African billionaire Aliko Dangote is pushing ahead with plans for a major oil refinery in Kenya as his company seeks to replicate the refining model it established in Nigeria across East Africa.
According to Reuters, Dangote’s company plans to build a 700,000-barrel-per-day refinery in Lamu, with construction expected to be completed by 2030. Dangote has estimated that the project will cost between $15 billion and $16 billion.
The company plans to hold a groundbreaking ceremony later this month, marking an important step towards developing what could become one of East Africa’s largest energy projects.
But unlike Nigeria, where Dangote’s Lagos refinery has access to substantial domestic crude production, Kenya currently has no commercial crude oil output. Securing enough feedstock for the proposed facility is therefore emerging as one of the project’s biggest challenges.
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Plans for the East African refinery have developed quickly. Discussions were initially focused on Tanzania before Dangote indicated that he was considering Mombasa in Kenya. By July, Lamu had emerged as the planned location.
The refinery will be developed within the Lamu Port-South Sudan-Ethiopia Transport special economic zone, close to Lamu Port.
Dangote Industries Vice President Devakumar Edwin told Reuters that the company did not see regulatory, financing or feedstock issues as obstacles to the project. The company has previously said the refinery would improve regional fuel supply and strengthen energy security.
Financing such a large project, however, could prove demanding.
Dangote Group said in July that it planned to fund the Kenyan refinery through internal cash flow, bonds and an initial public offering. The group is also pursuing other major energy investments, including a $14.3 billion expansion that would double the processing capacity of its Lagos refinery.
Petroleum economist Kaase Gbakon said the group is seeking about $40 billion between 2025 and 2030 for announced energy projects, including Lamu, which could make raising capital for the Kenyan project a significant challenge.
Dangote has also suggested that Rwanda, South Sudan, Tanzania and Uganda could jointly acquire as much as a 30% equity stake in the refinery, potentially providing another source of funding while giving regional governments a direct interest in the project.
Finding enough crude remains another major issue.
Kenyan President William Ruto’s chief economic adviser has said the refinery could secure about 600,000 barrels per day from East African sources, including South Sudan, Uganda and Kenya.
Those potential supplies face practical difficulties. Kenya has proven oil reserves but has struggled to begin commercial production, while Uganda currently routes its crude towards Tanzania through the East African Crude Oil Pipeline.
South Sudan’s oil exports also travel through Sudan, where insecurity has disrupted supplies.
Oil and gas lawyer Maximillian Ezeude told Reuters that these limitations could leave the Lamu refinery dependent on the international seaborne crude market. The nearest major source would be the Middle East, where the Iran war has disrupted exports.
Infrastructure presents another challenge. Plans for the LAPSSET Corridor include oil storage terminals capable of holding between one million and 1.5 million barrels and marine facilities for large vessels, but much of that infrastructure has yet to be built.
Despite the challenges, President Ruto has backed the refinery as an important project for Kenya’s economy.
Kenya spent about $4 billion on petroleum product imports last year, making fuel the country’s largest import. Ruto has said the proposed refinery could help reduce that dependence and support economic growth.
“We have to make those decisions that will change our country, that will transform our country,” Ruto said about the Lamu project.
What This Means For Africa
The proposed Lamu refinery represents an ambitious attempt to extend large-scale African-owned refining capacity beyond West Africa and create a major new fuel-processing centre in East Africa.
If completed, the 700,000-barrel-per-day facility could provide Kenya and neighbouring economies with another source of refined petroleum products while reducing dependence on imported fuel.
Regional ownership could make the project even more significant. Dangote’s proposal for East African countries to acquire stakes could turn the refinery into a shared regional energy investment if agreements are eventually reached.
The project still faces substantial financing, crude supply, infrastructure and environmental challenges. Greenpeace Africa has called for it to be stopped over concerns about habitat destruction and marine degradation near Lamu, while analysts have also warned about the financial demands involved.
Its success will therefore depend on whether Dangote Group can secure sufficient capital, reliable crude supplies and the supporting infrastructure needed to operate a refinery of this scale.
If those challenges are resolved, Lamu could become another major test of whether Africa can build more of the infrastructure needed to process its energy resources and meet regional demand within the continent.
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Image Credit: Xtrafrica Media Group
