Sudan lowers oil transit fee demand

KUWAIT (Reuters) - Sudan has lowered its oil transit fees demand to $32.20 a barrel in a bid to resolve a row that has shut in South Sudan's output, Sudan's oil minister said on Tuesday, but the two sides remained far apart as talks continue in Ethiopia.

South Sudan shut down 350,000 barrels per day of oil production in January, tightening global oil supplies further, after the north seized more than $800 million of its crude and built a pipeline to divert it through refineries in Khartoum.

Sudan then demanded $6 plus a renegotiation of pipeline and processing fees which would push costs to $36 per barrel. Khartoum has now lowered its demand to $32.20 a barrel, Sudanese oil minister Awad al-Jaz told Reuters in an interview on Tuesday.

"We think it's to the benefit of the two nations to allow the oil to pass," Awad al-Jaz said in an interview on Tuesday. "We expect this round will be more positive than before."

Khartoum thinks $32 is a fair charge, the minister told Reuters in an interview in Kuwait, because it owns all the facilities and provides all the services. Analysts say the proposed fee exceeds international norms by more than 10 times.

The latest round of talks between the two sides are being mediated by former South African President Thabo Mbeke in Addis Abbaba. But even with Sudan lowering its fee demands, there is still a gaping gap with South Sudan's offer to pay less than $1 to pump its oil north to the Red Sea.

South Sudan seceded last July under a 2005 peace agreement that ended decades of civil war with Khartoum. But peace remains uneasy at best, with the north and south deadlocked over oil transit fees that have contributed to recent high global oil prices.

South Sudan's government of Juba does not want to pay a "single penny" because it behaves as if the two sides are one, said Jaz. "Now we are two different countries," he said.

"We hope the mediator will present something acceptable for both sides," said Jaz.

"If you want to pass your goods through our land, you have to pay for that."

China is the biggest buyer of oil from Sudan and South Sudan - it got about 5 percent of its oil from the two last year - and the biggest investor in South Sudan's oilfields.

Jaz said Juba had been obstructing progress towards a deal. "We are neighbours," he said. "Unfortunately, the other side is always talking on the negative side."

Oil provides about 98 percent of South Sudan's income and is vital to the impoverished country as it tries to develop infrastructure and institutions devastated by a war that killed an estimated 2 million people.

Jaz said the north's seizure of Juba's oil was justified. "We had to take something to compensate since July 9, the time of separation," he said. "We have to take in kind what we think is reasonable."