Kenya, South Sudan and Uganda – Pipeline poker

from The Economist..

May 25, 2013 | KAMPALA

IN MARCH last year the heads of state of Kenya, Ethiopia and South Sudan met among mangroves in Lamu, a Kenyan town on the Indian Ocean, to launch the construction of a port and oil pipeline together costing $16 billion that would serve all their countries and vastly enrich them. Taxpayers were billed $350,000 for the celebratory meal, according to local officials, though it actually cost only $4,000. So far, so profitable. But little has happened since. Plans to build the pipeline have stalled.

The absence of the Ugandan president, Yoweri Museveni, at the launch was the first clue that all was not well. Uganda recently found 3.5 billion barrels of oil by Lake Albert. It should be part of any pipeline project that links new fields in the region. Oil has also been found on the other side of the lake, in Congo. And across the border in Kenya, exploration looks promising; Tullow Oil, a London-listed company, says it is pumping 281 barrels per day (b/d) from a test well. Nearby Ethiopia is exploring furiously, too. South Sudan, which is already producing oil, hopes to find more big fields along its border with Kenya.

So an oil bonanza is in the offing. Revenues could lift millions out of poverty, but only if the oil can find an efficient way to market. The local fields are expensive to tap, say experts. A single pipeline could serve them all and would be the cheapest option, running to Lamu via Lokichar in north-west Kenya and beyond (see map).

But the new oil nations cannot agree on a joint plan. All are obsessed with refining crude at the expense of exporting it.


But the new oil nations cannot agree on a joint plan. All are obsessed with refining crude at the expense of exporting it….


Separately the South Sudanese are holding talks with the Ethiopians about building a pipeline to Djibouti rather than to Lamu, cutting out Kenya…


Uganda, too, has talked up alternative pipeline plans. Maps handed around in Kampala, the capital, show three potential crude-export routes. In addition to the line to Lamu, they trace one to Mombasa, farther south on the Kenyan coast, and one to Dar es Salaam in Tanzania. Both would be for exclusive Ugandan use, since all other known fields are much farther north…


Planners say it could be built in about three years, carrying either 400,000 b/d if all countries were on board, or about half that if South Sudan or Uganda were not. Kenya’s new president, Uhuru Kenyatta, is pushing for results. He may be especially keen in order to deflect attention from his indictment by the International Criminal Court at The Hague. His first big trip after taking office was to Lamu. None of his counterparts was there to meet him.

By failing to co-operate, the new oil states are likely to waste part of their wealth on duplicate infrastructure, building too many refineries and pipelines. Oil can still be a curse.

Link to the entire article:


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