Lamu project a boost to recovering economy

It will soon be possible to link the rich oil fields of South Sudan to Kenya’s Lamu port, providing this landlocked country with a vital route to the sea.

This is if a railway line linking the city of Juba in Sudan to Lamu, an idea first sold to the Kenya Government by the late John Garang, then leader of the Sudan People’s Liberation Movement (SPLM), becomes a reality.

Interestingly, South Sudan abandoned the idea of building a parallel railway line linking it with Lamu and only appears to have reconsidered it after relations with the Khartoum administration in North Sudan went frosty.

The Lamu port project, which was first fronted by the late Alex Mureithi – nephew of President Kibaki, a then powerful State House operative and well-connected power broker and lobbyist, has been on the back burners for a while since Mureithi passed on.

But with discovery of commercial oil deposits in South Sudan, there is renewed vigour on the Lamu Port and Lamu Southern Sudan-Ethiopia Transport Corridor (Lapsset).

This Lamu corridor is a transport and infrastructure project in Kenya that when complete will be the country’s second transport corridor. Kenya’s other transport corridor is the Mombasa port and Mombasa-Uganda transport corridor that passes through Nairobi and much of the Northern Rift.

The project will involve construction of a port at Manda Bay, standard gauge railway line to Juba, a road network, oil pipelines to South Sudan and Ethiopia, an oil refinery at Bargoni, three airports and resort cities in Lamu, Isiolo and the shores of Lake Turkana. The planning stage of Lapsset is already complete with the Prime Minister,s Office mandated to coordinate implementation of all its associated components.

“The cost of the first three berths together with associated infrastructure is estimated at $710 million, over a four year period,” said Silvester Kasuku, secretary Lapsset coordination secretariat, Office of the Prime Minister.

During a meeting of cabinet committee on infrastructure held on November 30, 2011, it was agreed that Lamu port be constructed through a Build Operator Transfer (BOT) framework.

A railway as well as oil pipeline connections to South Sudan and Ethiopia is expected to make Lamu port more attractive to foreign investors.

Frantic efforts by South Sudan to link with its East Africa neighbours through railway are happening when several East African nations are pushing ahead with huge infrastructure projects. While the African Development Bank (AfDB) is funding Burundi’s multibillion-dollar infrastructure plan, Kenya has been raising funds from the domestic money market through infrastructure bonds and plans to finance the Lamu port project.

However, despite the high profile publicity that the project has attracted, analysts are cautious that South Sudan deal is yet to be bagged even though construction work for the Sh2 trillion project was officially lunched by President Kibaki and his counterpart Salva Kiir of South Sudan and Ethiopia Prime Minister Meles Zanawi. There is a possibility that while Kenya’s eyes are firmly on South Sudan oil, the latter has been shopping around for the best deal and not necessarily fixed on Kenya, with the same intensity.

At a recent meeting in Addis Ababa, the capital of Ethiopia, two senior officials of the South Sudan government – Atem Yaak Atem, Deputy Minister of Information and Broadcasting and Marial Awou Yol, Deputy Finance Minister – made curious statements.

The duo said that all options are still on the table in as far as which country finally gets to seal a deal on exporting South Sudan oil. The two further hinted that their country’s interest is to ensure any deal it brokers must safeguard their country’s best interest.

“As a landlocked country, we would like to have an outlet to the sea for our goods and a viable route for our imports,” explained Yol while on a fact-finding mission to explore whether an oil pipeline through Ethiopia was a viable option.

“We do not want to put all our eggs in one basket,” he said. “It should be financed by a consortium of companies. The more companies we have, the faster it can be done.”

Ordinarily, these statements will be dismissed as mere statements. However, these are not ordinary times and oil is a most sought after commodity.

Analysts say that for a country that has experienced probably the worst form of conflict, malnutrition and all manner of sufferings, South Sudan will do everything to ensure the interest of its people, including turning to the North and using its other options as a bargaining chip to force its hostile neighbour change its aggressive behaviour.

Those who have been looking at the negotiation style of South Sudan since it gained independence say that for Kenya to seal the oil deal and reap maximum benefits, she should ensure that it offers the best alternative for the oil exports and not just rely on its geo-political position.

According to the negotiations trends that have been widely reported in the Press, South Sudan has had talks with Ethiopia, Uganda and Djibouti in the past two months, all with the aim of exploring oil exportation routes.

South Sudan has virtually entered into some form of contract with all these countries, including keeping its options open with Sudan.
Barely months before entering into a deal with Kenya, South Sudan signed a pipeline deal with Ethiopia and Djibouti hoping to export its crude oil through the port of Djibouti on the Red Sea via neighbouring Ethiopia.

The talks saw a memorandum of understanding signed earlier this month, a development that was confirmed by South Sudan’s Minister for Information, Barnaba Marial Benjamin. It is understood that the Chinese, European companies and US have all shown interest in carrying out feasibility studies for the same.
Djibouti, on the Gulf of Aden at the entrance to the Red Sea, is at least 1,000km (625 miles) away from South Sudan’s oil fields and runs across a remote and difficult terrain where most of the South Sudanese and other militia groups operate.

Analysts say that it is the concerns of sabotage and the sheer amount of revenues required to push through such an infrastructure among other risks that is making South Sudan open to other ideas.

Already, South Sudan’s government has signed a deal with Kenya to link its oil fields to the port of Lamu.

Earlier in December last year and in a less publicised announcement, French oil major Total announced that it could build a pipeline from South Sudan to Uganda that would be linked to Kenya’s coast, in a move meant to solve the ever present concern as to how to export its oil.

In the announcement, Total Christophe de Margerie said that Total had proposed this idea to the Ugandan government, but no decision has so far been made.

“The pipe, which is supposed to be from our potential blocks, could be used as a hub for different sources of crude,” de Margerie told a news conference at the sidelines of the recent World Petroleum Congress.

Analysts, however, agree that despite the on-goings, Kenya still stands a chance to benefit whichever way the arrangement goes.
Investment analysts argue that it is because of these anticipated benefits, Kenya signed an agreement with the Government of South Sudan to build a pipeline to the port of Lamu.

“Obviously, Kenya stands to benefit immensely from the abundance of cheap oil next door,” said Patrick Obath, the chairman of the Kenya Private Sector Alliance.

“The pipeline corridor will also open up new business opportunities as the plan combines both roads, pipeline, electricity and a railway line – a catalyst of all manner of transport-related development that has the potential to support business.”