Sudanese President Omar al Bashir and South Sudanese President Salva Kiir signed a deal Sept. 27 allowing South Sudan to resume oil exports, which had been cut off since January due to a dispute over transit and production fees. The agreement extends through 2015, and production is expected to begin in a few months before increasing to full capacity by mid- to late 2013. Since South Sudan's secession from Sudan in July 2011, the two countries have found themselves in a mutually dependent economic relationship because South Sudan possesses 75 percent of the formerly shared oil reserves while Sudan controls the pipelines needed to export the oil to the international market. With each country's financial position growing increasingly difficult since the cutoff, they had little choice but to sign the deal to resume production. While both countries have an economic incentive to get oil flowing as soon as possible, certain oil fields are likely to begin production more quickly than others. South Sudan produces two blends of crude: the Dar blend and the Nile blend. A majority of South Sudanese crude is the Dar blend and this type will be the first to come back online. The Dar blend is a difficult-to-process high-arsenic crude that is typically sold at a discount. Dar is usually blended with other fuel oils by Chinese refineries to produce gasoline and other refined fuel products. Besides China, few refineries outside the United States, Japan and other Western countries have the specialized equipment to refine these types of crude, but many had not contracted for Sudanese oil since it had been subject to U.S. sanctions until late 2011 — essentially when the cutoff began. The Nile blend will take longer to come back online. A return to full production for the blend may not occur for 10 to 12 months as a result of the damage sustained by pipeline infrastructure during April border clashes in Unity state. The Nile blend is a higher quality, light sweet crude that has become increasingly purchased by Japan, where it is burned for electricity. Barring any sort of military conflict that shuts down production again, the new agreement will help stabilize the economic situation for both countries through at least 2015.
