South Sudan signed an agreement with Kenya to build an oil pipeline to a Kenyan port, potentially freeing it from reliance on its northern neighbour Sudan, officials said Wednesday.

South Sudan became the world's newest state when it split from the north last year but while it has most of the oil, Khartoum controls the pipeline and has access to the sea, causing frequent rows between the former civil war foes.

A memorandum of understanding was signed by Kenya and South Sudan "for the construction of the new pipeline," said Elizabeth James Bol, South Sudan's deputy minister of petroleum and mining.

The agreement, inked in Juba late Tuesday, "will allow the development of an oil pipeline and fibre optic connections between the oil fields in South Sudan and the Kenyan port town of Lamu," an official Kenyan statement read.

The agreement Tuesday was witnessed by South Sudanese President Salva Kiir and Kenya's Prime Minister Raila Odinga.

"The pipeline will be developed through Kenyan territory and will be built and owned by South Sudan," a statement from Odinga's office read. "The two countries will negotiate and agree on transit fees for the oil pipeline."

A pipeline would free land-locked South Sudan on its dependence of exporting oil through its northern neighbour and former civil war enemy Sudan, which it split from last July after decades of bloody conflict.

However, the oil-rich but grossly underdeveloped country lacks the infrastructure to refine and export oil.

Crucial facilities including a pipeline and Red Sea export terminal remain in Sudan, leaving the two states arguing bitterly over how much the South should pay to use the infrastructure.

Bol said no date had been fixed for construction to begin but it "will start as soon as possible."

Juba ordered last week a complete shutdown of oil production despite it making up some 98 percent of its revenue, amid a deepening row with Khartoum over pipeline fees.

It accuses Khartoum of stealing $815 million of its crude and building a pipeline to illegally siphon off oil.

Khartoum admits to taking some South Sudanese oil destined for export as compensation until an agreement is reached, but the South has said this is theft.

Industry experts have said that building a pipeline could take three years or more and be extremely costly to complete.

China is developing Lamu port, in a huge infrastructure project that conversationists have warned risks spoiling one of the country's environmental and cultural jewels.

The pipeline would also pass through areas rife with rebel forces, with groups warning Juba and oil companies of "military confrontation" if the pipeline goes ahead without their permission.

The South Sudan Liberation Army and South Sudan Democratic Army, rebel forces that operate in the oil-producing states of Unity and Upper Nile, also warned in a joint statement that shutting oil production was "economic suicide."

Kiir and Sudan's President Omar al-Bashir are slated to meet Friday for talks in the Ethiopian capital, where teams from both sides continue dragging negotiations mediated by the African Union.

"We are now talking to Khartoum, we are at the table. (We are) leaving no stone unturned until we catch these thieves, we will make them behave," South Sudan delegation head Pagan Amum told reporters Wednesday.

"I am actually not even sure if Kiir will meet Bashir if he still maintains this thieving attitude and he continues this stealing... It's not that our patience is running out, it has already run out."