Sudan frees South Sudan's oil tankers; row continues

KHARTOUM/JUBA Mon Jan 30, 2012 7:45am EST

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KHARTOUM/JUBA (Reuters) - Sudan has released four tankers loaded with South Sudanese oil in an effort to defuse a row over export transit fees, but southern officials said the move was not enough to reverse their decision to shut off crude supplies.

South Sudan seceded in July under a 2005 peace agreement that ended decades of civil war with Khartoum but the two sides have yet to resolve a long list of disputes. Disentangling the oil industries both depend upon is at the top of the agenda.

The landlocked new nation took control of about three quarters of the unified country's roughly 500,000 barrels a day in oil output, but it needs to export its crude through northern pipelines to the Red Sea port of Port Sudan.

Both sides have been unable to agree on a transit fee, prompting Khartoum to seize part of Juba's exports arriving at the port. In response, South Sudan shut down its oil production last week.

The ships that have been released were already loaded and Sudan had held them from sailing. Separately, Sudan has sold off at least one tanker of crude seized from the South and has offered two other cargoes.

In addition to the three, at least seven tankers are still waiting at the port to lift December and January cargoes, racking up demurrage costs of $20,000-$22,000 per day, traders and shipbrokers said.

Sudan's Oil Minister Awad al-Jaz said Khartoum had released the vessels held at Port Sudan in an effort to ease the tensions and pave the way for a deal, but that South Sudan had showed no sign of reversing its decision to shut off its output.

"We don't have any positive response from the other side," he told reporters at an oil industry conference in the Sudanese capital. "We're still open to cooperation but the other side has refused."

Jaz's southern counterpart Stephen Dhieu Dau confirmed four ships carrying 3.5 million barrels of crude for buyers Vitol and Sinopec had been released, but said ships were still waiting to load another 5.4 million barrels of southern crude.

"The ships are waiting," Dau said. "If they want to negotiate in good faith with us they should allow us to come and lift it."

Trading giant Vitol chartered two of the released tankers, an industry source familiar with the matter told Reuters, adding the two ships were carrying 1.6 million barrels of oil in total.

South Sudan government spokesman Barnaba Marial Benjamin said four more ships were still waiting to load at Port Sudan.

He also said the country was pushing ahead with plans to build two or three refineries and had signed a memorandum of understanding with a U.S. company as part of that.

"We have already signed with a major American company and they will start building as soon as possible and complete in four months," Benjamin told Reuters.

"It will start with 6,000 barrels and ramp up to a maximum of around 110,000 barrels per day by the end of the year."

LONG LIST OF DISPUTES

Analysts expect no quick breakthrough in the oil talks because the two countries' positions have remained far apart.

Khartoum is demanding $1 billion in rear payments and has said it wants $36 a barrel as a transit fee -- a demand that exceeds international norms by more than 10 times, according to some industry analysts.

Sudan also wants assistance with some of its $38 billion in external debt as it struggles to overcome a severe economic crisis exacerbated by the loss of oil revenues. Oil used to make up 90 percent of Sudan's exports.

Sudan's oil minister Jaz blamed Juba for obstructing progress toward a deal, saying South Sudanese officials had refused to sign an African Union-brokered agreement that would have opened the way to defusing the row over the weekend.

"Sudan agreed to sign that. Unfortunately the other side refused to sign," he said.

Senior officials from both countries have also said they want to tie the oil issue into a deal that addresses violence on both sides of the poorly-marked border and finds a solution for the disputed border region of Abyei.

Abyei, rich in fertile grazing land, is a source of tension between north and south. Khartoum seized Abyei in May after an attack on a convoy of northern troops and U.N. peacekeepers that the world body blamed on southern forces.

South Sudanese officials have since said they would offer Khartoum oil at discounted prices and financial help if it gave up its claim to Abyei.

Oil provides about 98 percent of South Sudan's income and is vital to the impoverished country as it tries to develop infrastructure and institutions devastated by a war that killed an estimated 2 million people.

China is the biggest buyer of oil from Sudan and South Sudan -- it got about 5 percent of its oil from the two last year -- and the biggest investor in South Sudan's oilfields.

(Reporting by Amena Bakr in Dubai, Hereward Holland in Juba and Alexander Dziadosz in Khartoum; Writing by Ulf Laessing; Editing by Manash Goswami and Angus MacSwan)

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