Less than three years after overcoming surging costs, swampy terrain and inadequate infrastructure to launch Africa's biggest oil refinery in Nigeria, billionaire Aliko Dangote is
The report indicates that less than three years after overcoming surging costs, swampy terrain and inadequate infrastructure to launch Africa’s biggest oil refinery in Nigeria, billionaire Aliko Dangote is set on replicating that project on the continent’s opposite coast.
It further notes that but the construction of his company’s planned new 700,000-barrel-per-day Lamu refinery in Kenya promises to bring a whole new set of issues — not least where to secure crude supply in a country that, unlike oil-rich Nigeria, currently has no commercial output.
Plans are evolving quickly. Until April, discussions for Dangote’s East African refinery were focused on Tanzania.
A month later, Dangote told the Financial Times he was leaning towards siting the plant in the Kenyan city of Mombasa, but in July, an executive stated it would be built in Lamu, a deep-water port critical to the refinery’s success.
The company will hold a groundbreaking ceremony at the end of this month, and hopes to complete the refinery by 2030. Aliko Dangote has stated he expects it to cost $15 billion to $16 billion.
The project tests whether the model that helped turn Nigeria from a major fuel importer into a growing exporter can be replicated in a region with fewer crude supplies and less-developed energy infrastructure.
Asked about potential regulatory, finance and feedstock challenges for the project, Devakumar Edwin, vice president of Dangote Industries, stated there were none to overcome. The company believes the project will enhance regional fuel supply and energy security, it has previously said.
However, “if not successfully implemented, it runs the risk of becoming a very expensive white elephant,” Brendon Verster, senior economist at Oxford Economics, said.
A company executive stated in July that Dangote Group plans to finance the Kenyan refinery through internal cash flow, bonds and an initial public offering. Dangote is planning an IPO of its Lagos refinery that is slated to be Africa’s biggest ever.
If the Lagos playbook is followed, Dangote could also add in a mix of his own equity, commercial bank loans and development finance institutions such as Afreximbank.
But the company already has other big expansion plans, saying on Monday it would spend $14.3 billion to double the processing capacity of its Lagos plant. With multiple oil-related projects already underway by Dangote, securing funding could prove problematic, analysts say.
“Given that the group is seeking some $40 billion (including Lamu) between 2025 and 2030 for announced energy projects, raising the capital for Lamu could become a formidable challenge,” stated Kaase Gbakon, a petroleum economist formerly with state-owned Nigerian oil company NNPC.
East African nations such as Rwanda, South Sudan, Tanzania and Uganda could take up a combined 30% equity stake, which would open another funding stream and tie governments to the project, Dangote has also suggested, though no details have been given on potential deals.
In terms of feedstock, Kenyan President William Ruto’s chief economic adviser has stated the plant could secure 600,000 barrels of crude oil per day from within East Africa, including South Sudan, Uganda, and Kenya itself, according to Kenyan media reports.
