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South Sudan may reconsider Glencore oil deal

Juba is open to reviewing joint-venture with state oil firm to develop the new country's industry, says petroleum official

Reuters, Thursday 29 Mar 2012

South Sudan may reconsider a scrapped contract with Glencore for crude marketing and other services if the oil trading major agrees to revise terms seen as unfavourable to the African producer, an oil official said on Thursday.

The newly-independent country is also studying an offer from an Asian government to give it a loan backed by crude oil to help weather a production shutdown in a row with Sudan over oil payments, Deputy Minister for Petroleum Elizabeth James Bol told Reuters.
This week's border fighting between the two former civil war foes has not damaged the country's oil facilities, she said, adding it could take up to nine months to bring production back to old levels once Juba decides to restart production.
Bol said the nation was open to reviewing a Glencore venture with state oil firm Nilepet to market crude and develop South Sudan's oil industry, in doubt since shortly after it was signed on the eve of the country's secession in July.
"We know the previous contract that was signed, it was not signed during our time, it was signed during the time of the former minister for petroleum," she said in an interview.
"If they [Glencore] came again, we will review it. Because they know they have some terms that South Sudan will not agree with," she said, declining to say which terms she meant.
The central African country is also considering inviting another firm to help develop French firm Total's roughly 120,000 square kilometre block.
"We want to review the contract that was signed with them (Total). We want to sign another transitional agreement with them to review the contract in terms of the size of the blocks because Total is one of the largest blocks," she said.
"If there is a way to reduce the blocks, let us do it and invite other investors and let them compete with them in terms of technology, even for quick exploration of oil."
That could mean giving out a 20 percent stake in the block once owned by Marathon Corp, which pulled out during the civil war, she said, adding South Sudan had received "many" applications from international firms for the stake.
South Sudan seceded from Sudan in July under a peace deal that ended decades of civil war. It took about three quarters of the country's oil output but must export crude using pipelines, a Red Sea port and other facilities in Sudan. The two have been wrangling over how much it should pay to do this.
In January, South Sudan shut down its roughly 350,000 barrels per day of oil output after Khartoum started taking some oil to compensate for what it called unpaid fees.
Bol said it would take between six to nine months to return to previous output levels once a decision was made to restart. Recent border fighting with Sudan and alleged aerial bombardment since Monday has not damaged southern oil facilities, she said.
South Sudan - which counted on oil for some 98 per cent of state revenues - is looking to secure $1 billion to help cover expenses for the next year, she said.
Officials were meeting with commercial banks such as Kenya Commercial Bank, Ivory Bank and Equity Bank to help arrange loans, she said. An "Asian government" had also offered to make a loan against the country's crude oil, she added.
"It's government to government, but our fear is that we want to know the policies between the two governments in terms of how to refund it, in terms of the guarantee because we can not have the crude oil on a loan basis without guarantee," Bol said.
A petroleum bill laying out rules for the sector should be enacted next month to encourage investors, she said.
"The chairperson of the committee told me that maybe next week it will be enacted in the parliament," Bol said. "So by the next month, the legal framework will be ready."
She also reiterated previous warnings that trading house Trafigura could be barred from doing business with the country if it is proven it bought oil from Sudan knowing it was "stolen" in a dispute over oil payments.
"They know that this crude oil is entitlement for the Republic of South Sudan," she said. "They violated even the international rules."
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