Ethiopia and Kenya have signed a deal to construct a crude oil pipeline to run from Lamu, a coastal town, to Ethiopian capital, Addis Ababa.
Kenya's President Uhuru Kenyatta and Ethiopian Prime Minister Hailemariam Desalegn, who is on an official visit to Kenya, signed the pact during bilateral talks in Nairobi, on Thursday.
The new deal is a part of joint infrastructure project to integrate the region under the Lamu Port- South Sudan-Ethiopia Transport (Lapsset) corridor.
Last month, Kenya, Uganda and Ethiopian signed a deal for the development of a crude oil pipeline on the Hoima-Lokichar-Lamu route under the Lapsset programme.
Uganda abandoned the plan and opted to export its oil to overseas markets through Tanzania's Tanga port.
In a joint statement, Kenyatta and Hailemariam said they are "committed to finalise an agreement on the development and operation of a product oil pipeline from Lamu Port to Addis Ababa by the end of 2016".
The communiqué did not give much detail.
The two countries also agreed to establish a Joint Railway Commission but refrained on giving more details.
During the visit, Kenya and Ethiopia agreed on five pacts, which include co-operation in sport, cross-border trade, livestock, health and education.