The agreement for the construction was signed in Nairobi last week by Kenyan energy minister Kiraitu Murungi and his South Sudan counterpart Stephen Dhieu.
The pipeline, which will be built at a cost of US$3 billion, will enable South Sudan to export between 700,000 and one million barrels of its crude oil via the proposed Lamu port – freeing the landlocked country from reliance on a route through Sudan.
Although South Sudan does not have the funds to finance the entire project, the country is confident that the project will be successful as it plans to use reserves of crude to offer guarantee to financiers of the pipeline, which is scheduled for completion by 2015.
The country has seven billion barrels in proven crude reserves.
On the other hand, Kenya – which discovered oil in Turkana a few months ago – is hoping to use the pipeline to transport its oil surplus to other countries.
“If we are lucky we might have as much oil as South Sudan. Any extra that we don’t use in the country we’re going to put in the same pipeline as the Sudanese oil and export it through the port of Lamu,” said Mr Murungi.
The minister further said that Kenya will build a second refinery in Isiolo to process at least 100,000 barrels per day and refine crude oil from Turkana. A pipeline will be built to link the Isiolo refinery to Nakuru for distribution of products to western Kenya, while another pipeline will be built to supply products in Nairobi.