OIL SITUATION STILL UNSOLVED

Oil Infrastructure in Port Sudan © Zeinab Mohammed Saleh

Khartoum and Juba have yet to reach an official agreement regarding the use of Sudan’s oil pipeline, the lifeblood for both economies. Negotiations may mark a new round of disputes.

Under the 2005 Comprehensive Peace Agreement (CPA), Sudan’s oil wealth was divided evenly between north and south. After 9 July, when the south seceded, 75 percent of the revenues from the 500,000 barrel-per-day production went to the new nation, where the oil originates.

But since South Sudan is a landlocked country, it still relies on the north’s infrastructure to export its oil from Port Sudan on the Red Sea.

Khartoum originally demanded a pipeline usage fee of $32 a barrel from Juba, which some promptly dubbed “daylight robbery” since the international fee is usually a fraction of that, around $0.25 a barrel. Pagan Amum, South Sudan’s Peace Minister, said he expects South Sudan to pay $0.41 a barrel, the amount Chad pays to Cameroon for transporting oil through its pipeline of roughly the same length.

South Sudan’s oil, given its waxy nature, requires special treatment at field processing facilities before shipment. Under a deal with Khartoum, the cost is estimated at ten to 20 dollars per barrel for the procedure, which includes water and gas extraction, then heating the oil to prevent it from hardening.

In recent years, Southern Sudanese were rarely visible in the region’s oil industry, according to a newly recruited employee at a major oil company. Northern workers now fear they may lose their jobs in the wake of the south’s secession, since most of the oil is now officially a resource of South Sudan.

“I’m glad we southerners finally have a chance to be part of this industry,” said one employee, “But it’s stressful not knowing how the situation will be affected, depending on the agreement that is finally reached.”

Shortly after the south’s independence in July, all South Sudanese residing in the north lost their jobs except for those working in the oil sector. This suggests an agreement on transit fees and wealth sharing is of direct interest to both countries’ economies.

South Sudanese have high expectations that their government will use the new nation’s oil wealth to build basic infrastructure, which is largely lacking. Continued delays on oil agreements with the north will likely mean setbacks for South Sudan’s development.

Others argue South Sudan would be better off ending its dependence on the north completely where oil is concerned.

Oil experts say a proposed 1,400-kilometre pipeline from South Sudan’s oil fields to the Kenyan coast at Lamu would cost around $1.5 billion and take years to complete
Nerves were rattled last month when Khartoum blocked an oil shipment from South Sudan in a dispute over customs fees. At the time, observers feared halting a cargo of 600,000 barrels of crude in Port Sudan would escalate tensions between the two countries.

Once the delayed payments were remitted, the situation was quickly diffused. But many Sudan watchers say this incident points up the urgency of resolving oil issues between Khartoum and its new neighbor. (Information for this article from sudanvotes.com)

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