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Sudan Oil Pipeline

South Sudan to shut down oil production by end of July

By Andrew Green and Khalid Abelaziz

JUBA/KHARTOUM, July 20 (Reuters) – South Sudan plans to sell
6.4 million barrels of oil worth $300 million before shutting
down its entire production by the end of July due to a row over
its alleged support for rebels in neighbouring Sudan, its oil
minister said on Saturday.

Sudan, the sole conduit for South Sudan’s oil exports, said
a month ago it would close two cross-border oil pipelines within
60 days and insisted output be shut by Aug. 7 unless South Sudan
gave up support for the rebels. Juba denies backing insurgents.

The shutdown is bad news for both countries, which fought
one of Africa’s longest civil wars before separating in 2011.

Diplomats worry South Sudan might collapse without oil, the
main source for the budget apart from foreign grants. They point
to recent looting of aid agencies by soldiers as a sign that
Juba is struggling to pay salaries.

Closing the wells is also grave news for Sudan, which has
been struggling with turmoil since losing most oil reserves with
South Sudan’s secession. Oil fees from Juba are essential to
bringing down soaring inflation, which stokes dissent.

South Sudan had only resumed oil production in April, after
turning off wells pumping around 300,000 barrels per day in
January 2012 when both sides failed to agree on pipeline fees.

Oil industry insiders say once the pipelines are closed it
will take several months to restart production as they would
have to be flushed of water and cleaned first.

South Sudan sold 1 million barrels of crude in June and had
contracted further sales of 2.2 million for shipment in July and
3.2 million in August, Oil Minister Stephen Dhieu Dau told
Reuters.

“There is enough crude in the pipeline to meet this,” he
said. Sudan has said it would allow the sale of oil which has
already reached pipelines on its territory or the export
terminal on the Red Sea.

Dau repeated South Sudan was not backing any Sudanese
rebels. “We are committed to the flow of the oil. It is in the
interest of the two countries. We don’t see that this shutdown
can bring any peace or stop internal rebellions in Sudan.”

“It will have a negative impact on Sudan and South Sudan.
Our economies will suffer,” he said. Sudan will get pipeline
fees of around $100 million until the shutdown, he added.

Khartoum accuses Juba of supporting the “Sudanese
Revolutionary Front” (SRF), a rebel alliance, which complains of
neglect at the hands of the wealthy Khartoum elites. The SRF in
April staged an attack on central Sudan, embarrassing the army
on whose support President Omar Hassan al-Bashir depends.

South Sudan in turn accuses Sudan of backing rebels in its
eastern Jonglei state, where fighting is making it impossible to
realise government plans to search for oil with the help of
France’s Total and U.S. Exxon Mobil.

Rahmatullah Osman, undersecretary in Sudan’s foreign
ministry, told al-Akhbar newspaper Sudan would not allow any
passage of South Sudanese oil unless Juba cut all ties with
insurgents.

“There won’t be any reversal,” he said, adding that Sudan
hoped like South Sudan that China would mediate. China dominates
the oil industries in both countries, and state firm China
National Petroleum Corp is most affected as it runs the
oilfields in the South with Malaysia’s Petronas and
Indian firm ONGC Videsh.

(Reporting by Andrew Green in Juba and Khalid Abdelaziz in
Khartoum; Writing by Ulf Laessing; Editing by Mark Potter)

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