Sudan frees South Sudan's oil tankers; dispute continues

JUBA/DUBAI (Reuters) - Sudan released tankers loaded with South Sudanese oil that had been held at Port Sudan in a row over export transit fees, days after Khartoum seized crude from its new neighbor and offered it at a steeply discounted price.

Sudan's Oil Minister Awad al-Jaz said the release came as part of efforts to reach an agreement with South Sudan on the transit fees, but so far "we don't have any positive response from the other side."

South Sudan has shut down oil output in protest at the seizing of the cargoes, and talks between the two to reach a settlement broke down over the weekend.

The former civil war foes have failed to agree the value of the fee landlocked South Sudan should pay to pump oil north by pipeline for export from Port Sudan.

"The four ships that were being detained were released yesterday at 5:00 p.m.," South Sudan's Minister of Petroleum and Mining Stephen Dhieu Dau said by telephone.

"They were carrying oil for Vitol and Sinopec."

He added that 3.5 million barrels have been released but Sudan should now allow 5.4 million barrels to be lifted, indicating that the dispute was far from resolved.

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

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, raking up demurrage costs of $20,000-$22,000 per day, traders and shipbrokers said.

Two of the tankers that were freed were chartered by oil trading giant Vitol, an industry source told Reuters.

"The two tankers were freed on Sunday and they are carrying a total of 1.6 million barrels," said the industry source, declining to be identified because he is not authorized to talk to the media.

Oil is the lifeline of both countries' economies. The South controlled about 350,000 bpd of oil output when it became independent in July under a 2005 peace agreement that ended decades of civil war.

Oil provides about 98 percent of South Sudan's income and is vital for developing an already poor country devastated by years of civil war.

China is the biggest buyer of oil from the two countries and the biggest investor in South Sudan's oilfields.