UPDATE 2-South Sudan resumes oil output after ending row with Sudan over ... - Reuters UK

* Resumption of output follows accord with Sudan on fees

* First export cargo to reach Port Sudan at end May

* Shutdown threw economy into deeper crisis

Andrew Green

JUBA, April 6 (Reuters) - South Sudan has restarted oil production after agreeing with Sudan to resume cross-border flows last month, an oil official said, ending a row over transit fees which brought the African neighbours close to war.

Landlocked South Sudan shut down its oil production in January 2012 after failing to agree with Khartoum over oil fees, throwing both nations into turmoil. The new nation, which seceded from Sudan in 2011, needs to export its oil through Sudanese pipelines and the Red Sea port of Port Sudan.

"Yes it has started," Paul Adong Bith Deng, managing director of state oil firm Nile Petroleum (Nilepet), told Reuters by phone from the Thar Jath oilfield in Unity state, South Sudan, when asked whether oil production had resumed.

After months of negotiations, Sudan and South Sudan agreed last month to resume oil production. South Sudan previously produced 350,000 barrels a day but will resume output of between 150,000 bpd and 200,000 barrels bpd initially, Sudan's state news agency SUNA said late on Friday, quoting officials from both countries.

The first cargo would reach Port Sudan at the end of May, SUNA said, two weeks later than initially expected.

There was no immediate comment from South Sudan's oil ministry. The oil minister said on March 14 that oil companies in the South had been ordered to restart production, which he said would take two to three weeks.

TURMOIL

The oil shutdown threw both countries into economic and political turmoil.

As tension over oil transit fees and territory escalated In April last year, the Sudan and South Sudan armies fought for weeks along their disputed border in the worst violence since South Sudan seceded in July 2011.

The shutdown has worsened economic crises in both countries as they depend heavily on crude exports for state revenues and use the foreign currency to import food and fuel.

This is especially true for South Sudan where oil used to make up 98 percent of state revenues in one of the world's least developed countries.

Sudan has also badly felt the shutdown because transit fees are a major source of dollars after the country lost three-quarters of oil production when the South seceded.

Khartoum and other cities have witnessed anti-government protests after veteran President Omar Hassan al-Bashir was forced to launch austerity measures last summer.

Sudan hopes to collect up to $1.2 billion in transit fees in 2013, Finance Minister Ali Mahmoud told Reuters on Wednesday.

South Sudan seceded from Sudan in 2011 under a 2005 peace deal which ended one of Africa's longest civil wars but both countries remain at loggerheads over ownership of disputed territories and other issues. (Writing by Ulf Laessing; Editing by Susan Fenton)