South Sudan resumes oil exports through Sudan

KHARTOUM Tue May 7, 2013 1:01pm EDT

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KHARTOUM (Reuters) - South Sudan's first oil export shipment since January 2012 has reached Sudan, state news agency SUNA said on Tuesday, in the latest sign of a thaw between the longtime foes.

The African neighbors agreed in March to resume cross-border oil flows, ending a row over pipeline fees that prompted landlocked South Sudan to shut down its entire production of 350,000 barrels a day in January 2012.

Sudanese Oil Minister Awad al-Jaz told SUNA the first oil from the South had arrived at Heglig, an oilfield controlled by Sudan along the disputed border.

Sudan and South Sudan came close to war a year ago but pledged in March to end the conflict over oil fees and a disputed border.

The oil shutdown threw both into turmoil, because they depend on oil revenue and pipeline fees to fund food and other imports.

In Heglig, which was damaged during weeks of skirmishes between the two armies in April 2012, water will be removed from the oil before it be will be piped to Port Sudan on the Red Sea to be loaded on to vessels.

South Sudan has resumed production of oil at the small Thar Jath oilfield in Unity State across the border from Heglig.

On Sunday, the government also turned on wells again at the Palouge field, the country's largest, in Upper Nile state in the northeast.

SLOW PRODUCTION

The return of production is going slower than planned. South Sudan hopes within a month to pump up to 180,000 barrels per day in Palouge where Dar Blend, a heavy sour crude, is produced.

But damage caused by the skirmishes means South Sudan can only gradually ramp up output in its Unity State oilfields, which is mixed to produce Nile Blend, a light, sweet, waxy crude. Its production is likely to remain at around 30,000 to 40,000 bpd for at least six months, experts say.

Originally the country had planned to have resumed oil exports by January, but mistrust between the neighbors delayed the set up of a border buffer zone, a condition for Sudan to let through southern oil.

South Sudan expects to start getting paid in June as the first exports will be lifted in Port Sudan only by May 20, according to its oil ministry.

South Sudan seceded from Sudan in 2011 under a 2005 peace deal, which ended one of Africa's longest civil wars. However, the two remain at loggerheads over control of disputed territories and other issues.

(Reporting by Ulf Laessing; editing by Jane Baird)

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