Kenya wanted a joint facility for oil from Uganda and its own fields that are under development, BBC online reports Satuday.
Somalia's al-Shabab Islamists have attacked targets close to where the pipeline would have passed.
The 1,400 km pipeline will connect Uganda's western region near Hoima, where big oil reserves have been discovered, with Tanzania's coast.
The project is expected to cost about four billion US dollar and create 15,000 jobs. The discovered oil reserves in Uganda are estimated at some 6.5 billion barrels, and the country expects to start production in 2018.
France's Total, China's CNOOC and the Anglo-Irish company Tullow hold most of the licences, the BBC notes.
