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.
Sudan meanwhile accuses Juba of backing rebels of the Sudan People's Liberation Movement North in the border states of Blue Nile and South Kordofan which seek to overthrow President Omar Hassan al-Bashir.
SPLM-N rebels in South Kordofan, where fighting broke out last June, said on Sunday they were holding Chinese workers for their own safety after a battle with the Sudanese army. Sudan responded that there had been no battle and rebels had attacked the compound of a Chinese construction company and captured 70 civilians, who the army were trying to rescue [ID:nL5E8CT030]
COMPREHENSIVE DEAL NEEDED
Sudan has already sold at least one tankerload of seized South Sudanese crude since the row broke out, industry sources have said, but on Saturday Khartoum said it would free other tankers being held at port to help defuse the dispute.
Dau said that four cargoes in question had not left the port yet, but that its agent in Sudan had been told to prepare documentation meaning it was possible they would leave later on Sunday or on Monday. China relies on the two countries for 5 percent of its crude oil imports.
South Sudan was "committed to negotiations" but first Khartoum "must take some steps," he said.
"First they must release the cargoes, and the stolen crude that was lifted by force must be returned to us, and any deal must be tied to the issues of the border and Abyei, and they must stop sponsoring militias in South Sudan," Dau said.
"This deal must be overseen by the international community. We will restart operations when we agree all these issues."
Sudanese negotiators and oil officials were not immediately available to comment.
Asked if the dispute might escalate into renewed war, U.N. chief Ban Ki-moon told reporters in Addis Ababa: "That is of great concern for me as secretary general. That's why I'm meeting as many African leaders as possible."
South Sudan's population voted overwhelmingly to secede in a referendum a year ago, held under the terms of a 2005 peace deal that ended decades of devastating civil war between Sudan's north and south.
(Reporting by Hereward Holland and Yara Bayoumy; Writing by Ulf Laessing and Alexander Dziadosz; Editing by Ben Harding)