South Sudan threatens to shut oil pipeline

A man waves South Sudan's national flag as he attends the Independence Day celebrations in the capital Juba.

A man waves South Sudan's national flag as he attends the Independence Day celebrations in the capital Juba.

Published Aug 14, 2011


South Sudan accused Khartoum of trying to charge too much for use of the northern pipeline and said it might shut it down, signalling a further rise in tension as both sides argue over dividing oil revenues.

The South took 75 percent of the country's oil production of 500,000 barrels of oil when it became independent on July 9 as part of a 2005 peace deal that ended decades of civil war with the north.

But it depends on the North to use its refineries and the only cross-border pipeline to the Red Sea outlet of Port Sudan to sell the oil, the lifeline of both economies.

“The amount of money Khartoum wants us to pay is unreasonable,” David Loro Gubek, undersecretary at South Sudan ministry of energy and mining, told Reuters in an interview.

“If Khartoum insists that unless we pay they are not going to allow us to use these things, then the Republic of South Sudan... could request them to close the pipeline because it is discriminative.”

For use of its oil facilities, North Sudan has demanded fees worth a third of the export value of landlocked South Sudan. Both sides have so far failed to agree on usage fees in a row that could disrupt supplies from one of Africa's largest producers.

Gubek said the South may seek other alternatives including building a separate oil pipeline if the North insists on fees worth a third of the export value of the new nation.

“We are not the only country exporting oil through their neighbour's land... Why should ours be terribly high?,” Gubek said. “If we are forced, we will put in a separate pipeline.”

Khartoum is asking for $32 a barrel to use its port, the pipeline and refineries to sell the southern oil. This is worth roughly a third of South Sudan's export value at current prices. according to Reuters calculations.

Earlier this month, Sudan halted a 600,000 barrels crude cargo from South Sudan in a dispute over customs fees, the latest in mounting tensions between the two Sudans.


Companies including Chinese are ready to fund deploying a separate pipeline in South Sudan, Gubek said, adding it could take about two years to connect to a pipeline in east African neighbour Kenya. But experts say such plans are years away.

“Companies including Chinese, Japanese, South Koreans and other Middle East countries are prepared to fund the pipeline up to Lamu,” Gubek said.

China vowed to support Sudan and South Sudan and help both countries develop their oil industries as Beijing is aggressively pursuing natural resources in Africa.

It has maintained close economic and political ties with north Sudan throughout a US trade embargo and now also wants to reach out to the south.

Last week, the energy and mining ministry signed a memorandum of understanding with the Chinese state oil firm China National Petroleum Corp (CNPC), Gubek said without giving further details. Sudan has also granted CNPC more oil exploration rights.

On Monday, Chinese foreign minister Yang Jiechi visited Khartoum in the first high-level visit of a Chinese official since South Sudan became independent. He later left for talks in the southern capital Juba.

“The Chinese also want to please us equally. It is the Chinese who built the pipeline and it is the Chinese who built the refinery in Khartoum,” Gubek said. - Reuters

Related Topics: