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Kampala (Platts)--15Aug2012/510 am EDT/910 GMT

South Sudan has said that it held fruitful discussions with Kenya on the the South Sudan-Kenya crude pipeline, a statement posted on late Monday on the South Sudan government website said.

According to the statement by South Sudan's minister of energy and minerals development Stephen Dau the two governments are in the process of formulating an inter-governmental legal framework that will provide for implementation of the project that will allow South Sudan to export its oil via the Kenyan port of Lamu, easing its reliance on its northern neighbor's pipelines to Port Sudan.

"The areas of cooperation include the development of a crude oil pipeline between the oil fields of South Sudan and port of Lamu in Kenya," Dau said.

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South Sudan seceded from Sudan last year and the two countries have since failed to agree on transit fees that the south should pay in order to export its crude via the northern oil pipelines.

South Sudan in January was compelled to shut its 350,000 b/d of oil production over the lack of agreement and the two countries almost went to all-out war in April.

They reached an interim deal earlier this month ending the row that led to the shutdown in January of southern oil production.

South Sudan has since said it could resume oil production in September.

Under the agreement, South Sudan has agreed to pay $9.48-$11/b for the use of Sudan's two pipelines.

The three-and-a-half-year agreement offer also includes a financial package of $3.2 billion to help cover Sudan's budget gap caused by oil revenue losses when the south became independent and took some 80% of Sudan's oil wealth.

Oil is essential to both economies and makes up 98% of South Sudan's budget.

The South Sudan-Kenya oil pipeline is projected to cost at least $ 3 billion.

South Sudan has at least seven billion barrels of proven oil reserves.

--Mercy Matsiko, This email address is being protected from spambots. You need JavaScript enabled to view it. --Edited by Elston Soares, This email address is being protected from spambots. You need JavaScript enabled to view it.