By Agencies

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Sudan has started to confiscate some oil exports from South Sudan to meet “unpaid transit fees” but said it will not shut down a pipeline carrying the southern state's oil.

"Since early December we've started taking part of our share after the southern government refused to agree on a deal for a transit fee," Saber Mohammed Hassan, a member of the Sudanese delegation in Addis Abba for talks on the oil issue, said on Sunday.

The south said on Saturday that diversion of southern oil was "blatant theft." It accused Khartoum of ordering its security services to load 650,000 barrels of southern oil worth $65 million on a Sudanese tanker at Port Sudan.

"The Government of Sudan has chosen to steal this oil in broad daylight just days before its own proposed commercial oil negotiations with the Republic of South Sudan," Stephen Dhieu Dau , South Sudan's oil minister, said in a statement on Saturday.

'Pipeline to stay open'

He said the oil pipeline would be closed within days since storage capacity was filling up in Port Sudan but Azhari Abdalla, director general of Sudan's Oil Exploration and Production Administration, dismissed this.

"What I can confirm from our side is we will not close any line. It will stay open. You can take this for granted," he told Reuters news agency.

Both countries have failed to agree on a transit fee but will resume on Tuesday talks sponsored by the African Union. Previous rounds have ended in failure.

In November, Sudanese officials announced the country will take 23 per cent of the South’s oil exports as payment in kind during the fee dispute.

Khartoum wants its neighbour to pay a total of $36 a barrel including a "transit fee" and charges for using the marine terminal, transportation and processing.

Sabir Mohamed Hassan, who is Khartoum's chief negotiator on economic issues, did not say directly how much oil Sudan has confiscated.

But he said Khartoum is applying the $36 rate, up from an initial demand of $32, to the volume exported by South Sudan, which is then divided by the global oil price "to get the number of barrels we take." He did not say what Khartoum is doing with the seized oil.

Zubair Ahmed Hassan, another delegation member for the Addis Ababa talks , said Khartoum was taking some southern oil to feed some of its refineries but gave no volumes.

South Sudan has accused Khartoum of blocking oil exports of 3.4 million barrels in Port Sudan and asking foreign oil firms to divert some oil to refineries in Khartoum and El-Obeid.

Pagan Amum, South Sudan's top negotiator, said on Sunday oil companies had sent a letter to Khartoum verifying that South Sudan has paid for the use of oil infrastructure in Sudan since July.

"This letter makes it clear that the government of Sudan has no basis to demand any payment from the government of South Sudan because it has been paying and we cannot pay twice," Amum told reporters in the southern capital Juba.

In a second demand, Khartoum wants South Sudan to pay a total of $1 billion for transit fees since July, said Badr el-Din Mahmoud, the deputy governor of Sudan’s central bank who is also part of the delegation.

He said South Sudan also owed Khartoum another $6 billion in debt. "The South has sent us a letter demanding $5 billion but this amount is not correct. We actually demand from the South $6 billion," he said.

Under pressure

Sudan's government is under pressure to overcome a severe economic crisis after losing the southern oil which made up 90 per cent of the country's exports. It generated $5 billion in oil revenues in 2010.

"The national economy cannot do without oil," said Idris Mohamed Abdul-Qadir, head of Khartoum's delegation in Addis Ababa.

South Sudan has refused to shoulder Sudan's foreign debt pile of almost $40 billion which has been a burden for the economy for many years in addition to a US trade embargo deterring most Western firms.

South Sudan pumps around 350,000 barrels per day (bpd), officials have said. Sudan produces 115,000 bpd in its remaining fields but needs it entirely for domestic consumption.

South Sudan became independent in July under a 2005 peace deal with Khartoum that ended decades of civil war that has killed two million people. But both sides have failed to sort out a long list of disputes.