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S. Sudan’s pipeline construction begins October: minister

February 9, 2013 (JUBA) - Construction of South Sudan’s oil pipeline, to by-pass reliance on neighbouring Sudan, will commence by October, the country’s petroleum and mining minister, Stephen Dhieu Dau, told Sudan Tribune in an exclusive interview on Saturday.

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Stephen Dhieu Dau (Getty)

The government says it is engaged in a series of direct discussions with a number of donor countries to help provide funds for the construction of an alternative pipeline to resume production and transportation of its crude oil to international markets,

In January 2012 - 18 months after seceding from Sudan - the young nation stopped its oil production over a transit fee dispute with Khartoum. The move has severely affected South Sudan’s economy, with oil revenues accounting for 98% of the government’s income.

Dau said he had met with “potential investors” in the oil sector who have expressed readiness to finance construction of the pipeline during a recent visit to South Africa, where he participated in a mining conference.

No deals have been signed but the government is in “talks with companies and governments who have expressed readiness to finance the construction of the alternative pipeline”, Dau told Sudan Tribune.

South Sudan is still considering three potential routes to reach the East African coast. Prior to the shutdown Southern crude was exported through Port Sudan on the Red Sea.

Despite agreeing on new transit fees over four months ago, border tensions have meant that production has not yet resumed. Sudan insists that border security be resolved as a precondition to other aspects of the September deal being implemented.

The impasse continues, with Juba accusing Khartoum of adding additional demands in order to block its implementation.

The official said previous Memorandums of Understanding (MoU), which his ministry has signed with Ethiopia and Djibouti authorities to create a mechanism for the construction of a pipeline through their countries, still stood.

However, Dau also expects his country to sign similar deals with the government of neighbouring Uganda and Kenya, which would allow the construction of a pipeline to the Kenyan ports of Lamu and Mombasa.

The construction of one of the new pipelines would begin around October or earlier “if all goes according to the plans”, Dau told Sudan Tribune.

A number of companies, including a Japanese company which has just completed feasibility studies on the Lamu route, have shown interest to partner with a number of American companies to jointly fund the project.

“We have already reached an understanding with some international companies to do more exploration and to build [a] pipeline with understanding that they will own it, operate it and transfer later. We shall only be renting it from them during the period of the agreement”, he said.

A senior member of the country’s governing Sudan People’s Liberation Movement (SPLM) said his ministry had already given a contract to German company ILF to carry out a feasibility study on the South Sudan-Ethiopia-Djibouti route.

The study is underway, but will take between six and nine months before it is completed, he added.

South Sudan took with it nearly 75% of the oil resources it previously shared with Sudan when it seceded in July 2011 after a self-determination referendum conducted in January that year. The vote was a key part of the 2005 peace deal, which ended over two decades of civil war between the north and South.