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South Sudan orders production shutdown in oil row

20 January 2012 22:53 (UTC +04:00)

Baku-APA. South Sudan has ordered the shutdown of oil production that provides some 98 percent of its revenue, amid a deepening row with Khartoum over pipeline fees, the government said on Friday, APA reports quoting news.yahoo.com website.

"The government has instructed the Minister of Petroleum and Mining to proceed with arrangements for a complete shutdown of oil production," Minister of Information Barnaba Marial Benjamin told AFP.

Khartoum admits to taking some South Sudanese oil destined for export as compensation until an agreement, but the South has said this is theft.

"The Council of Ministers decided today that in light of the present quantities of oil being taken by Khartoum" it would halt production, Benjamin added.

In Khartoum, Sudan’s foreign ministry reacted by saying its neighbour has the right "to do what they want with their oil," but the South will suffer more than the north from a disruption of the oil flow.

The South split from Sudan in July, taking with it 75 percent of the country’s oil production of 470,000 barrels per day, but despite its oil wealth, the new state of South Sudan lacks the infrastructure to refine and export oil.

Crucial facilities including the pipeline and Red Sea export terminal remain in Sudan, leaving the two states arguing over how much the south should pay to use the infrastructure.

The former civil war enemies -- now regional neighbours -- have exchanged repeated tit-for-tat accusations in a bitter spat during dragging oil negotiations, raising tensions between the two sides.

Sudanese authorities recently stopped two ships loaded with 650,000 barrels of South Sudanese oil from leaving the export terminal because they did not pay the port fees, according to Khartoum’s foreign ministry.

However, Benjamin said shutting down production would not be immediate, and that South Sudanese President Salva Kiir would meet Sudanese President Omar al-Bashir before it was stopped.

"It (production) is not just closed like a door key... it cannot be less than seven days," he said. "The council has also agreed that President Kiir will meet Omar al-Bashir at the African Union in Addis Ababa on January 27."

Oil companies in South Sudan include Nile Petroleum Corporation, wholly owned by the government of South Sudan, and Petrodar Operating Company, which is owned mainly by China National Petroleum Corporation (CNPC), Petronas of Malaysia, Sudapet of Sudan and SINOPEC of China.

China, which relies on South Sudan for nearly five percent of its oil and is also a key ally of the Khartoum government, is supporting negotiations between the two sides in the Ethiopian capital.

In November Sudanese officials announced the country will take 23 percent of the South’s vital oil exports as payment in kind.

Juba has also claimed Khartoum is also trying to siphon off southern crude and divert petroleum from the pipeline.

"If Khartoum is continuing to do that, there is no other option for the South," Benjamin added.

Juba has threatened to sue companies buying oil from Khartoum, as it claims the oil does not belong to the north.