Dangote Picks Kenya’s Lamu for a $17 Billion Refinery

KENYA · ENERGY

Key Facts

—The decision: Aliko Dangote has selected Lamu, on Kenya’s northern coast, as the site of his planned East African refinery, with soil tests and engineering work already under way.

—The scale: Up to $17 billion and 700,000 barrels a day — on par with his Lagos plant, the world’s largest single-train refinery.

—The market: The refinery is to supply Kenya, Uganda, Tanzania, South Sudan and neighbouring countries, a region that imports virtually all its refined fuel.

—The financing: Internal cash flow, bond issuances and a planned initial public offering of Dangote shares, according to the group.

—The timeline: Construction is expected to take about three years once it begins.

—The twist: The project had earlier been discussed for Tanga in Tanzania before landing in Kenya.

The Dangote Kenya refinery has a home: Lamu, on the country’s northern coast, will host a 700,000-barrel-a-day plant costing up to $17 billion — the Nigerian billionaire’s second continental-scale bet in a matter of weeks.

Where the Dangote Kenya refinery will rise

Edwin Devakumar, vice-president for oil and gas at Dangote Industries, confirmed the site selection on Tuesday, telling Bloomberg the plant will cost as much as $17 billion. Soil tests are under way at Lamu, and design and engineering work has begun.

At 700,000 barrels a day, the facility would rank alongside the group’s Lagos refinery, which processes 650,000 barrels. Together the two plants would make Dangote the operator of refining capacity on a scale no private African group has ever held.

The choice ends months of speculation across East African capitals, several of which had courted the project. For Nairobi it is a rare piece of unambiguous economic good news in a bruising year.

Why Lamu

Lamu is best known abroad for its centuries-old Swahili old town, a UNESCO World Heritage Site. But the county is also the anchor of LAPSSET, Kenya’s long-planned transport corridor, with a new deep-water port built to serve Ethiopia, South Sudan and the wider region.

LAPSSET’s backers have waited years for an anchor tenant of this scale. A refinery would give the corridor’s port and roads the cargo volumes their business cases have always lacked.

That infrastructure is exactly what a mega-refinery needs. East Africa has imported virtually all of its refined fuel for more than a decade, since Kenya’s ageing Mombasa refinery stopped processing crude.

The import bill is one of Kenya’s largest foreign-exchange drains, and every global price spike feeds straight into the shilling and local inflation. Refining at home would keep a chunk of that value chain onshore.

Kenyan outlets put the investment at about 2.2 trillion shillings. That would rank among the largest private investments ever announced in the country.

From Tanga to Lamu

The project’s route to Kenya had a subplot. Dangote had earlier discussed a site at Tanga on Tanzania’s northern coast, but the plan moved after talks in Dar es Salaam failed to align, according to regional reports.

Devakumar offered a smoother version, saying Kenya was the choice from the beginning. Either way, the decision hands President William Ruto’s government a headline investment at a moment when it is courting foreign capital hard.

Tanzania has hardly been abandoned. Dangote presented plans for a port, a power plant and a fertiliser complex there to President Samia Suluhu Hassan’s government in late June, as The Rio Times has reported.

How he plans to pay for it

The group intends to finance the plant from internal cash flow, bond issuances and a planned initial public offering, per Billionaires.Africa’s account of the announcement. Construction is expected to take about three years once ground is broken.

The Lagos plant supplies the cash engine. It has turned Nigeria into a net fuel exporter and in June overtook the United States as Europe’s top jet fuel supplier, The Rio Times has reported.

The planned share sale is itself a landmark in waiting. The group has floated a pan-African listing of the Lagos refinery worth up to $5 billion, which would be the largest offering in African market history.

Why it matters

A second Dangote mega-refinery would redraw the fuel map of an entire region, replacing seaborne imports from the Gulf and India with African-refined products. It is the sharpest example yet of African private capital building continental-scale infrastructure.

It is also a test of execution. The Lagos refinery took over a decade and billions more than first planned, and Lamu’s heritage setting and security history will add scrutiny — themes central to the contest for African markets The Rio Times tracks in its Africa: The New Scramble pillar.

Announcements are not steel in the ground, and Kenya has watched corridor projects stall before. The three-year construction estimate will test even the builder of Lagos.

Frequently asked questions

Where will Dangote build his Kenya refinery?

At Lamu, on Kenya’s northern coast, where soil tests and engineering work have begun. The site anchors the LAPSSET corridor and its new deep-water port.

How big is the planned Dangote Kenya refinery?

It is planned at 700,000 barrels a day and up to $17 billion in cost. That is on par with his 650,000-barrel Lagos refinery, the world’s largest single-train plant.

How will the refinery be financed?

Dangote Industries says it will use internal cash flow, bond issuances and a planned initial public offering. Construction is expected to take about three years.

Which markets will the Lamu refinery serve?

Kenya, Uganda, Tanzania, South Sudan and neighbouring countries. East Africa currently imports virtually all of its refined petroleum products.

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