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South Sudan Cuts Back Oil Output, Braces for Shutdown

July 25 (Bloomberg) -- South Sudan made further reductions in oil output as it prepares to halt pipeline exports through neighboring Sudan amid conspiracy recriminations between the former foes.

Oil production from Africa’s newest country fell to 97,000 barrels a day from 200,000 barrels a day a week ago, Mawien Makol Arik, a foreign affairs ministry spokesman, said today by telephone from South Sudan’s capital Juba.

Sudan’s Oil Minister Ahmed al-Jaz told Ethiopian newspaper Walta in a report published today that his government intends on Aug. 7 to shut down the pipeline that carries South Sudanese oil to the Red Sea loading terminal of Port Sudan. He renewed accusations that the government in Juba supports rebels seeking to overthrow Sudanese President Umar al-Bashir, Walta reported.

South Sudan’s declining supply is contributing to tightness in the global oil market as it coincides with the maintenance season at North Sea oil fields and compounds disruptions from Libya, Soozhana Choi, an analyst at Deutsche Bank, said in a note today. Front-month Brent crude, a benchmark for more than half the world’s traded oil, have gained 4.2 percent this month and were trading at $107.31 a barrel at 2:21 p.m in London.

Landlocked South Sudan denies supporting the rebellion in Sudan, accusing its neighbor in turn of deploying troops in its oil-producing Upper Nile region. Oil in South Sudan is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd., known also as Petronas, and India’s Oil & Natural Gas Corp.

Investigating Claims

The African Union on July 23 asked for a six-week period to complete a probe into the claims of the former adversaries and urged the Sudanese government in Khartoum to back down from a threat to close the 1,600-kilometer (about 990 miles) pipeline.

“It is for our benefit to start reducing the volume because if we don’t, it’s going to be very hard for us to redo it in a very short period of time,” South Sudanese spokesman Arik said on July 18. Petroleum Minister Stephen Dhieu on July 23 said the flow of oil into the pipeline should halt by the end of the month.

In a statement today, the African Union called on South Sudanese President Salva Kiir to quickly select a new cabinet that “reflects the diversity” of the country after he removed the entire cabinet on July 23.

South Sudan seceded from Sudan in July 2011 and took three-quarters of the formerly united country’s output of 490,000 barrels a day, producing about 350,000 barrels daily. It has been producing 200,000 barrels a day since May, when it resumed operations after ordering a halt in January 2012, accusing its northern neighbor of stealing $815 million worth of crude.

To contact the reporters on this story: Mading Ngor in Juba at mngor@bloomberg.net; Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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