South Sudan and Kenya sign oil pipeline deal

2012-01-25 11:26

Juba – South Sudan signed an agreement with Kenya to build an oil pipeline to a Kenyan port, potentially freeing it from reliance on its northern neighbour Sudan.

A memorandum of understanding was signed by Kenya and South Sudan “for the construction of the new pipeline”, said Elizabeth James Bol, South Sudan’s deputy minister of petroleum and mining, today.

The agreement, inked in Juba late yesterday, “will allow the development of an oil pipeline and fibre optic connections between the oil fields in South Sudan and the Kenyan port town of Lamu,” an official Kenyan statement read.

A pipeline would free land-locked South Sudan on its dependence of exporting oil through its northern neighbour and former civil war enemy Sudan, which it split from last July after decades of bloody conflict.

However, the oil-rich but grossly underdeveloped world’s newest state lacks the infrastructure to refine and export oil.

Crucial facilities including a pipeline and Red Sea export terminal remain in Sudan, leaving the two states arguing bitterly over how much the South should pay to use the infrastructure.

The agreement yesterday was witnessed by South Sudanese President Salva Kiir and Kenya’s Prime Minister Raila Odinga.

“The pipeline will be developed through Kenyan territory and will be built and owned by South Sudan,” a statement from Odinga’s office read.

“The two countries will negotiate and agree on transit fees for the oil pipeline.”

Bol said no date had been fixed for construction to begin but it “will start as soon as possible”.

Industry experts have said that building a pipeline could take three years or more and be extremely costly to complete.

Juba ordered last week a complete shutdown of oil production despite it making up about 98% of its revenue, amid a deepening row with Khartoum (capital of Sudan) over pipeline fees.

It accuses Khartoum of stealing $815 million (about R6.5 billion) of its crude and building a pipeline to illegally siphon off oil.

Khartoum admits to taking some South Sudanese oil destined for export as compensation until an agreement is reached, but the South has said this is theft.

Kiir and Sudan’s President Omar al-Bashir will meet on Friday for talks in Addis Ababa, Ethiopia.

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