South Sudan seeks alternatives for oil exports

Shortly after the announcement of a deal between South Sudan and Kenya to build a pipeline for the transport of oil from South Sudan to Lamu, a South Sudan official said more than 900 oil wells were being shut down in response to the alleged stealing of oil by neighboring Sudan. The oil issue has been smoldering ever since South Sudan gained independence in July 2011. For an assessment of the latest moves by South Sudan, Deutsche Welle talked to EJ Hogendoorn, director of the International Crisis Group's Horn of Africa project.

Deutsche Welle: Why has South Sudan turned to Kenya?  Is Juba seeking to punish Khartoum after years of civil war?

EJ Hogendoorn: South Sudan is extremely frustrated with Khartoum for its inability to reach what it feels is a fair deal on the sharing of oil revenue and the paying of transit fees to Khartoum by the south. Instead, it has decided it wants to pursue a project to build a pipeline from southern oilfields to Lamu, but that will be an extremely expensive and time-consuming project and very difficult to achieve. 

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:  The quiet times will be over in Lamu once the port project goes ahead

In addition to the time and expense involved, do you see any other risks involved in this project?

There are certainly political risks. Obviously this will anger the north a great deal. At the same time, the pipeline will also have to go through relatively unstable areas of Kenya, close to the Somali border, which is one of the reasons why Kenya has decided to intervene in southern Somalia in an effort to stabilize the situation. 

How do you think Khartoum will respond to the deal between South Sudan and Kenya?

That's uncertain. We would have thought it's in the interests of both sides to come to a deal, especially because building a pipeline is such an expensive proposition and will take such a long time. But it appears that feelings have become so bad between Khartoum and Juba that they are no longer thinking rationally and they have very much dug in their heels. It is possible that what will happen is that the pumps will be stopped and that will have long-lasting implications. It's not just that the pumps can be turned back on and the oil will flow again, it will cause damage to the pipelines and it will take quite some time and money for the system to be restored, should the two sides agree to a deal later on. 

Who stands to gain the most from the new deal?

Clearly the country that would gain the most is Kenya which would be able to charge an oil transit fee to South Sudan's oil producers and it would also get the investment it's been looking for to build the Lamu port project.

Before the oil shutdown and the agreement, the Juba government was collecting 98 percent of its revenue from the sale of oil.  How long do you think it can survive the shutdown?

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:  Transit fees were not clarified when South Sudan became independent last year

That's the question everyone is asking and no one can answer. We understand that the government of South Sudan has been approaching donors and commercial partners, asking both for loans and also for direct budgetary support to see them through this period of time. It will be very, very difficult for the government of South Sudan to sustain its operations without its regular oil revenue. 

Does the signing of the agreement with Kenya mean that South Sudan will become completely free of its reliance on Sudan's pipelines?

The dilemma is that it will take at least three years for any company to construct a pipeline from South Sudan to the Kenyan coast. During that period South Sudan will either have to go without that revenue or it will have to come up with some kind of deal that is acceptable both to Khartoum and South Sudan over the sharing of oil revenue.

Do you see other African nations becoming involved in this project?

The intention of the Lamu port project, at least in the mind of the Kenyan government, is that this would be a gateway for Ethiopia, South Sudan and Uganda, and perhaps even farther afield. It's quite possible that other governments in the region, and perhaps other companies that are operating in that region, will want to become involved and help further this project.

Interview: Chrispin Mwakideu
Editor: Mark Caldwell / rm