Kenya taps Ethiopia in joint oil pipeline deal after Uganda setback
Kenya has entered a deal with Ethiopia to build a crude oil pipeline to run from the coastal town of Lamu to Addis Ababa months after Uganda pulled out.
President Uhuru Kenyatta struck the pact with Ethiopian Prime Minister Hailemariam Desalegn in Nairobi as part of joint infrastructure projects to integrate the region under the Lamu Port-South Sudan-Ethiopia Transport corridor.
“I thank his Excellency for his continued goodwill to these projects which promise to bring our people together, while opening up greater opportunities to them,” said President Kenyatta.
It is not clear whether the pipeline will pass through Juba before heading to Addis Ababa.
Uganda had initially expressed interest for a joint pipeline with Kenya but later opted out in favour of Tanzania route through Tanga port.
Kenya is set to start building the Sh210 billion pipeline from Lokichar oil fields in Turkana to Lamu to be completed in 2021, according to Ministry of Energy and Petroleum.
“Kenya and Ethiopia are the pillars of the region and we have to work together to stabilise the region,” said Mr Desalegn.
Ethiopia has posted double-digit growth in the past decade, making it among the fastest growing economies while Kenya’s growth has averaged above five per cent in the past five years.
The two countries will establish a joint railway commission and project coordination committee to accelerate regional infrastructure development.
France’s Total, one of the oil firms developing Uganda’s fields, had raised security concerns about the Kenyan route.
Kampala had also raised the red flag on the location of the pipeline terminal at Lamu port and feared it was prone to Monsoon winds. Uncertainty over financing of the pipeline was also an issue.
But Tullow Oil, with stakes in both countries, had backed the Kenyan route, saying it would be cheaper if oil from both pipelines followed the same route.
A joint pipeline between Kenya and Uganda would have had an initial throughput of 300,000 barrels per day (200,000 barrels for Uganda and 100,000 barrels for Kenya).
This could have earned the pipeline companies $1.6 billion (Sh160 billion) a year to be shared between the countries based on the volumes.
Overall, Kenya and Ethiopia have entered into five pacts, including cooperation in sports, cross-border livestock, health and education.
“The two leaders agreed to explore the possibilities of launching a joint grand Kenya-Ethiopia marathon as a ‘sports brand’ to promote cultural cooperation and sports tourism,” read a joint communiqué.
Nairobi and Addis Ababa also pledged to tighten ties in sectors such as immigration, information and media, customs, trade and investments, civil aviation and energy.
Others are transport, environment, arts and culture.
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