Aliko Dangote’s plan to build a 700,000-barrel-per-day refinery in Kenya is moving towards construction, but the project faces a fundamental question over how it will secure enough crude to sustain operations once completed.
The proposed refinery, to be located at Lamu on Kenya’s coast, is expected to cost between $15 billion and $16 billion and be completed by 2030. Dangote Industries plans to hold the groundbreaking ceremony later this month.
Unlike Nigeria, where the group’s Lagos refinery can draw on a major domestic crude-producing base, Kenya currently has no commercial-scale oil production, leaving the proposed East African facility exposed to feedstock and import-route risks.
The refinery is being developed within the Lamu Port-South Sudan-Ethiopia Transport corridor’s special economic zone, close to Lamu Port. However, critical oil-handling infrastructure at the port is still largely undeveloped.
The LAPSSET project provides for between one million and 1.5 million barrels of crude storage capacity at Lamu, as well as marine facilities designed to handle vessels up to Suezmax size. Those facilities, however, have yet to be fully built.
Potential crude supplies from Kenya, Uganda and South Sudan have also raised logistical and geopolitical questions.
Kenya has proven oil reserves but has struggled to commence commercial production, although small-scale output is expected later this year. A proposed pipeline connecting South Sudan’s oil fields and Kenya’s Lokichar Basin to Lamu remains some distance from completion.
Ugandan crude currently moves through Tanzania via the East African Crude Oil Pipeline, while South Sudan’s exports depend on routes through Sudan, where insecurity has disrupted oil flows, according to Lagos-based oil and gas lawyer Maximillian Ezeude.
Ezeude said the limitations could leave the proposed refinery increasingly dependent on international seaborne crude markets.
The Middle East would be one of the closest major sources of imported crude, but the ongoing Iran conflict and disruptions around regional shipping routes have added another layer of uncertainty to the supply outlook.
Kenyan President William Ruto’s chief economic adviser has previously said the refinery could obtain as much as 600,000 barrels of crude per day from East African sources, including Kenya, Uganda and South Sudan. The practicality of delivering those volumes to Lamu remains a major consideration.
Financing presents another challenge.
Dangote Group said in July that it planned to finance the project through internal cash flow, bonds and an initial public offering. The company could also rely on equity, commercial bank financing and development finance institutions such as Afreximbank.
The group has nevertheless embarked on several large energy investments at the same time.
It announced a $14.3 billion plan to double the capacity of its Lagos refinery to 1.4 million barrels per day by 2029. Dangote is also pursuing other oil and energy projects, increasing competition for capital across its portfolio.
Kaase Gbakon, a petroleum economist and former official of Nigeria’s state-owned oil company, estimated that Dangote could require about $40 billion between 2025 and 2030 for its announced energy investments, including the Lamu refinery.
He said raising the funds required specifically for Lamu could therefore become a formidable challenge.
Dangote has also proposed giving East African governments a combined stake of up to 30% in the refinery. Rwanda, South Sudan, Tanzania and Uganda are among the countries identified as potential participants, although the structure and terms of any such arrangements have not been disclosed.
The project’s environmental and social implications could add another layer of execution risk.
Lamu Old Town, a UNESCO World Heritage site, is located about 10 kilometres from Lamu Port. Environmental campaigners, including Greenpeace Africa, have opposed the refinery, citing potential damage to habitats and marine ecosystems.
Dangote Industries has maintained confidence in the project. Devakumar Edwin, vice president of Dangote Industries, said there were no regulatory, financing or feedstock obstacles that the company considered insurmountable.
The company has previously said the refinery will strengthen regional fuel supply and energy security.
For Kenya, the project is being positioned as a potential solution to its heavy dependence on imported petroleum products. The country spent about $4 billion on petroleum imports last year, making fuel its largest import category, according to official data.
Ruto has backed the refinery as part of a broader push to transform the country’s economy and reduce its exposure to imported fuel.
Kenya’s previous refinery, located at Mombasa, was shut in 2013 after India’s Essar Energy exited the facility.
However, analysts warn that replicating Dangote’s Nigerian refining model in Kenya will require overcoming a different set of structural constraints.
Brendon Verster, senior economist at Oxford Economics, warned that failure to address the underlying challenges could leave the project as an extremely costly underperforming asset.
Benjamin Oluwatobi Ajayi, an energy analyst in Lagos, said the execution risks extended beyond crude supply.
He pointed to the scale of the debt requirement, environmental, social and governance-related financing restrictions, competition for capital from Dangote’s other projects and the need to coordinate multiple lenders and stakeholders within a relatively tight development schedule.
The proposed Lamu refinery therefore represents more than a replication of Dangote’s Nigerian project. Its success will depend on whether the group can build the supporting crude, storage, marine, financing and logistics infrastructure needed to operate a refinery of its planned scale in a market without an established domestic crude supply base.
The project was initially discussed in Tanzania before Dangote later indicated that Mombasa was under consideration. By July, the company had settled on Lamu, a deep-water port viewed as central to the refinery’s development.