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[Dehai-WN] (Reuters): 1. S. Sudan mulls oil pipeline through Ethiopia, Djibouti 2. INTERVIEW-S. Sudan oil shutdown could fuel inflation, unrest

From: Berhane Habtemariam <Berhane.Habtemariam_at_gmx.de_at_dehai.org>
Date: Thu, 9 Feb 2012 23:01:08 +0100

S. Sudan mulls oil pipeline through Ethiopia, Djibouti

Thu Feb 9, 2012 4:34pm GMT

JUBA Feb 9 (Reuters) - South Sudan is considering building an oil pipeline
through Ethiopia and Djibouti, officials said on Thursday, weeks after the
new country shut down crude production in a row over export transit fees
with Sudan.

South Sudan seceded from Sudan last year, but the two countries have been
unable to agree how much the Juba government should pay to transport its oil
output of about 350,000 barrels per day through Sudan to a Red Sea port.

As talks floundered in December, Khartoum began taking a portion of southern
oil to make up for what it calls unpaid fees. Juba responded by halting oil
production last month and has started looking for alternative routes to
export its crude.

At the moment, the only pipelines taking southern oil to market pass through
Sudan. Analysts fear the dispute could spark conflict between the two
countries, both of whose economies depend on oil.

South Sudan signed a memorandum of understanding with Ethiopia and Djibouti
around trade last week which included the possibility of building an oil
pipeline, Deputy Minister of Information and Broadcasting Atem Yaak Atem

"As a landlocked country, we would like to have an outlet to the sea for our
goods to go to the outside world and for our imports to come in," he said.

South Sudan's deputy finance minister Marial Awou Yol confirmed the country
was considering the oil pipeline through Ethiopia.

"We do not want to put all our eggs in one basket," he said. "It should be
financed by a consortium of companies. The more companies we have, the
faster it can be done."

South Sudan signed a similar deal with Kenya in January.

South Sudan previously said an arm of the Toyota group had started a
feasibility study into pipeline through Kenya, although some analysts say
the pipeline is not economically viable unless significantly more crude
reserves are discovered.

South Sudan declared independence in July under a 2005 peace deal that ended
decades of civil war with the north. About 2 million people died in the
conflict, fought over ideology, religion, ethnicity and oil. (Reporting by
Hereward Holland and Alexander Dziadosz)

C Thomson Reuters 2012 All rights reserved


INTERVIEW-S. Sudan oil shutdown could fuel inflation, unrest

Thu Feb 9, 2012 3:57pm GMT

* Dollar shortfall could hit S. Sudan pound -official

* Country could "mortgage" oil in the ground

* Government aims to double customs revenue

By Hereward Holland and Alexander Dziadosz

JUBA, Feb 9 (Reuters) - South Sudan's shutdown of its oil production could
stoke inflation and unrest unless the new nation can find alternative
sources of funding to help prop up its currency, a senior finance ministry
official said on Thursday.

The central African nation declared independence from Sudan in July and has
since been embroiled in a dispute with its northern neighbour over how much
it should pay to pipe its crude exports to the Red Sea terminal at Port

South Sudan shut down its oil output of roughly 350,000 barrels per day -
about three quarters of the united country's total - last month after Sudan
took some of the crude to make up for what Khartoum called unpaid fees.

If the shutdown continues, it could have "serious implications" for the
nation, which depends on oil for about 98 percent of government revenues,
South Sudan's Deputy Minister for Finance and Economic Planning Marial Awou
Yol said.

"Our currency is not floated. It is being supported to stand at where it
stands now. If we lose 98 percent of our revenues that come from oil,
definitely we will have no dollars to support the currency," he told Reuters
in an interview in his Juba offices.

He said the currency's value would weaken if the government stopped
supporting it "and we will have a lot of inflation, we will have unrest on
the streets. Such is possible."

Supporting the South Sudanese pound for up to a year would be "no problem",
Awou Yol said, without giving details. "We can support ourselves for a
reasonable period of time."

Financial analysts have estimated the country will struggle to pay salaries,
cover daily expenditures and support the currency after just a few months if
the oil shutdown continues. The central bank does not publish details on its
foreign currency reserves.

South Sudanese officials are now discussing the possibility of getting
credit using the country's oil reserves as collateral to help it meet
expenses, Awou Yol said.

"We should approach a number of friends, a number of creditors, a number of
people with good hearts. Because up the road we have our oil in the ground.
We can mortgage it to get loans. What is wrong about that?" he said.

Awou Yol said it would be easier to get credit to support projects like
roads, bridges, agriculture or an alternative oil pipeline than it would be
for salaries, but such loans could help free up resources for the state to
meet other obligations.

Salaries for civil servants, the army and others now make up between 40 to
50 percent of the budget, he estimated.


Juba and Khartoum are scheduled to resume oil talks in the Ethiopian capital
Addis Ababa on Friday. Awou Yol said South Sudan had received "reports" that
indicated the atmosphere would be improved this time around.

"Whether they compromise tomorrow or next month, they should have to
compromise. That would be good for both countries, not only for the south,
but for the north," he said, pointing to high inflation and a depreciating
currency in Sudan.

In the meantime, Juba would look at ways of using the money it does have on
hand to help ease the budget shortfall, for example by building refineries
that could help feed domestic consumption, Awou Yol said.

Refineries, in addition to a new road leading out of the country, could also
allow South Sudan to truck refined and unrefined oil products to
neighbouring Ethiopia, Kenya and Uganda, he said.

The finance ministry was also pushing ahead with plans to increase customs
and taxes collection by cracking down on "unauthorised" checkpoints and
other collection points along the main routes from Uganda, Awou Yol said.

That - along with streamlining bureaucracy, increasing policing of smuggling
and taking other measures - could double the roughly 55 million South Sudan
pounds per month of customs and taxes the government now collects, he said.

South Sudan seceded from Sudan under a 2005 peace deal that ended decades of
civil war with the north. About 2 million people died in the conflict,
fought over ideology, religion, ethnicity and oil.

Yol said in September the central bank had introduced a "managed float" for
the South Sudanese pound which it aimed to keep between 2.9 to 3.3 pounds to
the dollar by regularly supplying the market with dollars.

The official rate on Thursday was 2.96 pounds to the dollar. On the black
market, a dollar buys about 3.5 pounds. (Editing by Andrew Heavens)

C Thomson Reuters 2012 All rights reserved


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