Glencore embroiled in South Sudan oil-export row

22 July 2011

SEE ALSO: South Sudan: a new republic built on oil ; Continuity vital as two Sudans prepare to talk ; South Sudan plots oil pipeline to Kenya


Anthea Pitt, LONDON:
An oil deal struck between South Sudan’s state-owned producer, Nilepet, and international commodities broker Glencore is at the centre of an internal struggle for control of the fledgling nation’s exports.

On 9 July, the day South Sudan declared independence, Nilepet and Glencore sealed a joint-venture agreement establishing Petronile International. At the time, Glencore and South Sudan’s energy ministry said the venture would market a portion of South Sudan’s 375,000 barrels a day of crude output.

Today, however, South Sudan’s director-general of petroleum, Arkangelo Okwang Oler – a signatory to the joint-venture agreement – told reporters: “We have not mandated Glencore to market our oil. They [Glencore] are not mandated to sell the crude of the south.”

The dispute appears to centre on the sale of volumes of royalty oil, rather than the equity production Nilepet holds through its stakes in consortia producing from South Sudan’s fields. The exact volume of oil under dispute could not be ascertained. But South Sudan’s total daily production is worth around $40 million a day to the new nation – with Brent crude trading in the region of $110 a barrel.

Okwang was not immediately available for comment. But a spokesman from the South Sudan Ministry of Mines and Energy said: “This deal doesn't allow Glencore to market the government’s entitlement oil; the company may deal only with NilePet’s entitlements.”

He did not give further clarification. No one at Nilepet was available for comment.

Glencore, however, claims the joint-venture agreement covers both royalty and equity production. The trader, which listed in London through an $11 billion initial public offering in May, said the joint-venture terms make it clear that Petronile International “is responsible for marketing the state’s and Nilepet’s crude oil”.

Lual Deng, a southerner who was, until independence, Sudan’s oil minister, said he understood oil marketing was the responsibility of the South Sudanese oil ministry. By signing the joint-venture agreement, he said, Nilepet may have exceeded its authority.

But, added Glencore: “The [joint-venture] agreement was signed in Juba by the managing director of Nilepet [Mangok Kali Mangok] and Arkangelo Okwang from the energy ministry.”

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