South Sudan is planning to construct an oil refinery and a crude oil export pipeline through East Africa with the help of international oil companies operating in its fields, China’s state-run Xinhua news agency reported on Saturday.

The landlocked new nation earlier threatened to cut off crude output within two weeks, after it said its northern neighbour had begun seizing crude to compensate for what Khartoum called unpaid transit fees.

“We had to look for alternative route for exporting the oil after we have reached a deadlock with Sudan, which is exaggerating in the oil transit fees,” Barnaba Benjamin, South Sudan’s information minister and government spokesman, told Xinhua.

“We have started practical steps to rapidly construct a pipeline through eastern Africa, namely via Kenya and Uganda. We expect the pipeline to be completed in 10 months. We will also begin immediately the construction of a refinery in South Sudan.”

The Chinese foreign ministry had earlier on Saturday urged “calm and restraint” over the dispute, which began in November. The two neighbours together rank as the seventh-largest supplier of crude oil to China, accounting for 5 percent of its imports in 2011.

South Sudan has floated the idea of an East African pipeline before, but outside experts say barriers include the geography to be traversed as well as the need to ensure enough production volume to fill the pipeline in future.

International oil firms currently operating in South Sudan would construct the pipeline and refinery, Xinhua cited Benjamin as saying. It did not specify which.

Oil firms active in South Sudan include Chinese state-owned China National Oil Corp., or CNPC, and Sinopec, Malaysia’s state-owned Petronas, and Oil and Natural Gas Corp of India, or ONGC.

Source: Reuters & Xinhua