The Republic of South Sudan (RSS) will offer Khartoum less than half a dollar in transit fees for each barrel of oil produced that passes through the pipelines running through the territories of the North.
With the independence of South Sudan last month as part of the 2005 peace deal that ended more than two decades of civil war, the North has lost 75 percent of the country’s oil production of 500,000 barrels a day.
But the landlocked South relies on the infrastructure that resides in the North to export its oil through the Red Sea port in Port Sudan.
The RSS minister for Peace Pagan Amum told local media that he expects South Sudan to pay $0.41 to the North stressing that the benchmark will be international norms. He cited the case of Chad-Cameroon pipeline which is of a similar-length.
However, one observer countered that the comparison is not realistic noting that the waxy nature of oil produced in South Sudan means that it requires special treatment. He said that a fair price would be somewhere between $5-$10.
Sudan has reportedly asked for $32 per barrel for the service, something which South Sudan immediately rejected.
Last month, Sudan’s parliament approved an alternative 2011 budget that lawmakers said included an annual income of $2.6 billion for transit fees — the same amount expected for the loss of South Sudan’s oil production.
The African Union is seeking to bridge differences regarding the oil transit fees among many other post-secession arrangements negotiated between Khartoum and Juba.
Separately the Sudanese cabinet meeting today headed by president Omer Hassan al-Bashir approved guidelines for the 2012 budget that excluded oil revenue for the first time in years which in the past constituted 50% of revenue and 90% of exports, Sudan official news agency (SUNA) said.
The cabinet spokesperson Omer Mohamed Saleh was quoted by SUNA as saying that the new budget aims at compensating for oil loss through attracting foreign resources and bolstering local production as well as reigning spending.
The targeted GDP growth rate is 2.03% he said and an inflation rate of 17%.
Saleh further said the government aims to stabilize the pound and focus on non-petroleum exports and restructuring the government.