South Sudan to Unveil Pipeline Plans Next Week

Source: Reuters 1/21/2012, Location: Africa

South Sudan will announce plans for an oil export pipeline through East Africa next week, a priority for the new nation because its crude is "no longer safe" in Sudan, a government spokesman said. Landlocked South Sudan took about three quarters of Sudan's roughly 500,000 barrels per day of oil production when it seceded from Sudan in July under a 2005 peace deal, but it still relies on Sudan's infrastructure to export crude.

Oil is vital to both economies -- it accounts for almost all of South Sudan's government revenues -- but the two countries have yet to agree how much South Sudan should pay as a transit fee. South Sudan threatened to halt crude output within two weeks, after its northern neighbour started seizing crude to compensate for what Khartoum calls unpaid fees.

"The pipeline is now a priority. The minister of petroleum and mining will announce next week which pipeline we are going with and the consortium that will be involved," Barnaba Marial Benjamin, South Sudan's information minister and government spokesman, told Reuters by telephone. "It has to be done because of the shutdown. Our crude is no longer safe in Sudan," he said. "If we choose the pipeline through Kenya it could take less than 10 months to complete."

South Sudan has floated the idea of an East African pipeline before, but outside experts say barriers include geography and the need to ensure enough production volume to fill the pipeline in the future. South Sudanese officials have previously said the country can survive on credit using crude as collateral if exports were ever halted.

The new pipeline will be built with the help of international oil companies operating in its fields, China's state-run Xinhua news agency reported earlier. China, a major buyer of South Sudanese crude, has urged "calm and restraint" over the dispute, which began in November. The two neighbours together rank as the seventh-largest supplier of crude oil to China, accounting for 5 percent of its imports in 2011.

South Sudan has started "practical steps" to construct a pipeline through Kenya and Uganda and would begin construction of a refinery in South Sudan immediately, Xinhua quoted Benjamin as saying. International oil firms currently operating in South Sudan would construct the pipeline and refinery, the agency cited Benjamin as saying. It did not specify which.

Oil firms active in South Sudan include Chinese state-owned China National Oil Corp., or CNPC, and Sinopec, Malaysia's state-owned Petronas, and Oil and Natural Gas Corp of India, or ONGC.

French oil major Total said in December it could build a pipeline from South Sudan to Uganda that would continue to Kenya's coast but that construction of the pipeline at the time was still "just thoughts". South Sudanese officials have also talked to Toyota Kenya about the possibility of linking to a proposed regional oil corridor to help export crude.

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