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South Sudan, Kenya Sign Agreement on Oil Pipeline to Lamu

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Jan. 25 (Bloomberg) -- South Sudan and Kenya signed a memorandum of understanding to build an oil pipeline to the Kenyan port of Lamu, said Barnaba Marial Benjamin, a spokesman for South Sudan’s government.

Construction of the pipeline will begin “as soon as sources of funding are made available,” which should take about a month, Benjamin said in a phone interview today from the capital, Juba. The accord was signed yesterday.

Benjamin said the need for a new pipeline has taken on added urgency since South Sudan started on Jan. 22 to shut down oil production because Khartoum is confiscating its crude and demanding a transportation fee of $32 a barrel. Juba has offered $1 a barrel. South Sudanese President Salva Kiir said Jan. 23 that Sudan has “looted” $815 million worth of his country’s oil.

South Sudan took control of about three-quarters of Sudan’s output of 490,000 barrels a day when it gained independence in July. The crude is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd.

Benjamin said Kenya and South Sudan have been discussing plans for a new pipeline over the past few years and have identified possible investors, including Toyota East Africa.

Negotiations between the two countries in Addis Ababa, the Ethiopian capital, have been extended until “some kind of agreement” is reached on how much landlocked South Sudan will pay to transport its oil across Sudan to the Red Sea, Benjamin said.

South Sudan says Sudan is seizing exports that pass through its territory to an export terminal on the Red Sea. Sudan says it is diverting the crude to cover unpaid bills.

To contact the reporter on this story: Jared Ferrie in Juba at jferrie1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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