South Sudan: A third alternative to the oil pipeline proposal

By Makol Bona Malwal

September 17, 2013 – To say that the new state of South Sudan, a country with over 80 percent of the population illiterate and more than 50 percent living below the poverty-line, is facing huge challenges in kick-starting her economic development is no exaggeration. South Sudan is probably the most oil dependent country in the world. This means that we must make the best use of our oil revenues to jump-start that much needed development. This also means, not accepting the argument that, we are too weak to exert any, if not full control over our resources.

Following the suspension of oil production, the government of South Sudan announced that, it would build an alternative export pipeline to the Indian Ocean via Lamu in Kenya. With an economy that produces almost nothing else, except crude oil, there is a need to scrutinise, debate and think through this proposal thoroughly. This includes examining the feasibility and viability of this alternative option of an export route; the time it will take to build it “assuming that all is well”, technically and economically; the geo-politics and security of the region; and the cost of not just the construction, but including the charge per drum to be levied by Kenya, etc.

Insecurity is not an attractive option for investors to come in as cost benefits analysis simply generates a reluctance to invest in a new pipeline in an insecure region/ zone. Granted that oil companies will go anywhere there is money to be made, but of course we should strive for security and stability to make it easier. The dwindling oil reserves and lack of significant new discoveries in South Sudan is also another element to factor into the equation.

We need to start thinking rationally about these issues for our country’s sake. Keeping ourselves uninformed, infantilising and over-simplifying things would achieve very little or no good at all. There is the believe within South Sudan that a pipeline can be built within one year or two at most. Realistically speaking, it will probably take us from three to five years to build a new export pipeline to the Indian Ocean via Kenya, assuming that all preparations are in place.

Technically the two oil blends that we produce in South Sudan, the Nile Blend and the Dar Blend cannot be transported in the same pipeline. This is one of the reasons why there are two pipelines to Port-Sudan. This means we have to build two parallel pipelines to export these two types of oil as they cannot be mixed in the same pipeline.

Economically, building the two pipelines will require billions of dollars, which is not a small sum to find, especially given the shape of our country’s finances at the moment and the fact that there is no guaranteed financing for this option, contrary to all that has been reported.

This paper is trying to examine possible solutions to exporting South Sudanese oil. There has been a great deal about the alternative pipeline, which for the purposes of this piece I will call alternative 1.

While I am sympathetic and do not object to the idea and the proposal put forward by Professor Sharon Hutchinson of the University of Wisconsin and Professor Eric Reeves of Smith College, Massachusetts entitled: Oil Transport from South Sudan to the Kenyan Coast: An alternative to the oil pipeline proposal that would promote immediate employment, national unity, and long-term economic growth. I will call this alternative 2.

I would like to introduce alternative 3, which is the moving of the oil by road. Yes, Paved Road – A highway. This might sound like a farfetched idea and though I have to acknowledge from the outset that one of the major issues with transporting flammable liquid by people & road over far distances is, that it is not sustainable in the long term. Oil tankers on a road could be a cause for insecurity as it will be perceive as easier to attack, rob and vandalise. Drivers will be easy targets from all sorts of madness en route.

Now let’s look at several realities. For a start, all the oil and most of the other commodities consumed in South Sudan are transported into the country via trucks on largely unpaved roads. If I may, I would wish to thank the two eminent academics in proposing alternative 2. I also would like to say that I would more or less use the same template, the same justifications, reasons and rationales to present the case simplistically, and I have to emphasis here simplistically, for transporting our oil on paved road. The same rationales apply as much to the road alternative 3, as they do to the rail line.

I am confident that moving our oil by road would be much more beneficial for the people of South Sudan in a number of ways. This is more so, considering the country’s development and economic needs than transporting the oil by any other means.

Building a paved road for the purposes of transporting South Sudanese oil will have a residual benefit not only for the vested interest groups from within and without, but will at least at the same time leave something for the general South Sudanese citizen to improve their lot with. The building of a paved road to the Indian Ocean via Kenya has many major advantages over the oil pipeline proposal or even moving it by rail. If there was capacity I would recommend building a paved road and railway system together, but all considered I would say a road first. Seconded by a railway, and an alternative pipeline as the third option.

I would first highlight some of what I regard as the main disadvantages (with a few mitigations) to building a road and then illustrate the advantages:

The environmental impact of a road is a criterion which is often used to prevent new infrastructure from being built or to re-orient choices towards transport alternatives such as rail. The need to reduce CO2 emissions and prevent global warming has to be seriously taken into account. Road transport is becoming less polluting, thanks to the combined effects of stringent measures, new anti-pollution standards, modernisation, cleaner fuels and manufacturing and building of roads techniques and improving the performance of roads, better alignment coupled with sufficient width and infrastructure capacity giving traffic the possibility to flow steadily.

It is true that a road, even more than a railway transport, would move oil less rapidly than a pipeline some might consider this as a disadvantage. This could prove an even bigger advantage to South Sudan, because it could provide greater flexibility and control in responding to oil price fluctuations and permit longer term monetisation of this finite natural resource, as elegantly outlined by the two Professors in their proposal.

Evidently a road would move much less oil than a pipeline on a daily basis (quantity). This could actually be an advantage in that it will be better in the long run if South Sudan uses revenues from this natural resource over a longer period of time, extending the revenue stream for a number of years and maximising what can be extracted, than expending it within a short time.

Here are some advantages for the road besides just transporting our oil:

National Unity. A national highway would be a truly national project, linking regions, and with the potential to bring all of South Sudan within a continually growing transport system. An initial highway can serve as the beginning of a key part of the transportation infrastructure for South Sudan. The possibilities for roads spurs, extensions, and new roads/ highway are immense and multiple. In some areas, a road will provide creative possibilities for trade, as opposed to raiding for cows, etc. The road would be a symbol of national pride and resourcefulness. It would connect people, provide for improvements in national security, and speed movement of food in times of shortage, etc.

Expand the geographical reach of community services: A road could be used for the delivery of government-supported services in the areas of emergency food supplies, primary health service, veterinary medicine, etc. so as to bring tangible and socially inclusive “peace dividends” to greater numbers of citizens more cheaply and more quickly.

Employment: A road/ highway could provide an immediate and significant source of employment for South Sudanese especially among demobilised SPLA soldiers and those who live in the regions through, which the road would pass. Since a road construction does not require the same technical expertise as does an oil pipeline construction. In addition an expanding road system within South Sudan would continue to provide jobs and food security for the future, something that cannot be said of a completed pipeline.

The broadest benefits of a road: A road could last indefinitely with minimal maintenance continuing to grow and serve the peoples and economies of South Sudan and the region for many generations to come. In contrast, the utility of an oil pipeline would end with the depletion of this finite resource.

Help to create an import and export economy: A road can carry products other than crude oil for export and crucially will allow for imports as well. The image of an oil pipeline is that of a one-way extraction of resources from Africa (exploitation); a road moving a range of both imports and exports presents an entirely different picture and will connect South Sudan with the world at large in flexible and strategic ways. A road can carry cattle, gold, agricultural and other products to bolster nascent domestic markets as well as generate revenue from exports.

Speed of construction: since we have raised questions about the overall feasibility, cost and length of time required to construct an oil pipeline to the Indian Ocean via Kenya and to a lesser extend the railway option. A paved road could be constructed much more speedily (especially that we have some of the row materials right there at home in South Sudan) at a considerably less cost and without many of the technical nightmares that would inevitably accompany a pipeline and again to a lesser degree a railway construction.

Strengthen regional ties: Unlike a pipeline, a road could stimulate multiple economic initiatives, local entrepreneurship and economic growth that would benefit South Sudanese, Kenyans and the wider region. A road designed to benefit regional communities would face less potential opposition and thereby diminish long-term security concerns.

Further advantages:

To state the obvious a road is almost certainly much less expensive to construct than a pipeline by far (unless the contract is drawn up like most that have been reported since the CPA was signed). Given the two-way nature of such a road and the possibilities for both significant non-oil exports for example food stuff, etc., and inexpensive imports. An independent international cost/benefit analysis of a road against a pipeline will almost certainly favour the road.

A road can be repaired and maintained much more quickly in the event of damage from any source. Oil transport itself would be considerably more secure, especially since security forces could be equipped to patrol and monitor it and hopefully keep our communities peaceful and secure at the same time.

There are considerable environmental advantages, especially in areas where a ruptured pipeline would do tremendous damage to the local ecology.

Since South Sudan predominantly relies on oil. It would make sense to establish a proper oil industry including refineries to be built and strategically located within South Sudan (I must re-iterate strategically located).

We in South Sudan have realised the long cherished goal of our recent history’s struggle, starting with the Torit Mutiny in 1955, built upon by the SPLA in 1983, culminating in the referendum vote in January 2011 and independence in July 2011.

But, and it is a big BUT indeed, how many South Sudanese have benefited from their oil? The answer is a very minute – infact a very insignificant number of South Sudanese have or are enjoying whatever comes from their oil thus far.

We all want to actualise the political and economic independence of South Sudan. The question of how to do so remains an urgent one and it is never too late for a robust discussion and debate on the potential advantages and disadvantages of all the three alternatives: 1) A pipeline, 2) A rail line, and 3) A Road.

Yes, I have not done any costing yet and do not have any hard figures for how much a road will cost us and how long it will take us to build it. The only benefit to cost ratio that we should be measuring and thinking about here from a South Sudanese point of view, is what the South Sudanese people will get out of each option. The cobwebs of vested interests groups and associations have always and will always continue to get more than their due. And it is unfortunate that there is very little that we can do about that. At the end of the day consumers do not care where the oil they use come from and how it gets to them. But a road will make a considerable good difference to the people of South Sudan. The benefits of building a road to the people of South Sudan outweigh the cost by any measure.

We should not allow ourselves to be seen as delusional or out for an adventure. Sometimes good intentions are not enough. That is why we in South Sudan need to adopt pragmatic approaches and engage in a much more rigorous policy analyses and debates to inform our public and policy developers.

Oil is not just a commodity as many of our people believe it “just” to be. It is a strategic asset. And as such calls for strategic planning and thinking outside the box!
The problem is not the solution(s) to oil transportation, but our ability to do the right thing.

Makol can be reached at: [email protected]