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Oil pact key to peace as Sudan splits

by Staff Writers
Khartoum, Sudan (UPI) Mar 30, 2011
Hundreds of people have been killed in recent weeks along the still-to-be-defined border between Sudan and the breakaway state of South Sudan, mostly in oil-producing areas.

The bloodletting, pitting proxy militias of the northern Arab-dominated regime in Khartoum against former rebels in the Christian and animist south, underlines how vital it is that they negotiate an oil wealth-sharing pact if there is to be a durable peace.

The south, which voted overwhelmingly for secession in a January referendum, is scheduled to become the world's newest state July 9.

Tensions between the two sides have reached worrying levels in recent weeks amid a surge in violence. The flash points are the border states of Unity, Upper Nile and Jonglei, where most of the oil fields lie.

Marauding militias led by renegade southern commanders, all veterans of the 1983-2005 civil war, are widely believed to be paid and directed by Khartoum to destabilize the south.

They have repeatedly clashed with southern forces. Hundreds of people, mainly civilians, have been killed in what appears to be a determined northern effort to seize control of the border zones before the frontier has been demarcated.

On March 12, the Sudan People's Liberation Movement, which has governed the south since a 2005 Comprehensive Peace Agreement that ended 22 years of civil war, suspended negotiations with Khartoum.

The following day, the south signed its first oil cooperation agreement with Malaysia's state-run Petronas, which has been operating in the south under an agreement signed with the Khartoum government.

Similar deals are expected to be signed with the China National Petroleum Corp. and India's Oil and Natural Gas Corp. which also have operations in the south dating from Khartoum's rule.

South Sudanese Energy Minister Garang Diing Akuong met with senior officials from all three companies in Juba, the southern capital, March 15 and assured them their contracts were under no threat.

But distrust between the two sides is deepening and threatens to undermine moves toward a settlement on the thorny oil issue.

Central to these negotiations is the fact that for now at least the only export route for southern oil is through a pipeline running north to Port Sudan on the Red Sea.

With independence, the landlocked south will have no option but to go on using that 1,000-mile pipeline.

That gives Khartoum considerable clout at the negotiating table with the SPLM, which governs the south.

The outcome of those negotiations on revenue-sharing will be a significant indicator of the prospects for a peaceful separation in July.

"The geographic separation between oil resources and infrastructure has created an environment of mutual dependence that will be the foundation of a new post-referendum, oil deal," the Middle East Economic Digest reported.

"Neither side can afford to lose that revenue stream," said Roger Middleton, a Sudan specialist at the Royal Institute for International Affairs in London. "So the reality is that they have to reach some kind of agreement."

With the south only weeks away from declaring independence, its leaders are pushing to develop new pipelines that bypass northern territory.

One alternative is a route through Kenya to a deep-water port at Lamu on the Indian Ocean the Nairobi government plans to build. An oil refinery at Lamu is also on the cards.

But this and other projects are possibly four or five years away, if they go ahead.

Meantime, oil is the only economic asset the impoverished south has, so holding onto as much production as possible is vital for the survival of the infant state.

Sudan's the third largest oil producer in sub-Saharan Africa. Reserves are pegged at 6.7 billion barrels. Eighty percent of oil production is in the south.

Sudan produced 490,000 barrels per day in 2009 but by November 2010 that was up to 500,000 bpd, generating $5 billion a year in revenue.

Under a revenue-sharing deal that was part of the 2005 peace pact, north and south agreed on a roughly 50-50 split. That now has to be renegotiated.

Global Witness, a non-governmental organization, has questioned implementation of the revenue-sharing agreement and many southerners believe northern officials are skimming off oil revenues.

"Suspicions over the sharing of oil revenues have greatly added to the mistrust between the two parties," MEED observed.

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