South Sudan challenges Khartoum to produce backup for high fees demanded

By Ngor Arol Garang

February 15, 2012 (JUBA) – South Sudan on Wednesday said the government of neighbouring Sudan has “failed” to produce genuine reasons that support their demand for high charges in return for using the oil pipelines passing through its territory.

Speaking at a press conference, held at the National Secretariat headquarters of South Sudan’s ruling Sudan People’s Liberation Movement (SPLM), the chief negotiator for South Sudan delegation Pagan Amum told journalists shortly after his arrival from the Addis Ababa that talks could not go ahead because the Sudanese had nothing at their disposal that supported their calculation for oil transit fees.

“The Sudanese delegation has raised charges from $32.02 to $36.00 per barrel. This $36 charge is undeniably discriminatory because since these pipelines were built and since the transportation agreements were concluded, the Republic of South Sudan has not been the only shippers. There have been companies operating in Sudan and have never been charged $36. The example being Petro Energy operating in the North and WNPOC in the south [which] secured the right to ship through the pipeline but have never been charged $36”, Amum explained.

The senior member of the ruling party explained further that companies shipping through the pipeline are all paying tariffs consistent with the transportation agreements.

“This means that the proposal of the government of Sudan to charge Republic of South Sudan $36 is a clear violation of the international law and state practice which is not acceptable. The charges being proposed by the government of Sudan do not have any basis. The only defence that Sudan makes is that Sudan is sovereign state and that its sovereignty overrides everything”, he said.

Amum also denied claims by Khartoum that his country had not paid transport fees since it became an independent state in July 2011 and argued that oil companies have clarified this in a letter dated 3 January addressed to two ministers in the Republic of South Sudan and Sudanese minister in Khartoum.

The letter seen by Sudan Tribune on Wednesday bears signatures of the three oil companies, states “we wish to clarify that tariffs, as computed under COTA, are charged on the crude oil originating from the Republic of South Sudan including crude oil entitlements whilst processing charge is also imposed and paid through the cost oil recovery mechanism”.

“PDOC is advised to charge all shippers from the republic of South Sudan the tariff ceiling of 5.5 dollars per barrel as of July 2011, tariff and onwards”, reads the letter dated 8 August 2011.

The letter which bears signature of Azhari A. Abdalla, a Director General with Oil Exploration & Production Authority (OEPA) in the Sudanese ministry of oil was addressed to the PetroDar Operating Company in Sudan (PDOC) president, Liu Yingcaj and copied to Bior Ajang Duot, vice president of PDOC.

“From the information provided by JOCs, since secession, all the JOCs are continuing the usual established practice by issuing tariff invoices to the relevant shippers and also recovering costs of the processing facilities through cost recovery mechanism. These practices apply to all oil including crude produced in South Sudan,” adds the letter bearing signatures of presidents of the three oil companies.

Amum says Sudan has “no case” to make against the South.

“We have been paying. The companies have testified but then Khartoum changed the statement and said South Sudan needs to deal directly with Sudan in transport charges, as it is the one responsible with the transport system” Amum said.

The South Sudan official said his country remains ready to resume oil production through the north but only if a fair deal is reached.

“Our position has been clear from the outset. We need a fair deal with Khartoum and guarantees that it will not make unilateral decision again to confiscate our oil on the way to the international market while passing through Sudan”, said Amum.

The senior official said his delegation’s tabled demands included:

• Immediately release all the detained vessels that are loaded in Port Sudan with Republic of South Sudan crude oil entitlements and not to prevent any vessel coming to Port Sudan with intention of taking possession of the republic of South Sudan sold crude entitlements.

• Immediately pay to the republic of South Sudan the market value of what has been confiscated diverted crude oil at the sale price contracted for the by the government of South Sudan and its purchasers and the market value for any republic of South Sudan oil diverted by the government of Sudan for inland lifting at the domestic refineries.

• The government of Sudan to indemnify all direct, indirect and consequential damages resulting from its unilateral actions, including demurrage claims from buyers whose ships have been detained the port. Payments by the government of Sudan to the Republic of South Sudan for stolen and diverted crude oil and any damages shall be immediate and not part of the arrears reconciliation process.

• Ensure access for crude oil originating from South Sudan to the transportation system based on the processing fees and tariffs stipulated in the terms of EPSAs and transportation agreements respectively for blocks, 1,2,4 as an excess capacity user and blocks 3,7 which South Sudan has been paying since 9 July 2011.

• Impose no other charges, surcharges, customs duties, imposts or taxes other than a transit fee, which shall be 0.69 and 0.63 dollars respectively in accordance with the international law and state practice.

(ST)