Ethiopia Mulls Road to Import Oil From War-Torn South Sudan

Ethiopia Mulls Road to Import Oil From War-Torn South Sudan
  • Plan to link Paloch fields with west of neighboring country
  • World’s newest nation may build 100,000 barrel/day refinery

Ethiopia may finance a road linking it with South Sudan’s largest oilfields, allowing the war-ravaged country to sell its neighbor fuel produced at a planned new refinery, a South Sudanese official said.

The plan for a road linking the Paloch oilfields in South Sudan’s Upper Nile region with Malakal city and western Ethiopia is among the memoranda of understanding President Salva Kiir is due to sign this week during a visit to Ethiopia, according to Mayik Ayii Deng, a minister in Kiir’s office.

South Sudan, in turn, will build a refinery in Upper Nile with the capacity to process as much as 100,000 barrels of oil per day, and has secured financing from a Swiss and a U.S. company, he said, without identifying them.

“We want to deliver this refined fuel at very decent prices,” Deng said by phone from the capital, Juba, referring to another plan to sell the products to Ethiopia. “We want to access some hard currency through these refined products.”

Oil production in South Sudan plunged by at least a third to as little as 120,000 barrels a day since conflict erupted in the East African nation in December 2013. The decline, combined with a drop in prices, has devastated the economy, with annual inflation accelerating to almost 500 percent and gross domestic product forecast by the International Monetary Fund to contract 6.1 percent this year after shrinking 13.1 percent in 2016.

Unity Fields

Addressing South Sudan’s parliament on Tuesday, Kiir said Petroleum Ministry officials were working “tirelessly” to resume production at oilfields in the country’s former Unity state, offline since shortly after the war began, and to complete a diesel refinery in that location. Even as it tries to rebuild capacity, South Sudan is among 11 non-OPEC nations that have agreed to curb output in a joint bid to clear an oil surplus.

Kiir was scheduled to arrive Thursday in the Ethiopian capital, Addis Ababa, for a three-day visit. He and Ethiopian Prime Minister Hailemariam Desalegn will also sign a memorandum of understanding for Ethiopia to supply South Sudan with electricity, Deng said.

Ethiopian Foreign Ministry spokesman Tewolde Mulugeta Ambaye said by phone that “a number of agreements” will be signed and made public on Friday, without commenting further.

By Bloomberg Markets

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