Will Juba salvage Kenya’s pipeline dream?

An oil pipeline extension project in Eldoret, in Kenya’s Rift Valley, where Kenya Pipeline has a depot. Juba was Kenya’s last hope for a partner on the oil pipeline, following Uganda’s recent decision to take its oil to the market through Tanga port in Tanzania. PHOTO | FILE 

South Sudan is yet to make a decision on its preferred route for transporting its oil, as it awaits the outcome of talks with Sudan over transfer costs.

Juba was Kenya’s last hope for a partner on the oil pipeline, following Uganda’s recent decision to take its oil to the market through Tanga port in Tanzania. Kenya’s successful pitching and construction of the pipeline was initially hinged on the volume it expected to move from its oil fields and Uganda.

The EastAfrican has learnt that South Sudan may not be keen on the pipeline deal with Kenya, instead choosing to play its cards safe as it awaits two technical committee reports.

One of the committees was formed with Sudan early this year over the disputed transfer costs.

Stephen Dau, South Sudan’s Trade Minister, who last week held the Petroleum docket, told The EastAfrican that he was aware of Kenya’s proposal for the northern route, given that they have been partners under the Lamu Port Southern Sudan-Ethiopia Transport (Lapsset) Corridor project, but had not received any official communication over the same from either the Kenya or Uganda following the recent developments.

“Prior to the talks on the possible route, we were jointly on the Kenyan route with Uganda, but, once alternative routes came up, we decided to let Kenya and Uganda negotiate then we can join later on. Once we have a proposal, our technical teams will meet and advise on the right way forward,” Mr Dau said.

In late January, Sudan offered a fee cut to South Sudan, which culminated into a meeting between the two countries in February.

Mr Dau said negotiations were ongoing with his Sudanese counterpart Mohammed Zayed Awad to have a fluctuating transit fees rate that would be dependent on the prices of the crude globally.

“The new fee would be agreed upon by a technical team in not less than one month. What we have agreed on is in principle but we expect that by now, the technical people will be finalising before we reach the conclusion,” Mr Awad told Reuters.

The EastAfrican has learnt that the new negotiated transit fees could be pegged at below $18 per barrel, subject to the prevailing world crude oil prices.

Juba and Khartoum have over the years been feuding over transit fees leading to disruptions in the flow of crude to the markets. Currently, it is paying $24 per barrel to Sudan.

“The issue with Khartoum is different. We can still negotiate with them on the transfer costs because I believe we have enough oil to transport through both Sudan and Kenya, if they bring to the table a bankable proposal,” Mr Dau said.

Gabriel Garang Mayik, a Juba-based economist, said that South Sudan currently has no funds to push for a pipeline, so it would avoid any talk of new construction.

Leave a Reply