A South Sudan official said Wednesday that the country has shut down more than 900 oil wells after accusing neighboring Sudan of stealing its oil.
Pagan Amum, the secretary general of South Sudan's ruling party, said the shutdown will have a big impact on the new nation, which relies heavily on oil revenues.
But he said he'd rather see the country's oil sit in the ground than lose it to Sudan.
“That is even worse,” he said.
The news from Amum came one day after South Sudan and Kenya signed a memorandum of understanding to build a pipeline from South Sudan's oil fields south to Lamu, on the northern Kenyan coast, where a new port is planned.
The project has been a matter of speculation for the last few years, but South Sudan's Oil Minister Stephen Dhieu Dau said planning for the project will now begin as soon as possible.
“We do not know exactly when, but the pipeline is a priority for the government,” he said.
The agreement, signed by Kenyan Prime Minister Raila Odinga and South Sudan President Salva Kiir in Juba, comes as bitter negotiations between Sudan and South Sudan flounder.
At the center of the talks are pipeline fees being charged by Khartoum. All of South Sudan's oil currently runs through Sudan's pipelines to Port Sudan for export. Khartoum has asked for $32 per barrel of oil shipped through the pipes, but South Sudan has called the offer extortion.
South Sudan has in turn offered $1 per barrel, an offer which information minister Benjamin Barnaba Marial said was “the highest in the world.”
Dau said Kenya has agreed to set fees for its planned pipeline “based on the best state practices.” He said a planning committee would be immediately formed to work out the financing for the pipeline as well as the “environmental issues and social issues” surrounding its construction.
Landlocked South Sudan on Sunday started to halt oil production after accusing Sudan of stealing $815 million worth of the south's oil. South Sudan broke away from Sudan last July to form the world's newest country. But the two new neighbors never agreed on the transit fees that South Sudan should pay Khartoum.
Amum said the oil shutdown would be completed within two to three days. He said South Sudan is also approaching Ethiopia about developing a new pipeline that would eventually go to port through Djibouti.
While South Sudan is losing massive amounts of money by shutting down its oil industry, Sudan is losing money as well, and risks losing future revenue if South Sudan completes new pipelines out if its territory.
Onyiego contributed from Juba, South Sudan.