Home | News    Tuesday 21 February 2012

Ethiopia, Kenya and South Sudan to jointly fund new oil pipeline

By Tesfa-Alem Tekle

February 20, 2012 (ADDIS ABABA) – The cost of a massive a transportation corridor project aimed to link Kenya to South Sudan and Ethiopia will be shared among the three east African countries, according to a report.

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A general view of the sea front in the Kenyan coastal town of Lamu (file/Getty)

The $22billion dollar Lamu-Southern Sudan-Ethiopia Transport (LAPSSET) Corridor project is expected to be launched next month.

To cope up financial constraints, the LAPSSET master plan report has proposed that the subjects - Kenya, South Sudan and Ethiopia should share part of the project cost, although the countries are seeking an external finance source.

The groundbreaking ceremony will be held on 2 March in the presence of President mwai Kibaki of Kenya, Ethiopian Prime Minister, Meles Zenawi, and South Sudan president, Salva Kiir.

The project’s main section is the Lamu Port, which will have a road network linking Kenya with its neighbours Ethiopia and South Sudan but it also incorporates a port at Manda Bay, a standard gauge railway line to Juba, oil pipelines, an oil refinery at Bargoni and three Airports.

Once completed the Lamu transportation corridor will considerably advance transportation network, boost the volume of cross-border trade across the region playing a vital role in socio-economic development.

It will also open business and investment opportunities and further will have enormous savings on transport and shipping costs as well as transit time.

Following oil row with Khartoum over oil transit fees, Juba is pushing the construction of the project mainly to get rid of its dependency to Khartoum’s pipe lines to export its crude oil.

Land locked South Sudan has shut down its oil pipeline that runs through Khartoum accusing the latter of “stealing” an estimated $350 million worth of its oil and is seeing an alternative way via Kenya ports for its oil export.

Africa’s newest nation wants a pipeline (1,288 km long in Kenya, 427 km in Southern Sudan) with a capacity of 500,000 barrels per day completed within 18 months.

South Sudan says it is willing to pay $1 per barrel exported through Port Sudan saying this inline with international rates, however, North Sudan is demanding over $30.

So far talks brokered by the African Union in Addis Ababa have failed to bring the two sides to a solution.

Sudan expert Alex de Waal has described the move to stop production as economic suicide on the part of the Juba government .

Khartoum has accused South Sudan of trying to undermine the northern economy to try and effect regime change, an allegation denied in Juba.

From 2005 until July 2011 the two sides shared revenues from South Sudan’s oil 50:50 as part of the 2005 wealth and power sharing agreement that ended decades of war.

Juba has recently announced austerity measures to adjust to the lack of oil revenue, which made up 98% of the government’s budget.