Lamu oil pipeline project cost to be shared among South Sudan, Kenya and Ethiopia
9 min readBy JEFF OTIENO
Posted Saturday, February 18 2012
The South Sudanese have said they want a pipeline up and running within 18 months.” Umeme senior spokesperson Charlotte Kemigyisha
Countries expected to benefit from the construction of the Sh21.5 billion ($253million) Lamu-Southern Sudan-Ethiopia Transport (LAPSSET) Corridor will have to foot part of the budget, it has emerged.
There is fear that some parts of the project, among them, a highway, a railway line, a pipeline and a port, might delay, or even stall, if benefiting countries do not commit funds from their national budgets.
To minimise financial difficulties, the LAPSSET master plan report proposes that Kenya, South Sudan and Ethiopia share part of the cost, even as they seek donor funding. The plan report also acknowledges that some of the projects might not be completed on time if funds are unavailable.
Possibility of undertakings of the public infrastructures depends entirely on fund and budget availability and proactive involvement of the government of Kenya, said the report. President Kibaki will conduct the groundbreaking ceremony of the multimillion-dollar project, on March 2. Prime Minister Meles Zenawi of Ethiopia and Salva Kiir of South Sudan are expected to attend the function. The ceremony will mark the commencement of the construction of the Lamu port.
LAPPSET is expected to enhance regional trade, not only linking East African countries by making movements of goods and services easier, but also opening up sections of the hinterland that have remained underdeveloped due to poor infrastructure.
The report acknowledges that since the cost of the project is comparatively large compared to Kenya’s past Gross Domestic Product (GDP) and national budget, co-operation of neighbouring countries is indispensable in the construction of the Lamu port, railway and highway.
Though construction of oil refineries and resort cities are usually made through private investment, the report proposes that part of the investment be borne by neighbouring countries that will benefit from LAPSSET.
It suggests that Southern Sudan help fund crude oil pipeline, and both Southern Sudan and Ethiopia give Kenya a helping hand in the construction of an oil refinery, under the coordination of the LAPSSET Corridor Authority.
Already a high level delegation from South Sudanese has visited Kenya and held discussions with government officials on the construction of the 1,715 km crude oil pipeline.
Initially South Sudan had planned to finance the construction of the whole pipeline, with Kenya granting the right of passage. However, Kenya’s role is expected to be much broader given its experience in construction and expertise in maintaining an oil pipeline.
The urgency to construct the pipeline increased after South Sudan announced that it no longer intends to export its crude oil through Northern Sudan. Africa’s new nation wants the pipeline (1,288 km long in Kenya, 427 km in Southern Sudan) with a capacity of 500,000 barrels per day be built within 18 months.
Part of the crude oil — 417,600bbl/day — is to be exported from Lamu Port. Crude oil exporting pipelines are planned from the Lamu Tank Terminal located to the north of the Lamu Port to the two Single Point Mooring Buoys (SPMBs) at the outer channels through Pate Island, adds the report.
Another pipeline, for refined oil (diesel 52 per cent, kerosene 29 per cent and gasoline 12 per cent), with a capacity of 82,400 bbl/day will also be constructed.
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Lamu abuzz with construction as South Sudan seeks new pipeline
A high level delegation from South Sudan has been in Kenya through the week to initiate negotiations with over rights of passage for the 2,000 kilometre crude oil pipeline the country has decided to build to connect its oil fields to the Kenyan coastal town of Lamu.
Initially, Juba said it would be building the pipeline on its own at an estimated cost of $3 billion, with Kenya’s role limited to granting right of passage. But it appears that as the negotiations progressed last week, Juba realised that the scope of co-operation with Kenya on the project will have to be much broader to leverage the latter’s experience in executing large pipeline projects.
The climax of these preparations will be a groundbreaking ceremony to be conducted by President Mwai Kibaki on March 2 that will mark the start of the construction of the Lamu port. Ethiopian head of state Meles Zenawi and President of South Sudan Salva Kiir are among the dignitaries expected to attend the ceremony.
Last week, the joint implementation committee leading the negotiations expanded the terms of engagement. The parties will be negotiating terms and the role that Kenya can play in project execution support and management of the pipeline when it is fully operational. The joint committee is also negotiating issues such as immigration, transit fees, and provision of security for the pipeline
Last week, the negotiating party agreed to appoint a transaction adviser to advise on what are turning out to be complex negotiations.
With the government in Juba having decided that it will no longer export crude oil through North Sudan, the need for an alternative route to the sea is now more urgent than it has ever been for South Sudan.
The South Sudanese have said they want a pipeline up and running within 18 months.
Whether this is possible is debateable. But it is noteworthy that China Engineering Pipeline Corporation (CPPEC), the Chinese contractor working with the state-owned Kenya Pipeline Company, only recently completed building a 400-kilometre pipeline between Nairobi and Eldoret in a record 18 months.
Insiders have told The EastAfrican that due to the urgency with which Juba wants a pipeline, the plan is to have multiple contractors building different sections of the 2,000-kilometre pipeline.
For Kenya, the souring of relations between Juba and Khartoum offers not only a great opportunity to boost its geostrategic significance as the hub of economic activity in the region, but also an opportunity to achieve its dream of acquiring a second transport and economic corridor. Deepening economic relations with South Sudan and Ethiopia will counterweigh the heavy dependence that Kenya currently has on Uganda and Tanzania in the region.
Right now, Kenya only has one transport and economic corridor, the Northern Corridor, starting from the port of Mombasa to Malaba on the border with Uganda and onwards to Central Africa. A second corridor is critical for Nairobi as Kenya wants to access Ethiopia and South Sudan through northern and eastern parts of the country from the new port of Lamu.
Kenya’s ultimate aim is to extend the transport corridor to Kigali all the way to Douala in Cameroon. This will spawn a deeply inter-connected economic zone straddling the Nile Basin countries that will not only overshadow the ambitions of the East African Community, but whose future will be shaped by regional trade in oil, gas and electricity and the need to access the Indian Ocean.
Indeed, the battle over pipelines and access to the sea between Khartoum and Juba has broken out just when Kenya is in the middle of implementing its second corridor project.
A major project estimated to cost $15 billion, it has multiple parts including the Lamu port itself, and a railway line and fibre optic cable running from Lamu to South Sudan and Ethiopia through Isiolo.
The scope of the second corridor project includes airports at Isiolo, Lamu and Turkana, a highway, an oil refinery at Lamu and resort cities. But until the South Sudanese came up the other day, the only project that was actually being implemented was the Lamu port.
Indeed, the scope of the second corridor project had been reduced to the building of three berths to handle bulk cargo, general cargo and a container terminal. The pressure by the South Sudanese was bound to alter the equation, speeding up the construction pace of the port.
Repairs to road connections to places like Malindi, Witu and Garsen are going on at a scale and pace never witnessed before. But the most dramatic is the work currently going on the port area itself.
The whole port area is a massive construction site, with contractors clearing bush and building road connections to the port area. The construction of water and sanitation services and installation of electric equipment has already started.
The contractors building the port office headquarters, a port police station, and car parks moved to the site late week.
Controversies
Implementation of the Lamu project has not been without controversy. A disagreement between the Ministry of Finance and the Treasury over the cost of the feasibility study almost scuttled the whole project. Well-connected individuals connived with land officials to allocate themselves land on the port area, with the intention of selling it to the government later at a huge profit. It has emerged that some of the landowners had even charged the property to commercial banks for huge advances.
The matter was only settled two months ago when the Cabinet resolved that all titles in the proposed site of the port be cancelled by decree and the land compulsorily acquired. What is clear is that the entry of the South Sudanese into the fray has now altered the stakes. Even with delays, the proposed Lamu port is set to be the region’s largest oil exporting port.
Tanzania plans a railway line to reach South Sudan
The project will help ease congestion at the Dar es Salaam port. Picture: File
Tanzania, Uganda, Burundi and Rwanda have reached a formal agreement to construct a multi-billion dollar railway network, which would also serve South Sudan and tap into the bloc’s growing trade.
The project, to commence in 2014, is expected to take three years and cost $4.7 billion.
This will run alonsgside the $3 billion Tanga-Arusha-Musoma-Kampala railway line that is expected to be completed by 2015.
Tanzania and Uganda signed an agreement with China Civil Engineering Construction Corporation to undertake a feasibility study and implementation of the project, which will be the main gateway of Mwambani Port in Tanga, Musoma dock and Port Bell in Uganda.
“We are expecting to handover the feasibility study by April while construction of the 880km railway line is expected to be completed by 2015.” the Chinese engineering firm managing director Wang Xiangdong said,
Mr Xiangdong said the railway line will be constructed to the 1,435mm, which is the standard gauge used in other countries and directed by both states.
The project will see Tanga and Musoma ports dedicated to handle cargo, traffic destined to Uganda and South Sudan. Beyond that the project will help to ease congestion at Tanzania’s principal’s port, Dar es Salaam.
Freight would be conveyed from Musoma by ferry to the Port Bell pier — about 350km of transportation in the lake. A rail connection already runs via Tororo to Gulu – nearly 600km – on the Pakwach branch.
A new line of roughly 250km would be constructed to Juba, and a further 550km to the Wao railhead in South Sudan.
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