Eric Watkins
Oil Diplomacy Editor
South Sudan—now slightly more than a month old—already is having problems over oil with North Sudan. Its main trouble concerns the amount of money North Sudan wants to charge to pipe South Sudan's oil to the export terminal at Port Sudan.
"The amount of money Khartoum wants us to pay is unreasonable," said David Loro Gubek, undersecretary at South Sudan's ministry of energy and mining, following reports that North Sudan asked for $32/bbl for the service.
Gubek said South Sudan might examine other alternatives, including the construction of a separate oil pipeline if the North continues to insist on fees that amount to a third of the oil's export value.
"We are not the only country exporting oil through their neighbor's land…. Why should ours be terribly high?" Gubek asked, adding, "If we are forced, we will put in a separate pipeline."
A host of problems
The impasse between North and South Sudan comes just over a month after the two countries became independent of one another following some 50 years of civil war between them.
Despite the separation, though, the two sides still have a host of problems to resolve, including demarcation of their border, national debt and—most importantly—oil.
The bulk of Sudanese oil lies in South Sudan, but all of that oil must pass through a 1,000-mile pipeline from the oil fields through the heart of North Sudan to the Suakim oil terminal, which lies near Port Sudan on the Red Sea.
In an effort to recoup their losses following South Sudan's independence, northern government officials see oil transit fees as the most likely substitute. In fact, Khartoum lawmakers expect transit fees to cover the lost oil completely.
Oil cargo halted
That became clear last month, when North Sudan's parliament approved an alternative 2011 budget that lawmakers said included an annual income of $2.6 billion for transit fees—the same amount expected for the loss of South Sudan's oil production.
In an effort to underline their demands, North Sudanese officials last month halted a cargo of South Sudanese oil, claiming that it could not be exported until the Southern government had paid the required fees.
That was clearly an act that worried China, which has invested heavily in the Sudanese oil industry and which imports the bulk of Sudanese oil. Chinese worries were expressed in the form of a visit to the region by Foreign Minister Yang Jiechi.
On the agenda were a great many topics to do with oil, but price was the most important. Indeed, Arab media reported that Yang informed North Sudan's officials during his visit that their proposed oil transport fee is "exaggerated."
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