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S.Sudan Agree on Metering to Avoid Oil Disputes

Source: Reuters 9/28/2012, Location: Africa

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Sudan and South Sudan plan to avoid future disputes over oil exports with a metering system, but have failed to end a $1.8 billion row over how much Juba will pay for seizing northern oil facilities after its secession. On Thursday, the African neighbours signed a deal to restart oil exports from the landlocked South through a Sudanese Red Sea port. In January, Juba had shut down its entire output of 350,000 barrels a day after failing to agree on export fees.

When the row escalated, Juba had accused Sudan and the mainly Chinese oil firms operating in the new republic of publishing incorrect production data to the disadvantage of the South. Oil facilities in both countries were built before South Sudan became independent from Khartoum in July 2011, putting three quarters of oil production in the south but locating processing, refining and sea export facilities in the north.

To avoid any future arguments over export volumes, both sides plan to "review and ensure...effective metering facilities", according to the final agreement published by the African Union (AU) late on Thursday. The agreement did not outline any concrete steps but said each party had the right to ask oil firms to install additional metering systems. The neighbours also agreed to set up a committee headed by an African Union-appointed official to review payments and technical issues to avoid disputes.

Diplomats had hoped the agreement would settle all disputes but both nations failed to agree on how much South Sudan should pay Sudan in compensation for taking over oil facilities once owned by state firm Sudapet. Sudan demands $1.8 billion for Sudapet's assets, said Pagan Amum, Juba's chief negotiator. "We are not going to pay this," he said after the signing ceremony in Ethiopia on Thursday.

The agreement, which was brokered after three weeks of talks in Addis Ababa, only said the parties would try reach a deal within two months. Both sides also agreed that Sudan will have to pay back proceeds from two disputed oil shipments, transported by the Ratna Shradha and ETC ISIS vessels, which Sudan seized as compensation for what it called unpaid transit fees. Southern officials had previously demanded the return of four oil shipments worth more than 6 million barrels, seized since December by Sudan, which has never confirmed or denied the figures.

Juba will give up claims from southern oil diverted to refineries by Sudan when the row over transit fees escalated. "The Government of South Sudan shall not bring any other claims," the agreement said. Under the final deal, South Sudan will pay between $9.10 and $11 a barrel to export its crude through the north. Juba will also pay $3.08 billion to help Sudan overcome the loss of three quarters of oil production due to southern secession. South Sudan's government expects resuming oil production will take three to six months after the pipelines were watered and some fields were damaged during fighting between the two nations in April. South Sudan plans to build pipeline to Kenya but analysts are sceptical as it would be difficult to build across rough terrain hit by tribal violence.

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