Pipelines and Transit Fees in Sudan and South Sudan

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The Comprehensive Peace Agreement (CPA) between Sudan and South Sudan, signed in 2005, did not set provisions on oil transit fees. Since South Sudan retained 75% of combined Sudanese-South Sudanese oil production after its secession from Sudan in July 2011 - while the entire pipeline, refining, and export infrastructure remained in Sudan - pipeline fees have been an object of contention since South Sudanese independence.[1]

Transit fee dispute

Pipeline fees were at the heart of a dispute that came to a head in January 2012, about half a year after the South's secession, in which the Sudanese government in Khartoum asked for transit fees of US $30 per barrel, according to the Civil-Military Fusion Center think tank, while international standards typically lie between $0.40 and $1.00. South Sudan countered that it would pay only $0.63-0.69 per barrel, in addition to a one-time payment of $1.7 billion to compensate for Sudan’s loss in oil revenue when South Sudan gained independence.[2]

South Sudan's refusal to pay the high transit fee, and Sudan's subsequent seizure of South Sudanese oil as compensation, led South Sudan to entirely shut down its oil production in January 2012. As of mid-2012, the pipeline fee dispute and South Sudan's production shut-down had yet to be resolved.[2]

Main article: Oil Production Shutdown of 2012

South Sudan's new pipeline plans

To reduce its dependency on Sudan's infrastructure, South Sudan in January signed memorandum of understanding (MoU) with the Kenyan government to build an oil pipeline from South Sudan to the Kenyan port of Lamu; a month later Juba signed another MoU with Ethiopia's government to build an oil pipeline via Djibouti.[3]

Main article: Overview of Oil Infrastructure in South Sudan

References

  1. "Sudan and South Sudan" US Energy Information Administration, 19 March 2012.
  2. 2.0 2.1 "Sudan and South Sudan’s Oil Industries: Growing Political Tensions" Civil-Military Fusion Center, May 2012.
  3. "South Sudan, Ethiopia Sign Accord On Djibouti Oil Pipeline" Bloomberg, 9 February 2012.