Sudan officially informed South Sudan on Tuesday that it would freeze their oil and economic agreements and stop allowing its neighbor to export crude through its territory within two months.
Sudan on Sunday said it would close the two export pipelines from South Sudan within 60 days unless Juba gave up support for insurgents operating across their shared border. South Sudan denies its backs any rebels.
The row, the latest in a series of problems between the former civil-war foes, threatens to hit supplies to Asian buyers such as China National Petroleum Corp (CNPC), India's ONCG Videsh and Malaysia's Petronas, which run the oilfields in both countries.
The United States has called on Khartoum to reconsider.
"We would like to inform you that the Ministry of Petroleum will shut down the processing and transportation facilities in Sudan for the oil received from South Sudan," read a letter sent from the Sudanese oil ministry to its South Sudanese counterpart.
"In order to protect the facilities and to avoid any environmental hazards in the two countries, the shutdown shall be safely and smoothly carried out during a period of sixty days from the date of 9th June, 2013," it added.
Sudan's foreign ministry confirmed it had sent the letter.
OIL IN PIPELINES WILL BE SOLD
In reaction to the letter, South Sudan's oil minister, Stephen Dhieu Dau, said his country would abide by Sudan's decision but said it was "political" and "not based on the technical and economic reasons related to the oil agreement."
Dau said the oil that had already gone into the pipeline would be sold and distributed and added that his country was working closely with the operators to make the shutdown secure and environmentally safe.
"We have now almost produced and sent seven million barrels to the facilities within the territory of Sudan," he said.
South Sudan is currently pumping around 225,000 barrels a day, Mohammed Lino, director general for petroleum at the ministry of petroleum and mining, told reporters.
The African country, which seceded from Khartoum in 2011 under a peace deal ending decades of civil war, produce around 300,000 bpd until its first shutdown in January 2012 in a row with Sudan over pipeline fees.
"For block 3 and 7, the average is 185,000 barrels per day," Lino said, adding that the oil from these areas had reached Port Sudan terminal, the country's only window to markets.
He said blocks 1,2 and 4 accounted for another 33,000-35,000 barrels and block 5a between 4,000 and 5,000 bpd.
Diplomats doubt Sudan will actually close the two cross-border export pipelines because its economy has been suffering without South Sudan's pipeline fees.
Oil used to be the main source for Sudan's budget until southern secession in July 2011, when Khartoum lost 75 percent of its oil production and its status as oil exporter overnight.
Both countries accuse each other of backing rebels on the other's territory, one of several conflicts stemming from the messy split of what was once Africa's largest country.