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French oil giant mulls plan to build oil pipeline to aid South Sudan

Total may offer South Sudan a way out of its oil exporting impasse

The French oil major Total is weighing a plan to build a pipeline that would offer South Sudan a way out of its impasse over oil exports.

South Sudan has been at loggerheads with its neighbour Sudan over oil since the break-up of the country in July. The south is home to two-thirds of total Sudanese oil production of 500,000 barrels per day (bpd). The north insists on a transit fee of US$32 per barrel, a figure that Reuters estimates is 10 times the industry average.

Late last month, Sudan announced it had stopped exports through the Greater Nile Oil Pipeline, which connects the landlocked south to Port Sudan on the Red Sea, on the grounds that it had not received $727 million (Dh2.67 billion) of accumulated fees. But Christophe de Margerie, the chief executive of Total, has told a news conference at the World Petroleum Congress in Doha that the company is considering a way out for South Sudan's oil. The company is planning a pipeline from oilfield blocks it is buying in Uganda through to the coast of Kenya, a project that could be extended to connect Total's blocks in South Sudan.

"The pipe, which is supposed to be from our potential blocks, because they are not yet our blocks in Uganda, could be, effectively, a hub for different sources of crude," Mr de Margerie said.

Total has agreed to buy into Ugandan oil blocks holding proved reserves of 1.1 billion barrels and potentially as much as 2.5 billion barrels. The company also holds an oil licence with potential in South Sudan.

Connecting with South Sudan would bring down the capital expenditure for the Ugandan project.

"We say to Uganda as part of our long-term view 'you have to take into consideration what sort of oil can come from neighbour countries to make the pipe less expensive'," said Mr de Margerie. He declined to give a timetable for the construction of the pipeline.

The project would benefit China's CNPC and Malaysia's Petronas,which hold production assets in South Sudan, Mr de Margerie said.

Fearing for its oil interests in South Sudan, China urged the two sides last month to resolve the standoff. But authorities in Khartoum, Sudan's capital, are unlikely to budge and are considering suing the south over the nationalisation of assets that belonged to Sudapet, the national oil company before the country was divided.

* with Reuters

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