S.Sudan Kenya pipeline not feasible short-term: Norway

KHARTOUM (Reuters) - South Sudan's plans to build a pipeline to Kenya or Djibouti to end dependency on Sudan's oil industry seems unrealistic in the short-term, showing the need to find a deal with Sudan over oil payments, a Norwegian minister said on Wednesday.

South Sudan is locked in a row with Sudan over oil payments because it needs to ship its crude through northern pipelines and a Red Sea port.

Last month, Juba shut down its entire oil output of 350,000 barrels per day after Sudan started seizing southern oil after both sides failed to agree on a transit fee.

Juba now wants to develop an alternative pipeline to Kenya or Djibouti to bypass Sudan.

But Norway's Minister for Environment and International Development, Erik Solheim, said oil pipeline projects tend to take longer than planned.

"I see very few people in the international community who consider this feasible in the short-term," Solheim told Reuters.

"A much more realistic option would be to find a settlement using the north-south pipeline in meantime while then you can consider a long-term solution," he said during a visit to Khartoum.

Norway is advising Sudan and South Sudan on developing their oil industries.

Asked whether Juba would be able to build a pipeline to the Kenyan coast within 11 months as planned, Solheim said: "It's a very optimistic assessment."

Apart from Kenya, Juba has also signed a memorandum of understanding with Djibouti and Ethiopia to build another pipeline. No companies have been named yet for either project.

North and south resume talks sponsored by the African Union on March 3 but Solheim sounded sceptical on a breakthrough.

"Both sides say they are ready to compromise but there is not huge optimism," he said, warning: "It's a very serious issue for both sides, especially the south."

South Sudan's budget depends for 98 percent on oil revenues.

Positions of both sides are wide apart. The South wants to pay around $1 a barrel in transit fees, Khartoum demands around $36 a barrel plus back payments of $1 billion.