December 11, 2011 (JUBA) – South Sudan on Sunday said it is exploring new alternative routes for oil export in East Africa due to the difficulties in continuing to use the port in neighbouring Sudan.
“We are still open to negotiating with Sudan but we are also exploring ways to construct a new pipeline to one of the East Africa countries, because Sudan is demanding unaffordable charges,” Elizabeth James Bol, the deputy minister of petroleum and mining, told reporters on Sunday.
She explained that her ministry is planning, with oil companies operating in South Sudan, a new route.
A team of experts from the ministry has been sent to Uganda and will continue to Kenya and Ethiopia to identify a suitable pipeline location.
South Sudan has been at loggerheads with the Khartoum-based government over oil since the country split in July. Sudan demands a transit fee of US$32 per barrel – tens times the international standard – while the South offers to pay US$0.41.
In November, Khartoum announced it had stopped exports of South Sudanese crude oil to the international markets through Port Sudan on the Red Sea, claiming it has not received US$727 million of accumulated fees for the use of oil infrastructure since the country split. The South claims it has paid its rental fees and Khartoum, with a backdrop of disapproval from China, has since reneged on its threats.
Oil-wealth sharing talks mediated by the AU High Level Implementation Panel under the chair of former South Africa President, Thabo Mbeki, collapsed in November.
A stipulation of the peace agreement which ended more than two decades of Sudanese civil war in 2005 was a resolution on oil-wealth sharing. With the secession of South Sudan in July 2011 these negotiations and other stipulations of the agreement are yet to be actioned.
Oil-wealth is a crucial sticking point as with secession, South Sudan took three quarters of the oil fields which now accounts for the vast majority of its income.
The Government of South Sudan has released a statement confirming reports that Christophe de Margerie, the chief executive of Total, a French oil company working on both sides of the Sudanese border, told a news conference at the World Petroleum Congress in Doha from 4-8 December, that Total may have a solution for South Sudan’s oil.
Margerie said Total is planning a pipeline to export Ugandan oil from Kenya, which could be extended to land-locked South Sudan.
Total has agreed to buy into Ugandan oil blocks holding proved reserves of 1.1 billion barrels and potentially as much as 2.5 billion barrels. The company also holds an oil licence with potential in South Sudan.
Connecting with South Sudan would bring down the capital expenditure for the Ugandan project.
“We say to Uganda as part of our long-term view ‘you have to take into consideration what sort of oil can come from neighbour countries to make the pipe less expensive’,” said Margerie. He declined to give a timetable for the construction of the pipeline.
He indicated that the Malaysian Petronas and the Chinese National Petroleum Corporation oil companies, already operating in South Sudan, could be interested in the project.
On 10 December rebels operating in Unity state, where much of South Sudan’s oil is drilled, threatened the pipeline scheme claiming that construction in the state must be carried out only with their express permission.