A Review of the Nigerian Energy Industry

South Sudan to sell $300m of oil before shutdown

South Sudanese President Kiir speaks during a news conference with his Sudanese counterpart al-Bashir at Khartoum Airport22 July 2013, News Wires – South Sudan plans to sell 6.4 million barrels of oil worth $300 million before shutting down its entire production by the end of July due to a row over its alleged support for rebels in neighbouring Sudan, its oil minister has said.

Sudan, the sole conduit for South Sudan’s oil exports, said a month ago it would close two cross-border oil pipelines within 60 days and insisted output is shut by 7 August unless South Sudan gave up support for the rebels. Juba denies backing insurgents.

Diplomats worry that South Sudan, which separated from Sudan in 2011 after one of Africa’s longest civil wars, might collapse without oil as it is the main source for its budget apart from foreign grants. The diplomats have pointed to recent looting of aid agencies by soldiers as a sign that Juba is struggling to pay salaries, Reuters reported.

Closing the wells is also grave news for Sudan, which has been struggling with turmoil since losing most oil reserves with South Sudan’s secession. Oil fees from Juba are essential to bringing down soaring inflation, which stokes dissent.

South Sudan had only resumed oil production in April, after turning off wells pumping around 300,000 barrels per day in January 2012 when both sides failed to agree on pipeline fees.

According to Reuters, oil industry insiders said once the pipelines are closed it would take several months to restart production as they would have to be flushed of water and cleaned first.

South Sudan oil minister Stephen Dhieu Dau told the news wire that the country had sold 1 million barrels of crude in June and had contracted further sales of 2.2 million for shipment in July and 3.2 million in August.

“There is enough crude in the pipeline to meet this,” he said.

Sudan has said it would allow the sale of oil which has already reached pipelines on its territory or the export terminal on the Red Sea.

Dau reiterated that South Sudan was not backing any Sudanese rebels.

“We are committed to the flow of the oil. It is in the interest of the two countries. We don’t see that this shutdown can bring any peace or stop internal rebellions in Sudan,” he said.

“It will have a negative impact on Sudan and South Sudan. Our economies will suffer.”

Sudan will get pipeline fees of around $100 million until the shutdown, Dau added.

Khartoum has accused Juba of supporting the Sudanese Revolutionary Front, SRF, a rebel alliance which complains of neglect at the hands of the wealthy Khartoum elites. The SRF staged an attack in April on central Sudan, embarrassing the army on whose support President Omar Hassan al-Bashir depends.

South Sudan in turn accused Sudan of backing rebels in its eastern Jonglei state, where fighting is making it impossible to realise government plans to search for oil with the help of France’s Total and US supermajor ExxonMobil.

Sudanese foreign ministry’s undersecretary Rahmatullah Osman told al-Akhbar newspaper that Sudan would not allow any passage of South Sudanese oil unless Juba cut all ties with insurgents.

“There won’t be any reversal,” he said, adding that Sudan hoped, like South Sudan, that China would mediate.

China dominates the oil industries in both countries. State firm China National Petroleum Corp is most affected as it runs the oilfields in the South with Malaysia’s Petronas and India’s ONGC Videsh.

– Upstream

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