South Sudan, Sudan relations under threat over oil transit fees

The South Sudanese government has threatened to shut down its oil fields in Upper Nile state, if Khartoum refuses to reduce its oil transit fees. The Sudanese government announced that it has taken technical measures in preparation for South Sudan’s possible closure of its oil wells.

South Sudan’s Foreign Affairs Minister Barnaba Marial Benjamin told Sudan Tribune on Wednesday that Juba “has written to the Government of Sudan to accept our request to re-evaluate the charges, and reduce them to meet the current oil prices in the international market.

“We are not threatening. We are asking for a dialogue in which we are asking the Government of Sudan to make a rational decision”.

The Minister pointed to his recent visit to Khartoum during which he sought support regarding the implementation of the peace agreement signed by the South Sudanese government and the armed opposition last year.

Closure

The Government of South Sudan 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, should the Sudanese government decline a request to lower the 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 stated in a memo to Sudan’s Ministry of Petroleum and Mining.

Presently, South Sudan is producing 160,000 barrels of oil per day. Experts say that the country currently receives less than $5 per barrel from its oil after the Sudanese transit fees are deduced and oil exploration companies are paid.

Khartoum

On Tuesday, the Sudanese government announced that it had undertaken technical measures in preparation for South Sudan’s possible shut-down of its oil production.

Minister of Finance Badreldin Mahmoud told Members of the Parliament that Juba has failed to pay the oil transit fees, and consequently his government was forced to take its share in kind, according to the Cooperation Agreement signed between the two countries.

South Sudan agreed to pay to Khartoum $9.10 for oil produced in Upper Nile state and $11 for oil from Unity state in August 2013. Juba also agreed to pay the Transitional Financial Assistance to the agreed oil transportation fees. The global oil price currently stands at $29 per barrel.

"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," Mahmoud said on Tuesday.

According to the Minister, South Sudan has only implemented the oil agreement and ignored the other protocols in the Cooperation Agreement because “they have an interest in the oil money”.

(Sudan Tribune)