South Sudan demands border deal before restarts oil

By Hereward Holland

JUBA (Reuters) - South Sudan has totally shut down oil output in a row with Sudan over export transit fees and will only restart after the two reach a deal covering border security and the disputed Abyei region, its oil minister said on Sunday.

South Sudan became independent in July after a 2005 peace deal with Khartoum that ended decades of civil war. Some two million people died in the conflict.

But both sides have failed to resolve a long list of disputes including how to disentangle their oil industries, divide debt, mark the poorly drawn border and decide who should control Abyei, a region the size of Connecticut dotted with mud huts that was pummeled during the civil war.

South Sudan took about three-quarters of Sudan's oil output when it seceded, but still needs pipelines running through its northern neighbor to export crude. The two have not agreed on a transit fee.

South Sudan depends on oil for about 98 percent of its revenues but Khartoum also relies on fees from piping the oil since last year when the loss of revenues from the oil itself plunged the country into severe economic crisis.

The shutdown of South Sudan's oil output - which officials last put at about 350,000 barrels per day in November - was "100 percent complete" on Sunday, Minister of Petroleum and Mining Stephen Dhieu Dau told Reuters in Juba.

"Oil production will restart when we have a comprehensive agreement and all the deals are signed. Sudan must recognize the 1956 border, which means they must give back all the areas under occupation," Dau said, referring to an internal boundary used around the time of Sudan's independence.

The new U.N. member state said on January 20 it would shut down production after Khartoum started confiscating some oil in lieu of what it called unpaid fees.

Sudanese Foreign Minister Ali Ahmed Karti also said this month that an oil deal would likely depend on an agreement on border and security issues.

U.N. Secretary-General Ban Ki-Moon said he was worried the dispute could reignite armed conflict between the former civil war foes.

The two countries' presidents met on the sidelines of a meeting of East African officials in Ethiopia on Friday, but failed to resolve the row.

Many South Sudanese see the row as continuation of their struggle to win freedom. Analysts say Khartoum's demands to be paid $36 a barrel are in well in excess of international norms. Landlocked South Sudan has proposed less than $1 a barrel.