South Sudan Says Sudan Blocking Oil Exports, Diverting Crude Via Pipeline

South Sudan accused Sudan of blocking 3.4 million barrels of its oil exports and said the northern neigbor is also seeking to divert the flow of some of its crude by building a new pipeline.

Fuel shipments have been held up in international waters in the Red Sea since Dec. 22 and an oil-laden vessel scheduled to leave on Jan. 4 has been stopped from leaving Port Sudan, Oil Minister Stephen Dhieu Dau told reporters today in Juba, the capital. Sudan also started building a “tie-in” pipeline between PetroDar Operating Co.’s eastern pipeline and two oil refineries in Sudan to divert 13 percent of Dar blend crude, he said.

“We will take all the necessary legal actions against Khartoum and buyers of crude or refined oil that is stolen from South Sudan,” he said. Sudan Foreign Ministry spokesman al-Obeid Murawih didn’t answer his mobile phone when called for comment.

A dispute between the two countries erupted in November when South Sudan said Sudan blocked shipments purchased by China International United Petroleum & Chemical Corp. and Geneva-based Vitol SA. China publicly urged the two sides to reach an agreement that would ensure the flow of oil and sent its top African envoy, Liu Guijin, to the capitals of both nations on Dec. 7 and Dec. 8 for talks with officials.

South Sudan assumed control of about three-quarters of Sudan’s output of 490,000 barrels a day when it seceded on July 9 after an independence referendum. Talks since then have failed to yield an agreement on the amount landlocked South Sudan will pay to transport its oil through a pipeline across Sudan.

Letters of Complaint

Dau said the “tie-in” pipeline being built by Sudan will be ready to connect to the main PetroDar pipeline by Jan. 15. PetroDar wrote letters of complaint to Sudan and South Sudan after being requested by Khartoum to connect to the tie-in pipeline, Dau said.

“They rejected it as an illegal action,” he said.

British Virgin Islands-registered Petrodar’s shareholders include state-owned China National Petroleum Corp. (CNPZ), Malaysia’s Petroliam Nasional Bhd (PET) and the government-controlled Sudan Petroleum Co., according to its website. Calls to a number listed on the website didn’t connect and the company didn’t immediately respond to an e-mailed request for comment.

Juba and Khartoum failed to reach an agreement on the oil dispute in talks during December. Further African Union- sponsored negotiations are scheduled to take place on Jan. 17 to Jan. 21 in Addis Ababa, the capital of Ethiopia. Dau said his government invited the oil companies to sit in on the talks.

Chinese Visit

A delegation that will include Chinese oil executives is scheduled to arrive in Juba on Jan. 13, he said. During the visit, the companies will sign new exploration and production sharing agreements with the government for three blocks, while contract negotiations continue for three additional blocks. Since independence, Juba has been negotiating new contracts with oil companies, as previous ones were signed with the Khartoum government.

Dau told reporters that Sudan ordered foreign oil companies to divert all of South Sudan’s Nile blend crude entitlements for December to the Khartoum and el-Obeid refineries. He also accused the Sudanese government of ordering 550,000 barrels of South Sudan’s Dar blend crude entitlement to be delivered to a Sudanese buyer, whom he didn’t identify.

To contact the reporter on this story: Jared Ferrie in Juba at jferrie1@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net.

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