A South Sudanese oil official ruled out Glencore marketing the new African country's crude on Thursday, effectively quashing an earlier deal the trading giant said it had signed to sell the nation's oil.
The fate of the Glencore deal has been in doubt since shortly after South Sudan declared independence in July, when oil officials said the country's petroleum ministry would be responsible for selling crude.
Ministry of Petroleum and Mining Undersecretary Macar Aciek Ader - who previously worked for the Sudanese Petroleum Corporation in Khartoum - said he was currently the principal seller for South Sudan's crude and that Glencore would not handle future marketing.
"Nobody will accept giving a national resource of this nature to a private company to go and market it. Nobody will do that. Oil is politics, and it will continue to be politics," he told Reuters in an interview.
Asked who would market South Sudan's oil going forward he said: "The ministry will continue to sell it."
South Sudan gets almost all its revenues from oil, but production is likely to decline over the next few decades without new discoveries, pushing the government to seek more exploration and make other improvements.
The International Monetary Fund (IMF) warned last month that South Sudan's oil production would halve by 2020 unless new findings were made.
Aciek said South Sudan could boost oil production to about 500,000 barrels per day (bpd) from about 365,000 bpd now if it is able to do needed facility upkeep and overcome hurdles such as a need for more workers and technology.
"Once the present problems are resolved and production is stabilised, then people will start to plan for increasing the production," he said. "Definitely, it will rise . it will even exceed 500,000 (bpd)."
Aciek said it was too soon to give a timeline for any potential production boost.
South Sudan took about 75 per cent of the united Sudan's oil production when it seceded under a 2005 peace deal, but it still needs to pump crude through pipelines in Sudan to export it. The two countries have still not agreed on a transit price.
Khartoum has pulled out hundreds of Sudanese oil workers, leaving just 300 foreign workers and 38 Southern Sudanese to run fields in the country's main oil state Unity, that state's oil minister said last week.
Aciek said South Sudan was now producing about 365,000 barrels per day between consortiums Greater Nile Petroleum Operating Company, While Nile Petroleum Operating Company and Petrodar Operating Company.
Aciek said there was no exploration underway in the blocks alloted to Ascom and France's Total SA, partly because it was taking time to relocate oil businesses from Khartoum to Juba.
He said he expected companies to be finished relocating by the end of December, and the government hoped they would begin exploration after that.
"Total is not doing anything now. Ascom is not doing anything. And we are going to ask why. Once all of them are relocated, then we are going to have to question why we are where we are now," he said.
Unipec, the trading arm of China's top refiner Sinopec Corp, was the country's main buyer, purchasing more than 80 percent of South Sudan's oil, Aciek added.