The two countries reach an agreement over transit fees, meaning production halted may start again after a year of delays
China National Petroleum Co.'s (CNPC) operations in Sudan and South Sudan are expected to resume after the two countries reached an agreement over oil transit fees, the company said on August 31.
CNPC has been working on resuming production, which has been halted for a year, since mid-August. A CNPC official said it was waiting for a final agreement between the two countries on production. The issue is set to be discussed on September 22 at the request of the African Union and UN Security Council.
On August 4, the governments of Sudan and South Sudan reached a long-expected agreement regarding oil transit. South Sudan will pay US$ 9.46 per barrel to Sudan for using its pipeline and port facilities. South Sudan also agreed to pay US$ 3 billion as compensation after it gained independence last July.
After the secession, about 75 percent of what used to be Sudan's oil reserves are now controlled by the new southern country. But although South Sudan is heavily dependent on oil revenues, the crude mainly flows north to Khartoum or Port Sudan on the Red Sea. Due conflicts over territory and oil assets, most oil production had stopped.
CNPC has operated in Sudan since 1995, and the two countries are now home to the company's largest, most complete production chain outside China, with interests stretching from exploration to pumping and refining. CNPC has extraction rights in five blocks, including block 3/7, the largest oil project in the country with daily production of 250,000 barrels. Sudan's oil minister, Stephen Dhieu Dau, said the resumption of production at block 3/7 may take up to six months.
CNPC's block 1/2/4, which lies in a border area, was split into two parts. The block covers 50,000 square kilometers and has daily production of 200,000 barrels. CNPC had said that facilities in the north part of the area were severely damaged due to the conflict in April.
