South Sudan to Get Oil Out With Trucks

(HornTrade) – South Sudan is planning to export by road at least 10% of its 350,000 barrels-a-day crude oil production while alternative infrastructure is put in place, said Stephen Dhieu Dau, minister for petroleum and mining, without giving a time frame for when this would start.

The landlocked country, which sells its crude to refiners in China and Malaysia, has shut down its entire oil output amid a dispute with neighboring Sudan over oil-export transit fees, a move that has contributed to global oil prices in recent days hitting highs last seen in July 2008.

Mr. Dau said the government was planning to use trucks to transport a minimum of 35,000 barrels a day of its production to Kenya’s coastal city of Mombasa and to the coast of Djibouti, while pipelines in Kenya and Ethiopia were being built, although he said the plan to export crude by land wasn’t yet finalized.

Eric Reeves, an analyst on Sudan and South Sudan and professor at Smith College in Massachusetts, said poor roads between the oil-rich Upper Nile and Unity states would make transport by truck extremely difficult.

“I don’t know what the roads can bear, I doubt it is very much, but on the other hand if you are as cash starved as the South is, you are going to do anything you can,” said Mr. Reeves.

South Sudan receives 98% of its total revenue from oil, according to the U.S. Department of Energy.

South Sudan and Sudan were scheduled to resume talks Tuesday over oil-transit fees, though analysts are doubtful an agreement can be reached. Last week South Sudan accused Sudan of bombing its oil fields, a charge Khartoum denied, further ratcheting up tensions between the East Africa neighbors, who split into two countries in July.

Also, South Sudan in January accused Sudan of stealing $815 million of its crude oil since December, a charge also denied by Sudan.

South Sudan, which relies on infrastructure and pipelines in Sudan to transport its oil to the sea, has said it will pay less than $1 a barrel in accordance with international norms, while Sudan is asking for $32.20 a barrel.

Meanwhile, South Sudan will by June reach an agreement with companies looking to finance an alternative pipeline in Kenya, Mr. Dau said. The country is in talks with companies in China, Japan, Europe, South Korea and the U.S. about financing a pipeline running through Kenya and another through Ethiopia to Djibouti, he said, without disclosing which companies were involved.

Mr. Dau said in a phone interview, that the pipeline could be built in as little as 12 months.

“We know there are challenges, but we are trying our best because this project is a priority for the nation,” he said.

He said the pipeline that traversed Kenya would carry the Nile Blend grade of crude, while the pipeline through Ethiopia would carry Dar Blend.

Mr. Dau also said the government is in talks with trading house Vitol Holding BV to build a refinery in South Sudan, also to be completed within 12 months.


Source: WSJ

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