The oil ministers from Sudan and South Sudan have agreed in principle to reduce for the time being the monthly fee that South Sudan is paying to Sudan per crude oil barrel that it exports through its territory.
Oil ministers of the two countries met in Juba today after falling oil prices threatened to reduce South Sudan’s earnings on its oil production to a loss. The South has been paying a fixed rate to the North that has remained unchanged since the signing of a Cooperation Agreement in September 2012.
Most of the Southern government’s revenue is from oil earnings. The falling global crude price has therefore threatened to cripple the government, bringing spending on civil service salaries and security to a standstill unless loans could be obtained.
Under the terms of the 2012 deal, South Sudan pays $9.10 per barrel for oil flowing through Petrodar facilities in Upper Nile State, plus a fee of $15 per barrel to fulfill a $3.028 billion obligation called the “Transitional Financial Arrangement” (TFA).
In remarks to press today at New Sudan Palace, oil ministers of the two countries indicated that the $15 per barrel rate would be renegotiated, though the total TFA amount of $3 billion would not change but would merely be paid over a longer period of time.
“When we negotiate on the TFA in particular, it will not be a fixed $15 per barrel as it was agreed in 2012. It will be fluctuating up and down depending on the prices of the crude globally. This is the principle that we agreed. But how much, that we will leave to the technical. But in principle, less than a month.”
Meanwhile, the TFA payment “will be extended to more years,” said Stephen.
Sudan’s minister of petroleum Mohammed Zayed Awad confirmed that in principle they agreed to reduce the monthly payments for the TFA, extending the allowable period for payment of the $3 billion sum.
The September 2012 agreement will be extended to accommodate this change, since the deal had been scheduled to end in 2016, according to the South Sudanese minister.
Zayed Awad stressed the mutual benefit to the two sisterly countries. “For this issue to be scientific, we gave it to the technical people… Yes, we have agreed in principle but we need the technical people to work on it and in a week to come we will reach to the conclusion,” he said.
“We don’t want to talk on figures because we are not ready as it requires a lot of technical work and may be after when they conclude – we will tell you,” Zayed added.