Sudan, South Sudan agree on new oil pipeline deal

Sudanese, South Sudanese ministers agree new deal on oil pipeline fees to make exports profitable again

Photo by: AFP
Photo by: AFP

South Sudan's rebel leader Riek Machar (C) greets people as he arrives to hold a press conference in Kampala, Uruguay, January 26, 2016

Sudan and South Sudan's oil ministers have agreed in principle a new oil pipeline deal, reports said Thursday, after slumps in global prices made Juba effectively pay to export crude.

The countries, which split in July 2011 after decades of war, agreed then to a fixed fee for the use of export pipelines.

But with global prices so low, the fee was more than it earned for the oil itself, meaning impoverished and war-torn South Sudan lost money on every barrel it sold.

At a meeting in South Sudan's capital Juba on Wednesday, the ministers agreed to tie the fee to oil prices, although exact details are yet to be settled.

"We have discussed and agreed in principle to review the agreement," Stephen Dhieu Dau said, South Sudan's oil minister, according to the Sudan Tribune.

"It will be fluctuating up and down, depending on the prices of the crude globally," he added.

His northern colleague, Mohammed Awad, said the "technical people" would now work out the details, Radio Tamazuj reported.

South Sudan is estimated to produce around 150,000 barrels a day - down from 350,000 at independence in 2011 - after many oil fields ceased operating during the more than two years of civil war between President Salva Kiir and rebel leader Riek Machar.

Observers said that Juba is already in arrears for transit fee payments due to Khartoum in recent months, while years of financial mismanagement, a previous oil shutdown in 2012 amid a border conflict with Khartoum, and the civil war since December 2013 have drained the country's reserves.

The currency is also at risk of collapse, inflation is rocketing and government revenues are virtually non-existent.

Ceasefire monitors have criticised government spending on arms, amid a dire humanitarian crisis with several areas on the brink of famine.

Tens of thousands have died in the war, more than 2.3 million people have been driven from their homes and 3.9 million South Sudanese face severe food shortages.

UN experts last month said Kiir has spent or committed to spending $78 million to purchase eight Mi-24 attack helicopters.

"Amidst rapidly declining oil revenues, the public resources of the country have been largely squandered on financing the conflict," Festus Mogae said last week, a former Botswana president heading a commission pushing a stalled August peace deal.