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Latest News Last Updated: Mar 4, 2010 - 7:34:47 AM

Japan group eyes pipeline plan

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Japan group eyes pipeline plan

By Barney Jopson in Nairobi

Published: March 4 2010 02:00 | Last updated: March 4 2010 02:00

Plans to transform the east African oil sector by building a pipeline from south Sudan to the Kenyan coast were boosted yesterday when a Japanese company expressed interest in joining the project.

Toyota Tsusho, the trading arm of the Japanese carmaker, said it was developing plans to build the $1.5bn pipeline, which would run for 1,400km from Juba, the capital of south Sudan, to the Kenyan island of Lamu, where an oil export terminal would be constructed.

The project would be the boldest yet by a Japanese company in Africa. China has also been studying the proposed pipeline and Toyota Tshusho said that co-operation with Beijing was possible.

The geopolitics of east Africa could be reshaped in January, when south Sudan will hold a referendum on independence. If it chooses to secede, a new country will emerge with about three-quarters of all the oil presently possessed by Sudan.

At present, the oil is exported via pipelines leading through northern Sudan to an export facility on the Red Sea. The government of the semi-autonomous south wants the new pipeline to reduce its dependence on the north and to create an export route via Kenya.

Takashi Hattori, a Toyota Tsusho executive, said the company's plans were preliminary but that the goal was to build a pipeline with a capacity of 450,000 barrels a day, and an export terminal, the ownership of both of which would revert to Kenya after 20 years.

Mr Hattori said: "Of course, we need to discuss with the governments. But this is to show our intention to be involved."

Japan is the only big industrialised country that buys Sudanese oil, receiving 2 per cent of the country's petroleum exports in the first half of last year.

But the China National Petroleum Corporation, a state-owned company, has the largest foreign stake in Sudan's oil industry and Beijing received 79 per cent of Sudan's petroleum exports in the same period.

China has also expressed interest in the pipeline through Kenya and Mr Hattori has opened the door to possible co-operation with Japan. He said: "Maybe to collaborate with a Chinese company would be one of the options. We'd like to study any possible scheme further with the Kenyan government and the Sudanese government."

Mr Hattori added that a "key success factor" would be securing finance from the Japan Bank for International Co-operation.

But Dennis Awori, the head of Toyota East Africa, said: "Everything is subject to very thorough feasibility studies, not to mention agreements with governments."

If south Sudan achieves independence, the views of its government on who should build the pipeline will be crucial. "It's all academic until we know what the south Sudanese want," said David Raad, a business consultant in Juba. He added: "All the parties involved will be looking at the expertise, the resources and the intensity of proposals being made."

Kenya supports the proposed pipeline as a way to bring development to its northern territories. The Toyota Tshusho executives were briefing the press in the office of Raila Odinga, the Kenyan prime minister, who visited Japan last month to discuss the pipeline and other investment opportunities.

Japanese diplomats acknowledge that, in common with China, securing oil and other natural resources in Africa is one of their main objectives.

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