Report: South Sudan says it is suing Sudan over “looting” of its oil
South Sudan’s cabinet affairs minister, Deng Alor, said that his country had halted pumping crude through Sudan and would begin building a pipeline across east Africa that would allow them to export the oil from Kenya. The project would take about a year, he told Al-Sahafa.
“Our economy will not be affected by this step,” he said, adding that South Sudan had enough in cash reserves to sustain it for five years. Even if the economy was to be affected, it would be preferable to the “looting” taking place by Sudan, he was quoted as saying by the newspaper.
The Khartoum government downplayed the potential impact of the move by the south, with Sudanese State Minister for Cabinet Affairs Amin Hassan Omar saying that the oil currently held in pipelines would cover a considerable portion of the debts owed by the south.
The suspension of oil production is a “tactical move that will not last long,’ he told Al-Sahafa.
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Report: South Sudan Sues Khartoum Over Oil
by THE ASSOCIATED PRESS
KHARTOUM, Sudan (AP) — South Sudan is suing Sudan for “looting” its oil and will no longer export crude through its northern neighbor, a Sudanese daily reported Sunday, citing officials, in the latest spat between the two governments over the coveted resource in the newly-independent southern nation.
South Sudan Oil Minister Marial Benjamin said the lawsuit was filed in “specialized international tribunals against Sudan and some companies” that bought the crude,” Al-Sahafa daily said. Benjamin did not provide additional details on the venue or when the lawsuit was filed.
The case is the latest development in a long-simmering fight between the two governments over the oil they share, but which sits largely within the borders of the newly-independent South Sudan.
On Jan. 17, South Sudan Minister of Petroleum and Mining Stephen Dhieu Dau said Sudan is diverting about 120,000 barrels of oil pumped daily from the south daily, a move the northern government said stemmed from the unpaid transit fees for the oil carried in pipelines from the south to export terminals in its territory. The two sides have been unable to resolve the dispute.
South Sudan’s cabinet affairs minister, Deng Alor, said that his country had halted pumping crude through Sudan and would begin building a pipeline across east Africa that would allow them to export the oil from Kenya. The project would take about a year, he told Al-Sahafa.
“Our economy will not be affected by this step,” he said, adding that South Sudan had enough in cash reserves to sustain it for five years. Even if the economy was to be affected, it would be preferable to the “looting” taking place by Sudan, he was quoted as saying by the newspaper.
The Khartoum government downplayed the potential impact of the move by the south, with Sudanese State Minister for Cabinet Affairs Amin Hassan Omar saying that the oil currently held in pipelines would cover a considerable portion of the debts owed by the south.
The suspension of oil production is a “tactical move that will not last long,’ he told Al-Sahafa.
A soldier stands next to the infrastructure of a field processing facility in Unity State, South Sudan. Photo/AFP
Posted Sunday, January 22 2012 at 15:57
IN SUMMARY
Why the divorce between the two countries has continued to be frosty, months later
· Juba and Khartoum separated in July 2011.
· Blue Nile became the scene of an armed conflict between the Sudanese government and the SPLM-N in September 2011, three months after a similar conflict erupted in South Kordofan state, mainly in the Nuba Mountains.
· Khartoum accuses Juba of supporting the rebel groups in a proxy war over the control of Abyei area and other disputed border regions.
· Juba accuses Khartoum of backing the rebel groups in the South Sudan to undermine the political stability in the newly independent republic.
Plans by South Sudan to build an alternative pipeline through Kenya are expected to acquire fresh urgency in coming weeks as Juba shops for a route to export its oil following the closure of its current transport facility.
Juba on Friday announced it had decided to shut down the oil pipeline that runs through North Sudan to the export terminal at Port Sudan on the Red Sea, citing endless row with Khartoum.
Information minister Barnaba Marial Benjamin said the decision was reached at a Council of Ministers meeting chaired by President Salva Kiir on Friday and followed the recent failed talks in Addis Ababa.
South Sudan accused its northern neighbour of imposing a “per barrel penalty for secession.”
South Sudan, which gained independence from Sudan last July, is entirely dependent on oil revenues to meet 98 per cent of her budgetary obligations.
But Petroleum and Mining minister Stephen Dhieu said the government will adapt “new measures to deal with the new situation” and insisted his country could “also exist without oil.
We are able to run government affairs for the next 18 months without oil revenue.”
Mr Dhieu said there are only two conditions that may necessitate the reopening of the pipeline: “Either Khartoum accepts a fair deal with us and accept our offer by settling the financial proposal or we pay them a transit fee which wil not be more than $1 per barrel.”
South Sudan has been paying about $7 per barrel for transportation of its oil through Sudan.
Khartoum wants Juba to pay additional transportation fee of $32 per barrel, including a $22.8 transit fee. South Sudan has rejected the demand, calling it “looting in broad daylight.”
The shutting down of the pipeline, analysts warned, could worsen the increasingly frosty relations between Juba and Khartoum, putting East African Community States — which have been keen to prevent Sudan and South Sudan from sliding into full-blown war — in a tight spot.
Most EAC countries want to see South Sudan join the trading bloc giving to the resource offering it will be bringing on the table.
In crucial oil talks held last week, South Sudan adopted a hardline stance, opting to shut down the facility in two weeks. Juba has accused the North of confiscating oil shipments valued at $214 million while in transit.
This move will increase the pressure on Kenya and South Sudan to hasten construction of an alternative pipeline through Lamu.
Juba officials see the link to the Kenya Coast as more cost-effective than paying the transport and refinery fees being demanded by Khartoum. The dispute over oil and the announcement of the planned shutdown will also come as a shock for China, whose companies are deeply involved in production and logistics infrastructure.
China also consumes more than 75 per cent of the oil exported from Sudan, with the two countries together producing half a million barrels of oil daily.
The closing down of the pipeline means the flow of oil exports to China will be disrupted.
The Asian giant, with so much at stake, is thus likely to initiate diplomatic initiatives to end the stalemate and secure the transit route.
“Resources have driven instability and will continue to shape the political, social and economic character of South Sudan.
The assumption of greater oil sector responsibility will bring changes and an opportunity to revisit contracts and operating standards; it may also prompt new investment,” said the Brussels-based International Crisis Group in a report on Sudan.
Should Kenya and South Sudan opt to fast track the construction of the link to Lamu, this will spark a race among foreign governments with the financial muscle to develop infrastructure needed to export the commodity.
The project includes construction of an oil refinery and sea port in Lamu, a 1,400 kilometre oil pipeline that will link Juba, the South Sudanese capital to Lamu port and construction of a new Mombasa-Kampala standard gauge railway line.
But building a new pipeline will take very long.
“Such a large project would take no less than four years to complete, and this is why it is important that bridging agreements for oil exports and products supply are soberly negotiated between Sudan and South Sudan,” said George Wachira, director of Petroleum Focus Consultants.
Heavy investment is also being made in the 1,130 kilometre road that links Nairobi to Juba to cut the more than 26 hours it currently takes to cover the distance. The combined cost of the projects is estimated at $10 billion.
The other option that was being touted was to connect South Sudan with the pipeline that is planned to bring Ugandan oil to the Kenyan port.
But building a new pipeline will take very long.
“Such a large project would take no less than four years to complete, and this is why it is important that bridging agreements for oil exports and products supply are soberly negotiated between Sudan and South Sudan,” said George Wachira, director of Petroleum Focus Consultants.
A recent ICG report said the South’s search for an alternative transport corridor to reduce its dependence on the North had opened an opportunity for Kenya to attract billions of dollars in fresh infrastructure investment and an advantage in the scramble for foreign direct investment in East Africa.
Even after secession from the North, South Sudan continues to rely heavily on Port Sudan to take its key export, oil, to the global market. Sudan and South Sudan have since separation in July 2011 been locked in a row over sharing oil revenues after Juba took two-thirds of output.
The inability of the two countries to hammer out a fair commercial arrangement has meant South Sudan has not obtained full benefits from its crude oil exports, while Sudan has missed out on a fair commercial return on its oil export infrastructure.
Failure to reach an agreement between Juba and Khartoum over a transit fee is said to have prompted the latter to seize part of the oil as compensation.
Khartoum has been demanding $23 per barrel transported through the pipeline while Juba has offered $1.
Additional Reporting by Machel Amos in Juba
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