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.
Landlocked South Sudan exports roughly 350,000 barrels per day but has started shutting down production after talks collapsed with Sudan over transit fees and revenue sharing.
Sudan says South Sudan has not paid for use of northern export facilities since its independence and is demanding $1 billion in fees and $36 per barrel for the crude to be exported through Port Sudan.
In the event of exports through Port Sudan being blocked, South Sudan has said the country can survive on borrowing (using its crude as collateral) until a new export avenue is created.