April 23 (Bloomberg) -- South Sudan’s government will no longer export crude via neighboring Sudan and all future negotiations between the two countries will exclude oil, said Pagan Amum, South Sudan’s chief negotiator.
South Sudan has secured funding to build a new oil pipeline, Amum said in a phone interview today from Addis Ababa, the capital of Ethiopia. He didn’t provide further details.
“Oil is off the table,” he said. “South Sudan has taken a strategic decision not to export our oil through Sudan.”
South Sudan in January shut down its oil production, which accounts for 98 percent of government revenue, after accusing Sudan of stealing $815 million worth of its oil from a pipeline that is used to transport the fuel to a Port Sudan on the Red Sea. Sudan said it confiscated the crude to make up for unpaid fees, amid a dispute over how much South Sudan should pay to ferry the crude.
In January, South Sudan’s government said it was considering alternative pipelines to the Sudanese one. In February, it signed a memorandum with Ethiopia to build an oil pipeline via Djibouti, and said it’s in talks with a Texas-based construction company to build a pipeline to the Kenyan coastal town of Lamu.
Amum’s comments may be intended to influence bilateral talks once they resume in Addis Ababa, said Marc Mercer, an independent analyst who researches the region’s oil industry.
“I can’t imagine his words are more than just rhetoric or leverage for negotiations,” he said in a phone interview from Dubai.
Building a new pipeline across the Turkana region of northern Kenya, a mountainous area that is also unsecure because of ethnic tensions, may not be commercially viable, he said. Securing financing would be difficult, insurance premiums would be “through the roof,” and a pipeline may take “years to build.
South Sudanese President Salva Kiir will discuss the pipeline and other economic issues with Chinese officials during a six-day visit to Beijing that starts today, he said.
China lost 260,000 barrels a day of supplies when South Sudan halted output in January, New York-based Eurasia Group said in February. China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd. pump most of the oil in the two countries.
South Sudan seceded from Sudan in July, acquiring three quarters of the formerly united country’s oil production. Negotiations since then have failed to yield an agreement on how much the landlocked south should pay to use a pipeline and processing facilities in Sudan.
Intermittent clashes between the neighboring nations escalated since April 10 after South Sudan occupied the disputed border region of Heglig. South Sudan announced on April 20 it was withdrawing its forces from the oil-rich region, while Sudan said its soldiers forced them to retreat and said its “war” with South Sudan started with “liberating Heglig and will continue until we liberate the whole Sudan.”
Earlier today, South Sudan accused Sudan’s military of carrying out aerial bombardments of four towns and of carrying out ground attacks on South Sudanese territory.
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