May 21, 2013 / 7:01 PM / 6 years ago

UPDATE 2-South Sudan cuts oil output, sees new problems with Sudan

JUBA/KHARTOUM, May 21 (Reuters) - South Sudan has almost halved its oil production as it faces new “problems” exporting crude to Sudan, it said on Tuesday, suspecting its long-time rival had closed a cross-border pipeline, a move that would be a sign of friction.

A source in Sudan’s oil ministry denied crucial oil exports had been halted but the Sudanese pound fell on the black market close to a record low as traders worried an economic crisis would worsen.

The cut in oil production is bad news for both African countries which have been suffering since South Sudan shut down its oil output of 350,000 barrels a day in January 2012 over a row with Sudan over pipeline fees. Oil is the lifeline for both.

The neighbours agreed in March to resume crude exports from landlocked South Sudan through northern oil facilities and defuse the tension that has plagued them since their messy divorce in 2011.

But mistrust remains deep between the neighbours who fought one of Africa’s longest civil wars until 2005 and again came close to armed conflict in April 2012 over oil fees and disputed territory.

“There has been a problem with the oil production on the side of Sudan,” Mawien Makol Arik, spokesman for South Sudan’s foreign ministry said in the capital Juba.

He said the charge d’affaires of China, which controls South Sudan’s oil industry, had told the Juba government there was only a technical issue with the cross-border oil flows.

“But we suspect it is political. We suspect that Sudan has shut down the oil pipeline,” Arik said, adding that his government had cut the output to 105,000 barrels per day (bpd)from around 200,000 bpd previously.

“If it is closed down it will cause problems for us because we have no storage facilities left,” he said.

A source in Sudan’s oil ministry denied the two pipelines had been shut.

“This is not true. The oil from South Sudan is being processed for export,” said source who asked not to be named.

The Sudanese pound fell to 6.9 against the dollar, down from 6.4 a week ago - the official rate stands at around 4.4. Traders said they worried a dollar shortage driving up inflation would worsen unless pipeline fees from South Sudan arrived soon.

Like the South, Sudan needs dollars to pay for basic food items such as wheat or sugar.


Sudan said earlier this month it received the first oil from the south in Heglig, the scene of heavy clashes in April 2012, from where it is sent to Port Sudan to be exported.

South Sudan’s President Salva Kiir was expected to travel to Port Sudan this month to oversee the first loading of oil onto vessels but neither side has confirmed a date for three weeks.

Khartoum later accused Juba of supporting rebels operating across their shared border but Sudanese Foreign Minister Ali Ahmed Karti said during a visit to Juba on Friday the issue would not affect the oil export deal.

The tightly-controlled Sudanese press has been writing much in the past few days about Juba’s alleged support for rebels who launched a shock attack on a central Sudanese town in April.

South Sudan denies any support for Sudanese rebels and accuses Khartoum of backing insurgents on its territory.

Oil sources have said restarting oil production in South Sudan would be a technical challenge as oil wells were closed in a rush last year. Spare parts are difficult to get into one the world’s least developed countries which has few good roads. (Additional reporting and writing by Ulf Laessing; Editing by Jon Hemming)

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