Sudan denied it had halted landlocked South Sudan’s oil exports in a transit fee row, but said the country had confiscated crude shipments to make up for payments it claims South Sudan owes.
South Sudan’s oil minister – returning from Addis Ababa, where talks around untangling the two countries’ oil industries collapsed – said at least one 1-million-barrel cargo of his country’s oil was still “detained” at Port Sudan on Wednesday.
South Sudan split off into the world’s newest nation on July 9, taking about three-quarters of the formerly united country’s roughly 500,000 barrels per day (bpd) of oil production with it, Reuters reports.
Oil is vital to both economies, but the two sides have not yet agreed on how much South Sudan, which must send its oil through pipelines in Sudan to a Red Sea port, should pay as a transit fee.
On Monday, Sudan’s acting oil minister, Ali Ahmed Osman, said his country had halted South Sudan’s oil exports, roughly 200,000 bpd, until the two sides came to an agreement on transit fees.
Sabir Mohamed Hassan, Sudan’s co-chair of negotiations on economic issues, appeared to reverse that statement on Wednesday.
“Exports will continue. We will not stop the flow of oil exports,” he told reporters in Addis Ababa, where officials from both sides met for talks.
China, a major buyer of oil from both countries, on Tuesday urged the two governments to resolve the dispute and keep oil flowing.
South Sudanese officials said on Monday two shipments had been held up or would be held up because of the decision, a 600,000 barrel shipment sold to China’s Unipec and a 1 million barrel shipment sold to Vitol.
Asked whether those shipments had loaded, Hassan said: “Most probably that amount is the amount we took in lieu of charges accumulated against the government of Sudan.”
A senior oil official in Khartoum, speaking on condition his name not be published, said Sudan planned to take 23 percent of South Sudan’s oil exports as payment in kind until a final deal.
In a statement, the chairman of Sudan’s negotiating panel said South Sudan already owed Sudan more than $900 million.
Pagan Amum, South Sudan’s chief negotiator, rejected what he described as an attempt to “steal” the new nation’s oil.
“We sell our oil as it enters the pipeline. The oil that is going through the pipeline is sold oil to a third party, and if they attempt to steal it they will be stealing the property of another party,” he told reporters in Addis Ababa.
The Addis Ababa talks over oil and other issues collapsed on Wednesday, both sides said. Further talks are scheduled for December and January in the Sudanese and South Sudanese capitals.
Both said Sudan was proposing $36 per barrel as a transit fee – much higher than the $0.75 per barrel South Sudan has said it is ready to pay if an alternative financing package it has put forward does not work out.
“We thought this is extortion to us and it is discrimination and it is at the same time not based on a cost principle,” South Sudan’s Oil Minister Stephen Dhieu Dau said, referring to the $36 per barrel proposal.
Asked about the shipments sold to Vitol and Unipec, he said: “We have been informed this morning that (at least) one cargo with a million barrels is still detained at the port.”
Macar Aciek Ader, undersecretary for South Sudan’s oil ministry, said South Sudan would be forced to halt oil production if it was not able to resume its exports by Dec. 6 because of a lack of storage space in Port Sudan.
“If by December 6, there is no lifting, then we will have to shut down production,” he told reporters in Juba.
Analysts have said the row is likely to further stoke tensions between the two old civil war foes and complicate talks in the Ethiopian capital over a raft of issues related to the secession, including debt and the position of the shared border.
An African Union panel has since tried to help settle the row. The statement from the Sudan’s negotiating panel chairman said South Africa’s former President Thabo Mbeki had submitted a proposal that Sudan allow exports to continue for another two months.
South Sudan would pay a “certain sum of money” in lieu of transit fees and transportation charges while the two finished talks, the statement said, adding Sudan accepted the proposal, but South Sudan rejected it.
A copy of the proposal obtained by Reuters suggested South Sudan would transfer $300 million to Sudan, and that the “sum shall be taken into account in the computation of future transfers or payments between the parties.”
South Sudan voted overwhelmingly to secede in a January referendum under a 2005 peace deal that ended decades of civil war with the north. Oil was one factor behind the conflict, which killed an estimated 2 million people.