South Sudan seeks alternative to North Sudan oil pipeline

PERTH Thu Sep 1, 2011 1:01pm BST

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PERTH (Reuters) - South Sudan is exploring alternatives to transporting its oil through North Sudan, as the two countries face a stalemate over dividing up oil revenues, a government official said Thursday.

South Sudan took 75 percent of the 500,000 barrels a day of oil production when it became independent on July 9, but only the north has a pipeline and a port to export the oil.

Last month, North Sudan halted an oil shipment from landlocked South Sudan in a dispute over customs fees.

"We are having conversations. We are looking to the alternatives," Pagan Amum, secretary general of the ruling southern Sudan People's Liberation Movement (SPLM), told Reuters at a mining industry conference.

"Meanwhile, we believe if Khartoum accepts a deal, it would be in the interests of both Khartoum and the South," Amum said, adding that he expects international mediators to encourage Khartoum to be "reasonable" in negotiations.

Experts have said southern plans to connect to a pipeline in east African neighbour Kenya are years away, but Amum indicated that an alternative through East Africa would be more economical than paying the $32 per barrel fee that Khartoum has demanded for future use of its oil facilities.

Amum said the South Sudan government was not open to raising its current customs fees to North Sudan, which stand at $4 per barrel for old fields and $7 per barrel for new fields.

South Sudan has asked the African Union to find a compromise after rejecting the $32 proposal.

South Sudan seceded from Sudan after a decades-long conflict over religion, ethnicity, ideology and oil which killed some 2 million people.

Amum said the transition had led to increased oil investment interest.

"There's a lot of interest from companies from the Western world... the pariah nature of the Sudanese system made it politically and morally difficult or embarrassing for Western companies to be engaged," Amum said.

Sudanese oil flows mainly to Asia, with China buying more than half of total volumes. South Sudan's production is dominated by Chinese and Indian companies, which have been marketing their crude themselves so far.

Earlier this year, South Sudan also signed a deal with trading house Glencore to help it market crude, but a dispute between various officials has threatened to derail the agreement.

(Reporting by Rebekah Kebede; Editing by Anthony Barker)

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