Bloomberg News

South Sudan, Ethiopia Sign Accord on Djibouti Oil Pipeline

February 09, 2012

(Updates with comment by Sudan Foreign Ministry in sixth paragraph.)

Feb. 9 (Bloomberg) -- South Sudan and Ethiopia’s governments signed a memorandum of understanding to build an oil pipeline via Djibouti, South Sudanese Information Minister Barnaba Marial Benjamin said.

South Sudan also held talks with an unidentified Texas- based construction company about building a pipeline to the Kenyan coastal town of Lamu, Benjamin said on the government’s website in Juba, the capital. Kenyan and South Sudanese officials agreed on the pipeline last month.

The U.S. company “is ready to construct in six months time,” while Toyota Motor Corp. of Japan has begun a feasibility study on the Lamu project, he said.

South Sudan is evaluating alternative pipelines amid a dispute with neighboring Sudan over what fees it should pay to ship its oil through an existing facility that runs north to Port Sudan on the Red Sea. The disagreement led South Sudan to shut down its oil production last month.

South Sudan gained independence in July, taking control of three-quarters of Sudan’s output of 490,000 barrels of oil a day. Sudan is demanding compensation for the loss and also wants South Sudan to pay $6 a barrel to transit the oil via the country. South Sudan has offered to pay $1 a barrel.

Talks Resume

The two countries will resume talks tomorrow in Addis Ababa, the Ethiopian capital, with the African Union High-Level Implementation Panel on Sudan, on ways to resolve their disagreement, al-Obeid Murawih, spokesman for Sudan’s Foreign Ministry, said in an interview. The last round of talks ended in January without an agreement.

“The news about the pipelines will not affect the talks,” Murawih said by phone from Khartoum, Sudan’s capital. “The government of South Sudan is looking for alternatives for Sudan’s oil infrastructure because they’re not happy with our offer, and if other parties are offering them better deals, congratulations then.”

South Sudan’s crude is mainly pumped by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd. The oil companies won’t be present at tomorrow’s talks, Murawih said.

The planned pipeline via Djibouti forms part of a broader economic cooperation agreement with Ethiopia and South Sudan, said Djiboutian Finance Minister Ilyas Moussa Dawaleh.

‘Major Projects’

“One of the major projects we want to achieve is the transport of energy, especially the oil pipeline linking South Sudan to Djibouti via Ethiopia,” Dawaleh said in an interview yesterday in Djibouti City, the capital of the Horn of Africa nation.

Djibouti’s $982 million economy relies on services related to its strategic location on the Gulf of Aden, through which 20 percent of world trade passes on its way to the Mediterranean Sea, via Egypt’s Suez Canal.

Other areas of cooperation between the three countries will include extending the telecommunications networks in Ethiopia and Djibouti into South Sudan, while improving road and rail networks in the region, Dawaleh said.

--With assistance from Jared Ferrie in Juba, South Sudan, and Michelle Wiese Bockmann in London. Editors: Paul Richardson, Karl Maier.

To contact the reporters on this story: Salma El Wardany in Khartoum via Nairobi at pmrichardson@bloomberg.net; Mohamed Osman Farah in Djibouti City via Nairobi at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.


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