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South Sudan and 'exorbitant' pipeline fees
by Staff Writers
Johannesburg, South Africa (UPI) Jul 28, 2011

disclaimer: image is for illustration purposes only

Less than a month after gaining independence, South Sudan is contesting oil export pipeline fees imposed by its northern neighbor Sudan.

Earlier this month South Sudan made its first shipment of oil as an independent nation, despite the lack of a finalized agreement on revenue sharing of oil exports between it and Sudan, the Inter Press Service NGO reported.

The 2005 Comprehensive Peace Agreement between Khartoum and what would eventually become the country of South Sudan stated that northern and southern sections of Sudan would eventually equally split the revenue from oil exports but the agreement in the past four weeks has swiftly run into difficulties.

The core of the dispute is simple -- while most of Sudan's 500,000 barrels per day is extracted from oilfields in South Sudan, the pipeline infrastructure that allows its export, as well as refineries, are in the north, so the CPA stipulated that the South would pay transit fees to transport its oil and ship it abroad from Port Sudan terminal.

This uneven distribution of resources was noted prior to the country peacefully deconstructing, as last month Sudanese Minister of Finance and National Economy Ali Mahmood Hassanein told the National Assembly that 73 percent of the two-country region's oil was in the south, with about one-quarter in the north.

While the final figure for how much South Sudan should pay for exporting its oil through pipelines controlled by Sudan to Port Sudan on the Indian Ocean was unclear, the South Sudanese government is bitterly complaining that Khartoum is charging "exorbitant" export fees on each barrel of oil transiting the Port Sudan pipeline.

They claim it is more than 16 times the highest fee according to international practice -- approximately $2 a barrel. Instead, Sudan is charging its southern neighbor $33 a barrel, a transit tax equivalent to nearly one-third of the current global price for a barrel of oil.

South Sudanese Energy Ministry Director General Arkangelo Okwang said that this month 1 million barrels were shipped out of the country using Sudan's pipeline. He said South Sudan is currently capable of producing about 385,000 barrels of oil a day.

Asian customers are anxious to see the dispute resolved, as it could threaten to disrupt the flow of crude from the country, a significant exporter notably to China and Japan.

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