Dangote Industries’ proposed $15–16 billion refinery in Lamu, Kenya, is facing a major challenge even before construction begins: finding enough crude oil to keep the massive refinery supplied.
The planned refinery is expected to have a capacity of 700,000 barrels per day, similar to Dangote’s refinery in Lagos. A groundbreaking ceremony is expected later this month, with the company targeting completion by 2030.
Unlike Nigeria, however, Kenya currently has no commercial crude oil production, meaning the refinery would need to rely heavily on crude supplied from other countries.
Potential sources include South Sudan, Uganda and Kenya’s own oil resources, but each option comes with challenges involving pipelines, infrastructure and geopolitical risks. Dangote may therefore have to depend significantly on international shipments of crude, which could make the refinery more exposed to changes in global oil prices and shipping costs.
The proposed refinery is part of Dangote’s broader plan to expand its energy business across Africa. The company wants to use the Nigerian refinery as a model for supplying petroleum products to more African markets.
The Kenyan project is planned for Lamu, a deep-water port that is important to Kenya’s regional trade ambitions. However, the area still needs additional infrastructure, including facilities for storing and handling crude oil.
Financing is another major issue. Dangote Industries plans to raise money through a combination of internal funds, bonds, equity and IPO proceeds. The company is seeking about $40 billion over five years for its wider energy expansion programme. (Reuters)
The Kenyan government supports the project because it could reduce Kenya’s dependence on imported refined petroleum products and potentially make the country a major fuel supplier in East Africa.
However, analysts have warned that the project faces considerable execution risks if crude supply, financing and infrastructure are not properly addressed.
