China says hopes talks can resolve dispute after South Sudan expels oil company boss

BEIJING, China - China said Thursday it hopes talks will remove any misunderstanding with South Sudan after the Chinese head of the largest foreign oil company in the country was kicked out over allegations he conspired with neighbouring Sudan to steal the south's oil.

Foreign Ministry spokesman Hong Lei said China had seen the reports of Liu Yingcai's expulsion but would not comment on it directly. South Sudan officials say Liu, who is president of the Petrodar Operating Company, was notified Monday that he had 72 hours to leave the country.

Oil has been a source of tension between Sudan and South Sudan since the countries split in July. They have held bitter negotiations over the separation of their once-unified oil industry but are far apart on what South Sudan should pay to use the Sudanese pipelines and export facilities. The South inherited nearly three-quarters of Sudan's oil production but all oil it produces must be exported through two pipelines in Sudan.

"We hope that the parties concerned can step up communication and negotiation and remove misunderstanding for the sake of long-term co-operation," Hong told a daily news conference.

The Petrodar consortium of oil firms operating in South Sudan includes the national oil corporations of China and Malaysia. Besides operating oil fields, Petrodar is responsible for the maintenance and operation of one of the pipelines.

Calls to Petrodar rang unanswered on Thursday. There was no immediate reply to requests for comment from PetroChina Ltd., a leading member of the consortium.

Liu's ouster comes in the midst of the company's relocation of its headquarters from Khartoum, the capital of Sudan, to Juba, the capital of South Sudan.

South Sudan for months has accused its northern neighbour of stealing its oil. South Sudan's minister of information, Barnaba Benjamin Marial, said a government investigation found Liu was involved with the government of Sudan "in the conspiracy of getting the oil of South Sudan."

South Sudan in January ordered the shutdown of its oil production after Sudan announced it would levy an unspecified percentage of South Sudan's oil as an "in kind" payment for unpaid pipeline transit fees. Sudan also announced the completion of a tie-in pipeline which would divert around 120,000 barrels of oil per day to processing facilities in Khartoum.

In a letter sent to South Sudan's Ministry of Petroleum and Mining on Jan. 16, Liu informed the ministry of Khartoum's intention to build the pipeline but said Petrodar would not comply with orders to assist in its construction. Marial says that assurance was not sufficient.

Prior to South Sudan's oil shutdown, Petrodar estimates it was producing around 230,000 barrels of oil per day — around 65 per cent of South Sudan's estimated daily output of 350,000 barrels.