18 October 2012

South Sudan Instructs Oil Companies to Resume Production

Photo: UNEP
Oil rig (file photo): The country will only pump oil at about 70 percent of its former capacity.

Juba — South Sudan on Thursday issued an order instructing foreign and national companies involved in oil industry to immediately resume production and exports through the territory of neigbouring Sudan.

Stephen Dhieu Dau, South Sudan's Minister of Petroleum and Mining on Thursday said the government had completed assessing all oil infrastructures located in the world's youngest nation and was technically ready to recommence operations within three months.

Production was halted at the beginning of the year over a transit fee disputed between the two countries. South Sudan split from Sudan in July 2011 without bilateral agreements on oil and other issues leading to a conflict over a disputed border area in April this year.

Last month the two sides signed agreements on nine post-partition issues including allowing South Sudan to continue pumping its oil through Sudan for export. Before the shutdown oil accounted for 98% of government income.

The order to resume production barely a day after South Sudan's national parliament voted to ratify the deal. In a sitting chaired by speaker of the house, James Wani Igga Maring, on Tuesday saw a heated debate during which 189 members voted to ratify the cooperation agreement, with 15 members voting against the deal, specifically over the controversy of the "14 mile" area.

South Sudan President Salva Kiir Mayardit signed the deal with his Sudanese counterpart Omer Ahmed Hassan El Bashir in the Ethiopian capital of Addis Ababa on 27 September.

The deal did not address border demarcation or the status of areas claimed by both sides, such as Abyei, however it did create a demilitarized border zone 10km either side of a non-binding notional boundary put forward by the African Union mediation.

The house revoked the resolution which it passed in January ordering the oil shutdown after South Sudan's upper house - the council of ministers - passed a decision stopping oil production and exports to the international markets through Sudanese territory, after accusing Sudan of stealing its crude oil.

Khartoum admitted taking some crude but said it was payment in kind for unpaid fees.

Civil rights and community members from Northern Bahr el Ghazal State on Monday took to the street to stage a peaceful protest against the deal, waving placards and banners critical of the government, despite assertions by leaders of the country's governing Sudan People's Liberation Movement (SPLM) that the deal was only temporary arrangement seeking ways to settle post secession dispute involving two nations.

South Sudan's Minister of Petroleum and Mining Stephen Dhieu Dau said that a successful technical evaluation of oil infrastructure in Upper Nile State had been completed.

"There are no problems in these places to resume oil production and export. We have therefore instructed companies to immediately resumed production and exports of the crude oil to the international markets through Sudan as agreed in the agreement", Dau said.

"What was preventing immediate resumption was the ratification of the agreement by the national parliaments of the two nations. But with the ratification of the agreement by the two parliaments, we as government of the republic of South Sudan and parliament approved resumption of the operations within production blocks from today henceforth. The ministry would start production from blocks, 1, 2, 4, 3, 7 and 5a", Dau told journalists at news briefing on Thursday in country's capital Juba.

Minister Dau explained that biggest foreign operators, like Dar Petroleum, run by Chinese state firm Sinopec, China National Petroleum Corp and Malaysia's PETRONAS expects an initial output of 180,000 barrels per day (bpd) within three months.

This is a decrease from production levels before the shutdown. The senior government official noted that Petrodar, which runs oil blocks 3 and 7 in Upper Nile State, used to export between 230,000 bpd and 250,000 bpd until the shutdown.

"The two export pipelines through Sudan were filled with water to avoid gelling and some fields in western Unity state were damaged during weeks of fighting in April. A processing plant for the Unity fields located on the Sudan side of the disputed border was badly hit. Oil companies are currently working on it. This will take time. It requires technical assessment first", explained Dau

The minister said South Sudan will only pump oil at about 70 percent of its former capacity as it would take up to six months for oil to flow into the pipeline from Upper Nile State and nine to 12 months in the pipeline from Unity State.

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InFocus

Sudanese Pound Falls Sharply On News of Oil Delay

Oil rig (file photo): The country will only pump oil at about 70 percent of its former capacity.

The pound has registered a sharp decline against hard currency following news that the resumption of exporting South Sudan's oil via Sudan might be delayed due to failure in ... Read more »