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South Sudan Says Oil Pipeline May Close on Sudan Blockade

Jan. 13 (Bloomberg) -- South Sudan said the operators of a pipeline that carries its oil exports to Port Sudan have warned the facility may be closed in two days unless a blockade being imposed by neighboring Sudan on its shipments is lifted.

Sudan’s government would be “responsible for any damages that will follow that shut down,” South Sudanese Oil Minister Stephen Dhieu Dau told reporters today in Juba, the capital.

South Sudan on Jan. 10 accused Sudan of blocking 3.4 million barrels of its oil exports and said the northern neighbour is also seeking to divert the flow of some of its crude by building a new pipeline.

Sudan’s Foreign Ministry said it prevented the vessels from leaving international waters in the Red Sea because they failed to pay port fees. The new oil pipeline is for use in the future, when the government plans to “buy or take over part of our dues from the south in crude, after reaching a final oil agreement,” it said on Jan. 11.

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.

The two sides failed to reach an agreement on the oil dispute in talks last month. Further African Union-sponsored negotiations are scheduled to take place from Jan. 17 to Jan. 23 in Addis Ababa, the capital of Ethiopia.

Double Oil Output

Dau also said South Sudan plans to double oil production to 700,000 barrels per day in five years. For that increase to happen, the country would need to build a new oil pipeline because the current one doesn’t have sufficient capacity, he said. South Sudan also doesn’t want to be dependent on Sudan for its oil to be exported, Dau said.

“We must plan to diversify the routes,” he said. “You should not put all your eggs in one basket.” South Sudan has previously said it is exploring routes through Kenya and Ethiopia.

South Sudan’s government earlier today signed exploration and production-sharing agreements with six companies including China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd and India’s Oil & Natural Gas Corp. for six blocks in the East African country. Foreign oil companies have been operating without signed accords since South Sudan’s independence.

The state also plans to negotiate with companies that have agreements for non-producing blocks signed with companies before independence.

“We believe some of these companies have overstayed on those blocks without doing anything and even the ownership of these blocks is in question,” Dau said. “As a sovereign state we will not abide by contracts signed by the Republic of Sudan.”

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

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

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