South Sudan could restart oil exports by year-end - Reuters

The two former civil war foes agreed in September to end hostilities and restart oil exports - including creating a demilitarized border zone - after coming close to war in April.

But the neighbors had been unable to agree how to withdraw their armies from the disputed border, a step both had said was necessary to resume oil exports from landlocked South Sudan through Sudanese pipelines.

On Sunday, South Sudan's chief negotiator Pagan Amum said exports could begin within two or three weeks after he met Sudan's Defense Minister Abdel Raheem Mohammed Hussein as well as senior official Nafie Ali Nafie and others in Khartoum.

"By the end of this year it is possible to load the first ship of oil, especially after the agreement in the meetings today and yesterday," he said.

"We have been able to overcome all obstacles, more so than I was expecting personally."

South Sudan seceded from Sudan last year after decades of civil war but unresolved issues continued to fuel conflict.

South Sudan, which inherited three-quarters of oil production when it broke away, shut down its output of 350,000 barrels a day in January after tensions over pipeline fees escalated.

The new border tensions in the past two weeks had delayed a restart in production, originally scheduled for November 15, a serious blow to both crumbling economies.

REBEL FIGHTING

Amum said that both sides had agreed not to support armed rebel groups on either side of the border - one of the biggest points of contention between the two.

Khartoum has repeatedly accused South Sudan of supporting rebels of the Sudan People's Liberation Movement North (SPLM-N) who operate in two states on the border with South Sudan. Juba has denied the charge.

The SPLM-N rebels were part of the southern rebel army during the civil war but were left in Sudanese territory at partition.

Amum said South Sudan was ready to leverage its "historical relations" with the SPLM-N to help find a political settlement with Khartoum which it expects to support efforts to find political solutions with rebels in the South.

"Stability in Sudan is in our interests, and the presence of armed groups on the border is not in South Sudan's interests," he said.

He delivered a letter from South Sudan's President Salva Kiir inviting Sudan's President Omar Hassan al-Bashir to Juba.

Amum said South Sudan would continue to try to build alternative oil pipelines to reduce its dependency on Sudan.

He said the pipelines might run through Kenya or through Ethiopia and Djibouti or through Congo and Cameroon.

But added: "It's in our interests to pump the oil because the other alternatives require years."

(Reporting by Alexander Dziadosz and Khalid Abdelaziz; Writing by Alexander Dziadosz; Editing by Pravin Char and Anna Willard)