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Interview: South Sudan, White Nile in talks on more oil blocks

Southern Sudan’s government-in-waiting is in talks with London’s White Nile (WNL.LN) on injecting more of the country’s oil reserves into the company, a top official told Dow Jones Newswires Tuesday.

"We never stop talking," said Costello Garang, the Minister of International Cooperation and Development for the Sudanese People’s Liberation Movement, or SPLM, which is set to form the new government of Southern Sudan on July 9.

Plus, White Nile plans to drill its first Southern Sudan exploration well in mid-2006, according to the company’s co-founder Andrew Groves. Once White Nile has drilled four wells, it will be able to start a feasibility study on the asset, he added.

White Nile hopes to develop a disputed Southern Sudan oil tract it was awarded by the SPLM. The company said on Feb. 16 it had an agreement with the SPLM for a 60% stake in Block Ba, which represents more than half the huge Block B claimed by a consortium consisting of Total SA (TOT), Marathon Oil (MRO) and Kuwait Petroleum Corp. (KPT.YY). The balance is owned by Nile Petroleum, the Southern state’s oil firm, which will later take a 50% stake in White Nile.

Total tried to make contact with the SPLM two weeks ago, Garang said, but there were no talks. "We don’t have any agreement with Total," he said. "What can Total tell us?" Since Total’s agreement is with Khartoum, the oil major should talk to them, he argued.

Total and Khartoum assert that the SPLM isn’t a sovereign entity yet and doesn’t have the right to award contracts. Total revived its agreement with Khartoum on Dec. 21, 2004, after having abandoned the country in 1984, but failed to consult fully with the Southern authorities. The comprehensive peace agreement signed in January 2005 says all existing contracts will be respected.

In turn, White Nile and the SPLM argue their contract should be respected. But the SPLM hasn’t yet seen the need to hire legal support for any forthcoming dispute.

Garang pointed out that after July 9, when the Southern Sudan government is formed, both sides will sit on the National Petroleum Commission, a body to be set up through the peace process to review existing oil contracts and issue new ones. That body will discuss the issue of Block B, he said.

Turning to other oil blocks there, Garang said that a number of companies had approached the SPLM, but that talks hadn’t been conclusive. He talked of the need to screen companies that approached them, to assess their assets and be sure they are reliable, pointing out the SPLM had spent two years screening White Nile.

Plus, companies operating in Southern Sudan which haven’t been given the green light by the SPLM "should fear us more than Khartoum," Garang said. He added that in six years, the South may vote for independence at the end of the interim period of the peace agreement. Assets currently owned there by companies such as China National Petroleum Corp., ONGC-Videsh and Petronas could then be at risk.

Once it is installed as the government of Southern Sudan, the SPLM expects to reap some $1.5 billion in oil revenues a year, said Garang, depending on the oil price. Under the peace agreement oil revenues from existing oil production will be split equally with the North. These will be paid into the newly formed central Bank of Southern Sudan in Rumbek, he added, and backdated to Jan. 9, 2005.

Garang added that "the same model" that is being used to capture oil revenues through White Nile might also be applied to a copper, gold and uranium deposit in South West Sudan, but declined to give further details.

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