South Sudan, Djibouti and Ethiopia Planning New Oil Pipeline

Wednesday, 11 July 2012

Background

The East African countries of Djibouti, Ethiopia and South Sudan have announced ambitious infrastructure projects designed to increase employment, trade and interconnectivity. If completed, the projects will bring significant benefits. A proposed oil pipeline, in particular, would give South Sudan an alternative to the stalled pipeline to the Kenyan port of Lamu and allow it bypass its northern neighbour Sudan altogether. 

Comment

The state-controlled Djibouti daily, La Nation, announced on 8 July 2012, that ministers from Djibouti, Ethiopia and South Sudan had completed their second three-day Tripartite Committee meeting in Djibouti City.^[1]Outlined at that meeting was an ambitious programme of infrastructure projects, designed to increase trade and interconnectivity and to raise employment and living standards in the three countries. Key projects were an oil pipeline and rail and telecommunications links.

For oil-rich yet impoverished South Sudan, currently engaged in a standoff with Sudan over the transit fees charged for southern oil to use northern ports and pipelines, the planned oil pipeline to the port at Djibouti City could be a game changer in its relations with Khartoum. Plans for another pipeline from the South Sudanese oilfields to a new port to be constructed at Lamu on the Kenyan coast, have been around for some time now, but they remain stalled. One possible financier, China, remains uncommitted. Beijing aims to enjoy good relations with both Khartoum and Juba and would no doubt prefer to avoid choosing sides and, instead, see a resolution of the differences between the two Sudans. Other companies from the United States and Japan have expressed interest in the project, but, to date, nothing more concrete has eventuated.

It is a fate that is also likely to confront the proposed Djibouti pipeline. Once again, China would have to choose between the two Sudans. While that is not a consideration that would affect US companies, for instance, attracting backers for such a huge project in a country as devoid of infrastructure as South Sudan may be difficult.       

In addition to the oil pipeline, the ministers reiterated their commitment to a planned rail link between the three countries, also running from Djibouti City to Juba via Addis Ababa. Both the rail project and the oil pipeline build upon the Memorandum of Understanding signed on 2 February 2012, between the Djiboutian Minister of Economy and Finance, his Ethiopian counterpart and the South Sudanese Minister of Petroleum and Mines. No less ambitious, the rail link also lacks a financier, but could play an equally significant role in transforming regional economies and boosting incomes.

Leighton G. Luke

Manager

Indian Ocean Research Programme

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