South Sudan has warned Sudan that it will shut down its only active oilfield unless the cost of transporting crude through Khartoum is revised to reflect the low oil prices prevailing globally.

The closure would be the first step in Juba’s quest to bring back issues pending from the 2005 peace deal to the negotiating table, especially if a transitional government is set up as expected this week.

South Sudan ambassador to Kenya James Morgan said the Paloch oilfields in Upper Nile will be shut down because the country cannot pay Sudan $25 per barrel in transit fees when oil prices are below $30 per barrel.

“It does not make sense to pay Khartoum $25 and the Chinese pipeline owners $15 per barrel when the global oil prices have plummeted. It is better to stop and preserve the natural resource while waiting for oil prices to improve,” said Mr Morgan.

Juba has asked Khartoum to reduce the fixed pipeline fee that was agreed on under the September 2012 Co-operation Agreement signed in Addis Ababa.

The agreement was meant to fast-track solutions to wealth sharing, security arrangements, border demarcation, and the issue of Abyei, which, according to the 2005 Comprehensive Peace Agreement (CPA), ought to have conducted a referendum in January 2011.

As part of the wealth sharing and economic co-operation agreement, a fixed transmission fee of $25 per barrel was set to repay a $3 billion compensation package to Sudan for the loss of 75 per cent of the oilfields.

However, implementation of the CPA aborted when war broke out in South Sudan in December 2013.

Landlocked Juba pays Sudan for transporting oil through its pipeline to Port Sudan, but has been looking for alternatives like the yet to be completed Kenyan port of Lamu. South Sudan wants the transit fee to be renegotiated, and to be based on a percentage of the global oil price. 

Mohammed El-Sadique, Sudan’s ambassador to Kenya, told The EastAfrican that Khartoum is ready to reconsider the issue.

“The issue of falling global oil prices is a concern for everybody, and Sudan as an oil exporter is also worried whether the prices will go up soon or stay down for a long time,” he said.

Mr El-Sadique said that Sudan considers South Sudan its biggest market in the region, and a sister country, so much so that when the war broke out in 2013, it allowed those fleeing the turmoil to stay, work and acquire education in Khartoum as citizens, not refugees.

At the time of signing the agreement in 2012, global oil prices were at $125 per barrel. In addition, South Sudan — which  depends on oil to fund 78 per cent of its budget — has seen its oil production fall from 350,000 barrels per day to 140,000 per day due to the civil war.

Only the Paloch oilfields in Upper Nile are currently in operation; oilfields in Unity State have shut down because of insecurity.

Mr Morgan said Juba is in the process of signing concessions in the mining sector to reduce dependency on oil. South Sudan has deposits of gold, diamond, uranium, copper, zinc, lead, manganese and iron.

Sudan and South Sudan have also agreed to revive the implementation of the border demarcation, security arrangements and Abyei.