Cash-strapped South Sudan expects to restart oil production in December, almost one year after a row with Sudan led it to shut down the oil that provided nearly all the government's revenue, officials said Tuesday.

The closure had sparked fears the fledgling country's economy would collapse.

“The ministry of petroleum and mining expects production of Dar Blend (oil) to begin in December, with the first payments possibly received in January,” deputy finance minister Marial Awou Yol told reporters.

However, full production - using other pipelines with different oil types - was not expected to resume until June 2013, he added.

Juba recently reached an agreement with Sudan over how much it should pay to export crude through Sudan, ending a bitter row over fees that led to a complete shut-down of production in January, and escalated into a border conflict months later.

Sudan has said that an agreement on borders and security must be reached at the next round of African Union-led talks slated to start this weekend to cement the oil deal.

Ravaged by decades of war, South Sudan relies on oil for 98 percent of its revenues.

Yol warned that the government still faced a dire financial picture even with a return to production on the horizon.

“Our reserves are greatly reduced, there are signs of tension in our economy, and it will take many months before oil revenues start flowing if Sudan and South Sudan agree on a number of other issues,” Yol said.

“Even when the deal is signed, it will take months to repair damage to production equipment, for the oil companies to re-hire and re-assign staff, for the pipelines to be flushed of water and refilled with oil, and for the first tankers to be loaded and then payment made,” he warned.

Yol said internal borrowing and new loans would be taken to pay government and army salaries. - Sapa-AFP