Sudan and South Sudan End Negotiations on Oil Dispute Without Agreement

South Sudan’s president, Salva Kiir, and Sudanese leader Umar al-Bashir failed to reach an agreement to end an oil dispute between the two countries that led South Sudan to start shutting down its crude production.

The negotiations are expected to continue at the Jan. 29-30 summit of the 54-nation African Union in Addis Ababa, Ethiopian Prime Minister Meles Zenawi told reporters today in the capital.

“In general terms I believe there is quite a lot of progress, but not enough for us to be able to clinch a deal now,” Meles said. The failure of the talks means South Sudan’s shutdown of oil production will continue, he said.

South Sudan has accused Sudan of seizing oil that passes through its territory to an export terminal on the Red Sea and has demanded $32 a barrel in transportation fees. South Sudan offered $1 a barrel. Sudan says it is diverting the crude to cover unpaid bills. Kiir said on Jan. 23 Sudan has “looted” $815 million worth of his country’s oil.

South Sudan took control of about three-quarters of Sudan’s output of 490,000 barrels a day when it gained independence from its northern neighbor in July. The crude is pumped mainly by China National Petroleum Corp. (136), or CNPC, Malaysia’s Petroliam Nasional Bhd. (PET) and India’s ONGC Videsh Ltd. (ONGC)

The talks came after the African Union submitted a proposal, backed by the U.S. and China, to both leaders suggesting ways to end the dispute.

China imported about 250,000 barrels a day, or more than 65 percent of total Sudanese oil exports, accounting for 5 percent of the nation’s imports in 2010, according to data from the U.S. Energy Department.

South Sudan said on Jan. 25 that it has stopped output at more than 300 wells and there is “reduced production” at 600 more, cutting production to about 135,000 barrels per day from 275,000 barrels previously.

South Sudan’s “unilateral decision” to halt production “can only be stopped if there is an agreement,” Meles said.

The shutdown of output so far in South Sudan may have halted CNPC-operated production in Unity state, equivalent to about 150,000 barrels per day, Philippe de Pontet, Africa Director at New York-based Eurasia Group, said in a research report yesterday.

South Sudan says its government depends on oil for about 90 percent of its revenue.

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