Sudanese minister calls proposed oil line to Kenya 'uneconomical'

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 12 -- Sudan’s Minister of Oil Lual Deng called a proposed oil pipeline to Kenya from southern Sudan “uneconomical.”

Deng, also a prominent member of the semiautonomous southern Sudan region’s ruling party, told Khartoum’s daily al-Akhbar newspaper that the proposed line would be too expensive and that existing pipeline systems that transport crude from southern oil fields through northern Sudan to the Red Sea would continue to be used.

In March, Toyota Tsusho, a trading arm of the Japanese carmaker, outlined preliminary plans to lay a 1,400-km, 450,000 b/d oil line from Juba in southern Sudan to the island of Lamu off Kenya’s coast, where a new port is to be completed in 2016.

At the time, Takashi Hattori, executive officer at Toyota Tsusho, said his company proposed to own the line for 20 years before handing it over to the governments of Kenya and southern Sudan.

“We haven’t studied in detail, but a partnership with other investors, governments, foreign companies is of course one of the options,” he said, adding, “Maybe to collaborate with a Chinese company would be one of the options.”

China has expressed interest in funding the development of the proposed port in Lamu and other infrastructure, Kenya’s President Mwai Kibaki said on Jan. 6. Construction of the port at Lamu forms part of a $22 billion project announced by the Kenyan government in April 2008.

The government plan includes a railway line, a highway linking neighboring Ethiopia, southern Sudan, and Rwanda to Lamu and three airports, according to Kenya’s Transport Ministry. The port at Lamu will be bigger than the Kenya’s existing facility at Mombasa.

The proposed pipeline project arose in connection with political developments in Sudan. Next year, southern Sudan is scheduled to hold a referendum to decide whether to become an independent nation.

The vote is part of a January 2005 peace agreement that ended a 20-year civil war between Sudan’s mostly Muslim north and its largely Christian and animist south.

The proposed pipeline would substantially reduce the need for post-referendum economic and political cooperation between the south’s ruling party and their former foes in the north.

However, according to analyst BMI, the stability and security of post-referendum Sudanese territory will depend on the northern and southern politicians' ability to strike a mutually beneficial oil agreement.

“Any move on the part of a future southern Sudan to assert the independence of its oil industry would likely be seen as highly provocative in Khartoum and could lead to violence,” the analyst said.

“The new minister's comments, then, are likely aimed at reassuring officials in the north and potentially signaling the southern Sudan's willingness to keep close energy ties with Sudan,” BMI said.

Meanwhile, tribes in the city of Abyei—allegedly with the backing of the Khartoum government—have been accused of carrying out a series of attacks aimed at inflaming tensions ahead of next year’s referendum.

According to United Nations news sources, one of the most recent attacks included the killing of a police officer and five civilians near the village of Tajalei 30 km northeast of Abyie, the country’s most prolific oil-producing region.

Contact Eric Watkins at hippalus@yahoo.com.

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