Oil row chops South Sudan budget

Budget cut: South Sudan President Salva Kiir chops spending on oil feud with Sudan

South Sudan has slashed budget spending in half on the back of its bitter feud over oil with its neighbour to the north Sudan, but crucially salaries have survived the cut, a report claimed.

The severe austerity measures are effective immediately and follow on from the shutting-in of oil production last month, the BBC reported on Monday.

Although a cut in expenditure is unlikely to be welcomed, the regime of President Salva Kiir Mayardit will have retained a large degree of popular support with the retention of the budget on public sector salaries.

South Sudan is also to put more effort into recouping tax income, something Kiir promised in an address to the National Legislature in late January when announcing the shut-in of production.

“Insomuch as the duration of revenue disruption is unknown and to ensure the continued operation of our national government and to provide for our people, we will need to find other sources of funding,” Kiir said in his address at the time.

“In doing so, I have instructed the Ministry of Finance to initiate contingency plans for revenue collection and allocation. This will accelerate the increase in collections of non-oil revenues. It also will prioritise the allocation of existing revenue, allowing us to make the most of what we have.

“The Ministry of Finance will also look into other options for replacing the lost revenue. On existing cash reserves, rest assured that the government can operate for the immediate future, depending on which cuts are made.”

South Sudan split from Sudan in July but the two have yet to agree a deal on the sharing of oil revenues. The former took around 75% of all production with it when it left the once unified nation.

South Sudan currently needs to use its neighbour’s pipeline and port infrastructure to export its oil, but has recently inked deals with Kenya and Djibouti over the construction of pipelines to the Indian Ocean.

Sudan reacted last month by seizing the South’s oil and, allegedly, selling it on. Kiir said in January that Sudan had blocked eight shipments with a total of 6.3 million barrels of oil worth a combined $630 million. He also accused Sudan of “forcibly” taking another $185 million worth of oil.

“They have completed constructing a tie-in pipeline designed to permanently divert 120,000 barrels per day, which is almost 75% of our daily entitlements, to their refineries in Khartoum.”

On Monday a London High Court ruling allowed a tanker to discharge oil at a Japanese port which was loaded at Port Sudan. The ship had laid off the Japanese coast for almost a week as the exact ownership of the oil was determined.


Become an Upstream member!

Membership includes a subscription to our weekly newspaper providing in-depth news from the energy industry, plus full-access to this site and its archives. Still not convinced? Try our free trial.

Already a member?