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South Sudan resumes oil production

Thursday - 10/18/2012, 12:50pm  ET

By MICHAEL ONYIEGO
Associated Press

JUBA, South Sudan (AP) - South Sudan ordered oil companies to restart production Thursday and officials said oil export could resume in about 90 days, ending a nearly nine-month shutdown following a dispute with Sudan over borders and oil.

Sudanese President Salva Kiir and his Sudanese counterpart President Omar al Bashir signed an agreement last month in the Ethiopian capital that addressed several issues including residency, work and travel rights for citizens of both countries, and a demilitarized buffer-zone to reduce tensions along the oft-disputed border. Perhaps the most critical part of the agreement is the provision that allows South Sudan to export its oil through the port and pipelines in the north.

South Sudan's National Legislative Assembly on Tuesday approved the agreement, which attempted to cover issues left over from the 2005 Comprehensive Peace Agreement which ended 21 years of civil war between Sudan and South Sudan and led to the south's eventual split from Khartoum last July.

South Sudan's Minister of Petroleum and Mining, Stephen Dhieu Dau, said the nine-month shutdown "had served its purpose to protect the sovereignty and patrimony of the nation" and had ensured "once again that the South Sudanese People may exercise the right to enjoy the full benefits of their resources."

South Sudan inherited three-quarters of Sudan's oil production when it declared independence last year. But the country lacks the infrastructure to refine or export its oil, and must pump it through pipelines running north to Port Sudan for export. In January, Juba accused Khartoum of stealing nearly all of its oil. Khartoum said it had taken the oil in lieu of unpaid fees for the use of its facilities.

In signing and ratifying the Addis Ababa agreement, South Sudan has agreed to pay $9.10 and $11.00 per barrel for the pipelines operated by Dar Petroleum and the Greater Nile Petroleum Operating Company, respectively.

The production of oil could provide much needed relief for the economy of South Sudan. The government had imposed austerity measures in recent months to account for the loss of their oil revenue - which accounted for around 98 percent of the yearly budget. The South Sudanese Pound also fluctuated wildly in the wake of the shutdown, falling on the black market from around 3.5 pounds per dollar to around 5.5 in July. The rate has recently rebounded following news of the deal in Addis Ababa.

"The foreign oil companies and pipeline operators operating in (South Sudan) are hereby ordered. to resume any and all petroleum operations within the territory that may have been halted as a result of the government's prior shutdown instruction," said the minister.

South Sudan's oil is produced in its Unity and Upper Nile states, along the border with Sudan. About 80 percent of its oil production comes from facilities in Upper Nile, which are operated by Dar Petroluem.

Dar Petroluem's manager of exploration and production Chen Huanlong said after the agreement was signed that it could take between four to six months before the fields in the state produce at full capacity. Huanlong said they will need to "warm up the pipes" for one month. After that, Huanlong said they would "approach the production plateau" in three months.

Dar Petroleum is a consortium of Chinese, Malaysian and South Sudanese oil companies. Following the Agreement in Ethiopia last month, the company promised to eventually bring production up to 180,000 barrels per day.

In announcing the resumption, Minister Dhieu Dau said that "we assume that in 90 days part of our oil will be getting its way to the international market. Not 100 percent but we will be able to produce and export the crude oil of South Sudan within 3 months." The minister said that the export schedule depended on "technical preparations."


(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)