South Sudan-Kenya Oil Pipeline in the Works

An unresolved issue between Juba and Khartoum has been how to divide the revenue from oil that is essential to the finance of both South Sudan and Khartoum. According to the press, South Sudan is now producing 470,000 barrels of oil per day. But the infrastructure and principal port for its export is in Sudan. The two governments have not been able to reach agreement on fees, tolls and other payments that Juba would make. The South Sudan government alleges that Khartoum has seized up to $815 million worth of oil.  This week Juba announced that it will stop exporting oil stop exporting oil through Sudan, even as talks continue. South Sudan president Kiir and Sudan president al-Bashir are supposed to meet today.

Given these hang-ups, many in South Sudan have sought an alternative export route for their oil. And maybe they have found one. On January 25 South Sudan and Kenya announced an agreement whereby Juba would construct an oil pipeline and a fiber optics cable from its oil fields to the Kenyan port of Lamu. While the pipeline would be owned by Juba, it would pay fees to the Nairobi government. For Kenya, the pipeline would be part of an elaborate infrastructure development program that would include railways, super highways, airports, and tourist resorts as well as new port facilities at Lamu.

Some may see the agreement as part of Juba’s effort to pressure Khartoum. But, given the host of unresolved issues between Sudan and South Sudan, including border disputes that are resulting in low-level warfare, the political arguments for Juba to acquire a new outlet to the sea appear to be strong. It remains to be seen how the pipeline will be financed or how long it will take to build it. But, even in the unlikely event that Juba and Khartoum reach an oil agreement today or tomorrow, the construction of the pipeline will probably proceed.