* Heglig produced about half of Sudan's oil output
* Oil region's central processing facility damaged
* Sudan hopes to boost output after South seceded
By Alexander Dziadosz
KHARTOUM, April 22 (Reuters) - South Sudan's seizure of a Sudanese oilfield has all but killed off hopes the two countries will settle their disputes soon and Khartoum may demand compensation before returning to talks, a Sudanese oil minister said on Sunday.
The newly-independent South seized Heglig earlier this month, raising fears of an all-out war with Sudan - then announced it had started withdrawing on Friday, following sharp criticism from U.N. Secretary-General Ban Ki-moon.
Tensions have mounted since South Sudan declared independence from Sudan in July, under a peace settlement that ended decades of civil war.
Months of sporadic fighting between the old foes had already badly disrupted talks over the position of their shared border, oil payments and other issues.
Sudan's State Oil Minister Ishaq Adam Gamaa told Reuters in an interview the recent fighting in Heglig, which produced about half of Sudan's roughly 115,000 barrels a day, made it even less likely the countries would reach a deal any time soon.
"I think the chances are very remote," he said. "I think there will be conditions which the government will ask for, conditions by which they will not come to negotiations without meeting those conditions."
Sudan lost about 40,000 barrels per day of output because of the fighting, he said, but added the country had enough reserves to last up to six months before the impact would be felt in its refineries.
Gamaa said officials were also assessing the damage to several oil facilities in Heglig, including the central processing facility, which also served oilfields in South Sudan, and the power station.
Conditions for resuming talks were likely to "at least" include compensation for those facilities and other losses, although that would be up to negotiators, he said.
"Sudan will ask for compensation for the losses, the costs incurred during the Heglig invasion ... and maybe other political items have to be added to the terms by which Sudan will agree for negotiations."
FUEL RESERVES
When South Sudan split away, it took about three quarters of the formerly united country's oil production - the main source of foreign currency and state revenues for both sides.
But Juba shut down its roughly 350,000 barrels a day of output in January in a row with Khartoum over how much it should pay to export via pipelines and other infrastructure in Sudan.
Tensions have steadily risen since then as both economies have struggled with rising food prices and sharp depreciations of their currencies on the black market.
Echoing other officials, Gamaa said Sudan would make up for losing southern crude by boosting agricultural and gold exports.
The government is also pushing ahead with a programme to boost Sudan's output by adding new fields in existing blocks and improving recovery rates, he said.
Gamaa said the country had enough reserves to offset the loss of crude production from Heglig until output there resumed, which he said would happen "very soon," although he declined to give an exact timeline.
"There are two types of reserves, the reserve which is actually on the refinery side, and in the pipeline actually, that can also be used actually," he said.
"We can operate up to six months without any shortage of crude in the refineries before realising the Heglig difference."
South Sudan said its seizure of Heglig, which many southerners call Panthou, was an act of self defence after Sudan launched a ground attack from the area.
But on Friday Juba, under international pressure to withdraw, said it was pulling out to create an environment for talks. The Sudanese army said it had "liberated" the area.
A satellite monitoring group also on Sunday said images showed an oil collection manifold in Heglig appeared to have been destroyed in the fighting.
The group said the images were captured on April 15, but it was not clear when the oil equipment had been damaged or by which side. (Editing by Andrew Heavens)
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