December 14, 2013 (LONDON) - With tensions still high between Khartoum and Juba over border and security issues, South Sudan is looking to complete a new oil pipeline to the Kenyan cost, regardless of whether the young nation resumes exports through Sudan, according its Ambassador to Kenya.
For the last year South Sudan has not exported any of its crude, severely damaging is fragile economy over a transit fee dispute, with South Sudan accusing Sudan of confiscating oil entitlements worth about US$815m. Khartoum admitted syphoning some oil but said it in payment for unpaid fees.
Oil had provided the Southern government with 98% of its revenue revenue before the shut down.
The 2,000 kilometre pipeline from Juba to Lamu was initially scheduled to start in June but intergovernmental agreements have yet to be signed by South Sudan and Kenya. South Sudan has been talking up the alternative route for almost a year. since the oil dispute erupted
However, in September the Presidents of Sudan and South Sudan signed a new deal on oil exports that would allow production and exports out of Port Sudan on the Red Sea to resume.
Under the final deal signed on September 27, South Sudan was to pay between $9.10 and $11 a barrel to export its crude through the North. Juba will also pay $3.08 billion to help Sudan overcome the loss of three quarters of oil production due to southern secession.
However, oil production did not resume as Sudan put resolving security issues along the oil-rich border as a precondition. After a three month impasse the Presidents met again two weeks ago and agreed to implement all aspects of the September deal.
It is still unclear if and when oil-production will resume, with South Sudan warning recently that the dispute over Abyei could yet drag them back to war with Sudan.
The pipeline is expected to cost $5-6 billion and if completed would carry South Sudan’s oil to the proposed Lamu Port instead of Port Sudan. Some analysts have questioned the financial viability of the pipeline as well as the stability of the areas it will pass through.
South Sudan’s Ambassador to Kenya, Ngurduong Majok, told The EastAfrican on Saturday that construction is due to commence regardless of whether oil exports resume through Sudan.
South Sudan and Kenya are still in the negotiations to select a developers, the Ambassador said. The project, if it gets off the ground, would be funded by payments through oil exports once it was completed. If building begins it is expected to take a year and a half to build.
In March 2012 Kenya’s President Mwai Kibaki, President Salva Kiir of South Sudan and the late Ethiopian Prime Minister attend the official launch of the new Lamu Port project.
After oil exports start to flow there are also plans to build a refinery to be based in Isiolo in central Kenya.
Kenya’s secretary in charge of the Lamu Port-Southern Sudan-Ethiopia Transport (Lapsset) Corridor project at the Prime Minister’s office, Silvester Kasuku, told The East African that the two countries have yet to sign the bilateral agreements needed in order to allow construction to officially begin.
The building of the port in Lamu is ahead of schedule, Kasuku said.
When South Sudan seceded from Sudan in 2011 it took with it 75% of oil production but the only refineries and route to export the crude remained in Sudan.
During the six-year period between the signing of a landmark peace deal in 2005 and South Sudan’s independence oil pumped from the South was shared 50:50 with the North.
Despite recognising South Sudan’s independence relations between Khartoum and Juba have remained strained, with the two sides almost returning to full-scale civil war in April last year over Heglig - a disputed border area.
The South is concerned that even if border and security issues are resolved Khartoum may place further conditions before allowing the flow of oil to resume.
Sudan’s Deputy Ambassador to Kenya, Osman Hassan, also speaking to The EastAfrican maintained that South Sudan had to sever ties with its former comrades the SPLM-N in South Kordofan and Blue Nile in order for other agreements to be implemented.
Hassan denied that Sudan is seeking to replace Thabo Mbeki - the former South African president - as the chair of the African Union High-Level Implementation Panel that is mediating between the two sides.
Khartoum has been unhappy with Mbeki’s latest proposal on Abyei, and has been lobbying African nations ahead of an AU vote on the issue later this month in Addis Ababa.
“Vice-president, Ali Osman Taha has been touring many countries like Kenya, Zimbabwe, South Africa and Lesotho for confidence building. Sudan has been resisting a move by South Sudan to hand over the negotiations to the Intergovernmental Authority on Development (Igad).
"African mediators must see the negotiations to their conclusion because a new mediator will take time to understand the issues and we might even lose what we have achieved so far,” The EastAfrican quoted the Deputy Ambassador as saying.