China urges dialogue in South Sudan dispute with oil firms

BEIJING (Reuters) - China on Thursday urged dialogue between South Sudan and Chinese oil firms following the expulsion this week of the head of Chinese-Malaysian oil consortium Petrodar, in its first comments on an escalating row.

Chinese oil firms are caught in a dispute between Khartoum and the newly independent South Sudan over transport fees for moving oil from the landlocked South to ports in Sudan.

On Tuesday, South Sudan expelled Liu Yingcai, the head of Petrodar, the main oil firm operating in the new African nation, citing lack of cooperation with the South's investigation of oil firms suspected of helping Khartoum seize southern oil.

Petrodar has rejected the allegations and on Thursday the Chinese government weighed in, calling for joint efforts to resolve the dispute.

"China and South Sudan's cooperation is based on mutual respect and mutually beneficial equality, which brings real benefits to both peoples," Chinese Foreign Ministry spokesman Hong Lei told a daily news briefing.

"We hope that relevant sides step up communication and consultations and put an end to misunderstandings to benefit long-term cooperation," he added.

Petrodar, which pumped 230,000 bpd and exported the southern oil through a Sudan pipeline until the shutdown, has said it had followed only southern instructions.

Juba has shut down its oil output of 350,000 barrels per day to end the seizures by Sudan.

South Sudan's attack on Chinese interests is puzzling because China is the biggest buyer of its oil. Pagan Amum, South Sudan's top negotiator for talks with Sudan over oil payments, told Reuters that relations with China were good but added there were difficulties with some oil companies.

Petrodar is a consortium of mainly Chinese state firms Sinopec, Chinese National Petroleum Corp and Malaysia's Petronas . It runs oil fields in South Sudan's Upper Nile state and also an export pipeline through Sudan.

Many South Sudanese feel bitter about China because of its support for Khartoum during decades of civil war between the Muslim north and mainly Christian South that killed two million people. The conflict ended only in 2005 with a peace agreement that paved the way for southern independence in July.

South Sudan took three-quarters of Sudan's oil production when it became independent but needs to export crude through a northern pipeline and a Red Sea port.

Both states have failed to agree on transit fees, prompting Khartoum last month to seize at least three southern oil shipments at the Red Sea terminal.