The surprise decision by Uganda to dump Kenya and opt for Tanzania as its preferred route for an oil pipeline has left the country in a tricky situation over the Lamu Port Southern Sudan-Ethiopia Transport (Lapsset).
The Hoima-Lokichar-Lamu pipeline was one of Lapsset’s key infrastructure on the northern route.
It was to link landlocked Uganda’s oil fields to Lokichar on the Kenyan side before connecting to another line from South Sudan then proceed to the Lamu port.
With Uganda now out, Kenya hopes East Africa’s newest member South Sudan will construct its pipeline.
This is, however, uncertain due to the low international oil prices that have badly affected Kenya’s northern neighbour which is just coming out of a civil war.
Ethiopia, a key Lapsset partner signed another agreement with Djibouti in October last year for the construction of a 550-kilometre pipeline to transport diesel, gasoline and jet fuel from port Access in Djibouti to central Ethiopia.
The project is known as the Horn of Africa Pipeline and includes an import facility and 950,000 barrels of storage capacity in Djibouti, linked to a storage terminal in Awash, Ethiopia.
Both countries have teamed up in a bid to make the Ethiopia-Djibouti belt the central logistics hub for East Africa, something Kenya also hopes to achieve through Lappset.
It is believed the conflict in South Sudan and insecurity on the Northern part of Kenya were the main reasons why Ethiopia opted to make a deal with Djibouti.
REASON TO BE SCARED
And while it remains to be seen whether its commitment to Lappset is still solid, experts say Kenya has every reason to be scared.
“Kenya has every reason to worry because of such developments. For a country to develop, it cannot ignore its neighbours as well as development partners,” Eric Munywoki, a market analyst at Old Mutual says.
“It is it is a lost trade opportunity for Kenya. I tend to think there is a lapse on the government side. We need the ministers in charge of regional or international trade to be more active,” he says.
Uganda and Kenya had in June last year agreed to construct the pipeline through the northern Lamu route at a cost of Sh400 billion.
The agreement was made during President Uhuru Kenyatta’s state visit to Uganda, where he signed several bilateral agreements with President Yoweri Museveni.
Launched in 2012 by President Mwai Kibaki, former Ethiopian Prime Minister Meles Zenawi and South Sudan President Salva Kiir, the Sh2.7 trillion Lappset is one of the most ambitious and expensive infrastructure undertaking in East Africa with 70 individual construction projects spread across four countries.
It is also a key pillar of the Vision 2030 and includes the construction of a railway, road and oil pipeline from the Lamu port traversing Kenya, Ethiopia and South Sudan.
The pipeline was supposed to be extended to the oil fields in landlocked Uganda.
Three resort cities in Lamu, Isiolo and Turkana, airports and industrial districts at these three stops are also scheduled for construction which would open up the economic potential of Kenya’s northern frontier.
However, lack of funding, compensation to land owners around Lamu port and along the corridor in Kenya have been a huge obstacle.
Now with Uganda out and Ethiopia’s commitment being questionable more constraints have been added to an already bad situation.
The government, however, insists that Uganda’s exit is inconsequential.
“When we were creating Lappset, Uganda was not even part of the project. Their only link is a pipeline from their oil fields to ours in Turkana. Their exit will not have an impact,” says Gituro Wainaina, the acting director-general of Vision 2030 Delivery Secretariat.
“Uganda was not even contributing a penny but the beauty is now we have added South Sudan into the East African economic block which is crucial,” he says.