Khartoum preparing for South Sudan’s possible oil shut down, says official

January 19 2016 (KHARTOUM) – The Sudanese government has undertaken technical measures in preparation of a possible oil production shutdown by the South Sudan, the country’s finance minister said Tuesday.

Speaking to Sudanese law makers, the Minister of Finance, Badr al-Din Mahmoud said that Juba has failed to pay the oil transit fees, and consequently his government was forced to take its share in kind, according to a Cooperation Agreement signed between the two countries.

In August 2013, South Sudan agreed to pay to Khartoum $9.10 for the oil produced in Upper Nile state and $11 for that of Unity state which produces some 20% of South Sudan’s oil. Also Juba agreed to pay the Transitional Financial Assistance (TFA) to the average of the agreed oil transportation fees.

Mahmoud, however, said besides the oil transportation fees ($9.10 for the oil produced in the Upper Nile or $11 for the oil of Unity state) the fees ($ 25) meant to the repayment of a $3 billion compensatory package that Juba agreed to pay Khartoum.

He further said the two countries didn’t discuss the rescheduling of the three billion package, which is supposed to be paid within three years as provided in the Cooperation Agreement.

“If they are not able to implement it then we can talk about increasing the time period, but this should be done within the framework of the implementation of all other agreements,” the minister further said.

Also, Mahmoud pointed that Juba has only implemented the oil agreement, and ignored the other protocols in the Cooperation Agreement because they have an interest in the oil money.

The Sudanese minister revealed that his government has carried technical and administrative arrangements, in anticipation of the shutdown of the oil production and to reduce the potential impact on the pipelines.

The Government of South Sudan had earlier asked Khartoum to cut the lease of Sudanese oil transportation facilities, arguing that its request was prompted by the current fall in oil prices on the international market.

Last week, South Sudan’s Petroleum and Mining ministry said it may be forced to shut down its oil fields in Upper Nile state and turn off pipeline, should the Sudanese government a request to lower its oil transit fees.

“We are left with no option at the moment rather than to shut it down because it’s not feasible. We cannot sell the oil at loss”, the ministry said in a memo sent to Sudan’s Ministry of Petroleum and Mining.

Juba’s letter requesting the Sudanese Petroleum and Mining Ministry to reconsider its transit fees comes in the wake of changes in global oil prices.

The price of crude oil is currently at $29 dollars per barrel in the international market.

Presently, South Sudan is producing oil at 160,000 barrels per day, despite a decline in its oil production due to the violent conflict that engulfed the young nation, killing thousand and displacing nearly two million people.

South Sudan, experts say, now receives less than $5 per barrel when transit charges paid to Sudan are deduced and oil exploration companies are paid.

(ST)