The Summary

South Sudan accuses Khartoum of ‘looting
· Juba and Khartoum separated in July 2011.

· Khartoum accuses Juba of supporting the rebel groups in a proxy war over the control of Abyei area (oil zone)and other disputed border regions.

· Juba accuses Khartoum of backing the rebel groups in the South Sudan to undermine the political stability in the newly independent republic.

Juba on Friday announced it had decided to shut down the oil pipeline that runs through North Sudan to the export terminal at Port Sudan on the Red Sea, citing endless row with Khartoum

South Sudan accused its northern neighbour of imposing a “per barrel penalty for secession.”
South Sudan, which gained independence from Sudan last July, is entirely dependent on oil revenues to meet 98 per cent of her budgetary obligations.

Mr Dhieu said there are only two conditions that may necessitate the reopening of the pipeline: “Either Khartoum accepts a fair deal with us and accept our offer by settling the financial proposal or we pay them a transit fee which will not be more than $1 per barrel.”
South Sudan has been paying about $7 per barrel for transportation of its oil through Sudan.

Khartoum wants Juba to pay additional transportation fee of $32 per barrel, including a $22.8 transit fee. South Sudan has rejected the demand, calling it “looting in broad daylight.” Yes its robbery 

The shutting down of the pipeline, analysts warned, could worsen the increasingly frosty relations between Juba and Khartoum, putting East African Community States — which have been keen to prevent Sudan and South Sudan from sliding into full-blown war — in a tight spot

Information minister Barnaba Marial Benjamin said the decision was reached at a Council of Ministers meeting chaired by President Salva Kiir on Friday and followed the recent failed talks in Addis Ababa.

South Sudan, which gained independence from Sudan last July, is entirely dependent on oil revenues to meet 98 per cent of her budgetary obligations.

But Petroleum and Mining minister Stephen Dhieu said the government will adapt “new measures to deal with the new situation” and insisted his country could “also exist without oil. We are able to run government affairs for the next 18 months without oil revenue.”


Most EAC countries want to see South Sudan join the trading bloc giving to the resource offering it will be bringing on the table.

In crucial oil talks held last week, South Sudan adopted a hardline stance, opting to shut down the facility in two weeks. Juba has accused the North of confiscating oil shipments valued at $214 million while in transit.

This move will increase the pressure on Kenya and South Sudan to hasten construction of an alternative pipeline through Lamu.
Juba officials see the link to the Kenya Coast as more cost-effective than paying the transport and refinery fees being demanded by Khartoum. The dispute over oil and the announcement of the planned shutdown will also come as a shock for China, whose companies are deeply involved in production and logistics infrastructure.

China also consumes more than 75 per cent of the oil exported from Sudan, with the two countries together producing half a million barrels of oil daily.
The closing down of the pipeline means the flow of oil exports to China will be disrupted.
Should Kenya and South Sudan opt to fast track the construction of the link to Lamu, this will spark a race among foreign governments with the financial muscle to develop infrastructure needed to export the commodity.

The project includes construction of an oil refinery and sea port in Lamu, a 1,400 kilometre oil pipeline that will link Juba, the South Sudanese capital to Lamu port and construction of a new Mombasa-Kampala standard gauge railway line.

A recent ICG report said the South’s search for an alternative transport corridor to reduce its dependence on the North had opened an opportunity for Kenya to attract billions of dollars in fresh infrastructure investment and an advantage in the scramble for foreign direct investment in East Africa.


Even after secession from the North, South Sudan continues to rely heavily on Port Sudan to take its key export, oil, to the global market.
The inability of the two countries to hammer out a fair commercial arrangement has meant South Sudan has not obtained full benefits from its crude oil exports, while Sudan has missed out on a fair commercial return on its oil export infrastructure.


MMH!

Kenya, South Sudan to form team for oil pipeline project

Kenya and South Sudan will form a joint commission to streamline plans for the construction of an oil pipeline between Juba and the port city of Lamu.

South Sudan intends to construct a pipeline through Kenya to export its crude oil while the government would build a refinery in Isiolo to process the crude for local use and export to countries like Ethiopia.

“We do not have the money to build the pipeline. South Sudan has said it will build it but it will be jointly managed by the two countries,” said Energy PS Patrick Nyoike.

The PS said a similar arrangement would be adopted for the planned refinery, possibly on a 50:50 basis.

Last Tuesday, Kenya signed the oil pipeline and fibre optic deal allowing South Sudan build and own a pipeline through the Kenyan territory.

“We will form a joint venture on the twin projects . We have a counterproposal from Toyota Tsusho Corporation to build several multi products to Lamu and Nakuru,” he said.
Another line is planned to deliver products to the border town of Moyale to be tapped by Ethiopia. A pipeline would also be built to connect to the oil fields in Hoima in northern Uganda.

Mr Nyoike said it was possible to complete the project in a year given that the 2,000-kilometre line from South Sudan oil fields to Port Sudan was laid in 18 months.

The refinery, pipeline and fibre optic cable are part of the Sh16 trillion Lamu Port and Southern Sudan-Ethiopia Transport Corridor project.

The project includes resort cities along the corridor and airports linked via a modern railway line.

The pipeline offers South Sudan an alternative route to transport oil, which accounts for 98 per cent of its revenues while opening up northern Kenya for development.

Toyota Tsusho Corporation is planning to build a 1,400-kilometre oil pipeline under Build Operate and Transfer before handing over control of the facility to the two governments after 20 years.

The pipeline would carry a projected 450,000 barrels of oil a day from Juba in southern Sudan to Lamu on the Indian Ocean.

The estimated cost of the pipeline is $1.5 billion dollars (Sh135 billion).

“The pipeline is a gateway to move Sudanese oil to the market including Kenya. Both the crude oil line and the refinery are urgent. Our plan is to deliver both at the same time,” said Mr Sylvester Kasuku, Infrastructure specialist at Kenya’s Office of the Prime Minister.

He said Kenya would earn transit fees in line with international best practice adding that preliminary works on other aspects of Lappset such as roads and port building have started.

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