sudan and South Sudan are locked in a row over sharing oil revenues after Juba took two-thirds of output when it became independent in July.

The landlocked new African nation needs to use a northern pipeline and port to export the crude but has failed to reach an agreement with Khartoum over a transit fee, prompting Sudan to seize part of its oil as compensation.

“The ministry of petroleum and mining will sit down to start a technical process that will lead to a decision that will lead to a complete shutdown. That will be in a week or two weeks,” government spokesman Barnaba Marial Benjamin told Reuters.

“We have taken this decision because South Sudan is not benefiting from oil. It is being taken by force by the Republic of Sudan, and the oil that is going through the pipeline is being looted,” he said.

“Why would the Republic of South Sudan produce oil for the Republic of Sudan,” he said.

Khartoum has said Sudan is seizing some oil and diverting some of it to its two refineries but has not said whether it would try selling any seized oil.

South Sudan has said Khartoum has ordered loading of 2.15 million barrels of its oil onto northern ships at Port Sudan since last week.

Sudan is demanding $1 billion for unpaid transit fees since July plus $36 a barrel in the future as transit fee, roughly a third of the export value of southern oil. Khartoum also wants Juba to share Sudan’s external debt of $38 billion.

South Sudan pumps around 350,000 bpd, officials have said.  Sudan produces 115,000 bpd in its remaining fields but needs it for domestic consumption.

Sudan’s government is under pressure to overcome a severe economic crisis after losing the southern oil, which made up 90 percent of the country’s exports. It generated $5 billion in oil revenues in 2010.

Juba has offered Sudan the sale of discounted oil and other financial help, but neither side shows sign of shifting their positions.

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