South Sudan wants more talks to end oil transit row

JUBA (Reuters) - South Sudan's President Salva Kiir said on Thursday he wants to end a row with Sudan over oil transit payments but has rejected a proposal requiring Juba to pay billions of dollars and keep exporting crude through the neighbouring country.

The two neighbours are locked in a worsening row over disentangling their oil industries after the South split from Sudan and became independent in July, following decades of civil war that ended with a peace deal in 2005.

The landlocked new nation took three-quarters of the oil production - the lifeblood of both economies - but needs to pay for using northern pipelines and the Red Sea port of Port Sudan.

Tension rose when Sudan said last month it started seizing southern oil as compensation for what it called unpaid pipeline transit fees. South Sudan responded last week by shutting down its entire output of 350,000 barrels a day.

On Friday, Kiir met Sudanese President Omar Hassan al-Bashir on the sidelines of an African Union (AU) summit to discuss oil but failed to reach a deal.

Kiir said he had rejected at the meeting a draft agreement by the AU because it would have required Juba to keep selling oil from some fields through Sudan's export facilities.

"It is difficult for me to accept a deal that leaves our people vulnerable, dependent and paying billions they do not owe," Kiir said, according to the text of his speech published by the government.

NEGOTIATIONS

The agreement would also have required South Sudan to supply 35,000 barrels a day to Sudan's refineries, he said.

The value of the oil would be deducted from payments of $5.4 billion South Sudan also would have to make under the proposal to help Sudan cope with the loss of southern oil.

Kiir said the agreement had also not covered other conflicts such as marking the joint border and finding a solution for the disputed region of Abyei.

"I want to be clear that the Republic of South Sudan is committed to continue negotiations but we would also be wise to pursue efforts to enhance our economic self-sufficiency, prosperity and national security should we not find common ground with Khartoum for now," he said.

South Sudan said last month it would build an alternative pipeline to Kenya within eleven months to end dependency on Sudan's facilities.

But analysts are sceptical the project will take off because it would have to cross rough terrain and may not be viable.

Sudan accused South Sudan on Wednesday of being "hostile" towards Khartoum in the oil talks.