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Sudan and South Sudan have signed oil deal – Mediation by Arntzen de Besche

Following more than two years of negotiations, the Presidents of Sudan and of South Sudan on 27 September 2012 signed a suite of agreements on oil, security, trade and several other matters in Addis Ababa.

The parties to the civil war between the authorities and the rebel group SPLA in Sudan entered a Comprehensive Peace Agreement (CPA) in January 2005, after 22 years of fighting. The CPA required that a referendum on independence or continued unity be held in Southern Sudan six years later - in January 2011. The African Union in 2009 appointed a High Implementation Panel for implementing the CPA. The Panel consists of three ex-presidents; Mr Mbeki of South Africa, Mr Abubakar of Nigeria and Mr Buyoya of Burundi. The panel has facilitated the negotiations.

The referendum in January 2011 returned an overwhelming majority for secession and independence, and South Sudan became an independent republic on 9 July 2012. Despite not having agreed the terms for oil transportation through Sudan, oil production in South Sudan, and transportation to Port Sudan, continued until late January 2012 when trust and cooperation between South and North broke down and the Government of South Sudan decided to suspend all production.

A key issue of contention between the parties has been how the previous common oil resources should be exploited.  Of the total oil reserves in both countries about 75 % is within the territory of South Sudan, while the processing, transportation and port facilities are in the North.  The oil industry is highly important for the economy of both countries. Prior to shut-down of production in January 2012, oil revenues made up 98 % of South Sudan’s national budget, while oil was significant also for Sudan’s national budget and foreign exchange earnings from oil are crucial for both.

A Norwegian team of oil experts have assisted the facilitation and mediation for an agreement on oil and economic issues between the two countries. Arntzen de Besche attorneys amongst others Ole Kirkvaag has been members of the mediation team. The mediation has taken place for more than two years. Most of the negotiations have taken place in Ethiopia.

A deal covering the main economic parameters for oil processing and transportation was struck in Addis Ababa on 3 August this year. In September the parties have discussed other unresolved oil issues that need regulation.

In addition to the oil deal, the two countries have now reached agreement on security, apportionment of state assets and liabilities, a process for resolving contested borders and border regions, trade and some other issues. Not all issues in discussion were resolved in September; in particular the future of the border region of Abyei (claimed by both countries).