Kenya’s key to South Sudan oil exports
4 min readNAIROBI, Kenya, Aug. 11 (UPI) — The fate of newly independent South Sudan may hinge on a September conference in Kenya to drum up funding to build a $22 billion port and oil terminal on the Indian Ocean coastline.
The facility at Port Lamu, Kenya, would provide the world’s youngest state, born July 9 when it seceded from Sudan, with an export route for its oil, South Sudan’s economic lifeline.
Before the division of what was Africa’s largest country, the south moved its oil north across Sudan to the export terminal at Port Sudan on the Red Sea, the only maritime outlet.
Since partition, the Khartoum government has sought to impose transit fees worth one-third of the export value on southern oil shipments to Port Sudan. The fees, which are several times the usual transit costs, would give Sudan a projected annual income of $2.6 billion.
A 600,000-barrel shipment of crude was blocked in Port Sudan in early August as the Arab, Muslim north and the largely Christian south wrangled over how to share oil revenues, with agreement a remote prospect.
Before partition, the south accounted for at least 75 percent of oil production that totaled 490,000 barrels per day, the fifth largest in Africa.
“Khartoum is trying to sabotage the economy of South Sudan,” declared David Loro Gubek of the southern government’s Ministry of Energy and Mines. Oil accounts for 95 percent of South Sudan’s revenues.
These developments have heightened tensions between the two sides, which fought a decades-long civil war that ended in 2005. Some 2 million people died in the conflict.
“The South Sudanese know that without an alternative pipeline infrastructure, they are essentially dependent on cooperation with Khartoum to get their oil to marker,” the U.S. global security consultancy Stratfor observed.
In the north the military is increasingly restive, as are hard-line Islamists.
They blame President Omar al-Bashir for allowing the south to secede and this has weakened his authority. The military is pressing him to retake the oil zones by force if necessary.
It could reignite the north-south war, which could trigger a regional upheaval across East Africa, squeezed between political upheaval in the Arab world to the north and a spreading famine in the Horn of Africa.
In the run-up to partition, fighting erupted when the north tried to seize southern oilfields along the undemarcated border and frontier provinces remain on edge.
A new pipeline through Kenya to a greatly expanded Port Lamu, north of Kenya’s main port, Mombasa, would give the south an alternative export route that would cut out the north completely.
But even if the Kenyan government secures the funding for the project, designed to create an East African regional trade and energy hub, at next month’s conference in Nairobi, it will be years before the pipeline from South Sudan can be built.
The project is known as the Lamu Port-South Sudan-Ethiopia Transport Corridor, or LAPSSET.
As it stands right now, the blueprint envisages constructing transportation links between Kenya and Uganda and the mineral-rich eastern zone of the Democratic Republic of Congo.
The largest portion of LAPSSET’s funding — $7.1 billion — is earmarked for improving road and rail networks across the region and constructing new ones.
The most important elements are expanding Lamu’s port to 20 berths, at an estimated cost of $3.5 billion, and building a $4 billion oil pipeline to South Sudan’s oil fields, as well as a $2.5 billion oil refinery with a capacity of 120,000 barrels a day.
Kenya can’t finance this on its own but China, Japan, Germany and the Persian Gulf state of Qatar have expressed interest and further financing through the World Bank is possible.
China, which buys more than half Sudan’s oil, is also a potential investor in the Lamu project, and, as Stratfor notes, “holds a unique position in being able to manipulate both sides to its advantage.”
There are dangers if the project does get under way because it could trigger a broader dispute over South Sudan’s oil.
But, Stratfor observed: “Since the pipeline is several years away at best, Khartoum has time to influence the project through negotiations with Juba.
“For example, Sudan could reduce the transit fees it charges Juba to use its oil pipeline, thereby making the $4 billion LAPSSET pipeline uneconomical — or at least less so.”
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