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South Sudan Offers Sudan Higher Fees to Transport Its Oil

July 23, 2012

By William Davison
(Bloomberg) — South Sudan said it’s offering Sudan $8.2 billion and an increase in fees it pays to ship crude through its northern neighbor in a bid to end a dispute that led to the shutdown of its oil industry.
South Sudan will write off $5 billion it says it’s owed for oil payments the north failed to make since the signing of a peace agreement in 2005 that led to the south’s independence last year, said its chief negotiator, Pagan Amum. It will also make a cash payment of $3.2 billion to help the north cope with
the loss of three-quarters of its crude production, he said.
“This is our last offer,” Amum told reporters today in Addis Ababa, the Ethiopian capital where the African Union has been mediating talks between the two nations. “This is not a negotiating position.”
Since the south’s secession, the talks between the two countries have failed to yield an agreement on oil-transit fees and issues including the rights of citizens of both countries on either side of the border and the status of disputed territories
such as Abyei. The arguments brought the two countries to the brink of war in April and prompted the United Nations Security Council to threaten sanctions if they didn’t resolve all outstanding problems by Aug. 2.
The two sides won’t be able to complete the negotiations by that deadline, Mutrif Siddiq, a spokesman for the Sudanese negotiating team, told reporters today in Addis Ababa.
“It is impossible to do this in nine days,” he said.
Amum said earlier that South Sudan made its new financial offer late yesterday and Sudanese negotiators are considering it today.

Rebel Support

“Very few elements are new,” Siddiq said about the offer.

President Umar al-Bashir’s government has accused South Sudan of backing rebels in its Southern Kordofan and Blue Nile states.
The two sides will start talks on security later today, Siddiq said, adding that they would have to make progress before agreement can be reached on other issues.
“We are going to continue with the issue of security until we resolve it,” he said.
The insurgents in Blue Nile and Southern Kordofan are members of the Sudan People’s Liberation Movement-North, which fought alongside southern Sudanese forces during the 20-year
civil war that ended in 2005.
Amum said today that al-Bashir’s government has agreed to start direct negotiations with the rebels.
Economic Impact

The oil shutdown has hurt both economies.
South Sudan relies on oil for 98 percent of its government revenue. Inflation in the East African nation was 74.1 percent in June.
Sudan’s government has faced protests since June 16, after it raised transportation and fuel prices, boosted taxes and devalued its currency to cope with the loss of oil revenue. Inflation accelerated to 37.2 percent in June as food prices increased.
“Both of these countries face extremely bleak economic futures if they in fact do not reach political settlements on the differences that divide them,” U.S. Assistant Secretary of said State for African Affairs Johnnie Carson said in a July 18 interview. “Time is running out as the economic clock winds down.”
At independence, South Sudan assumed 75 percent of the previous country’s 490,000 barrels a day in oil production. In January, South Sudan shut down its industry after it accused al-Bashir’s government of stealing $815 million worth of crude.
Sudan said it was confiscated to pay transportation fees.

Negotiation Impasse

To break the negotiation impasse, Amum said the South is now willing to pay the north $9.10 a barrel, up from a previous offer of $7.40, to export oil in Greater Nile Petroleum Operating Co.’s pipeline, and $7.26 instead of $5.50 a barrel to use the Petrodar pipeline.
The north’s last offer for South Sudan’s oil to use its facilities was about $36 a barrel, which includes processing, transit, transportation and a marine terminal fee.
China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd. operate most of the oil wells in the two countries.

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