Dangote’s 700,000bpd Kenya Refinery Faces Major Setback Over Funding, Crude Supply Challenges
- Aliko Dangote plans to build a 700,000-barrel-per-day refinery in Lamu, Kenya, but funding the project could be difficult due to his other major investments
- The refinery also faces crude supply challenges, as Kenya has little commercial oil production and regional supply routes remain uncertain
- Lamu Port lacks key oil storage and handling infrastructure, raising further concerns about how the refinery will receive and process crude
PAY ATTENTION: Mark Legit.ng as a preferred source, and our content will appear higher in your Google feed!
Legit.ng journalist Victor Enengedi has over a decade's experience covering energy, MSMEs, technology, banking and the economy.
Aliko Dangote’s plan to build a 700,000-barrel-per-day refinery in Lamu, Kenya, is facing fresh challenges, particularly over crude supply in a country that currently has no commercial-scale oil production.
The proposed project comes less than three years after Dangote launched Africa’s largest refinery in Nigeria, despite difficulties including rising construction costs, challenging terrain and poor infrastructure.
Source: UGC
A Dangote Group executive said in July that the Kenyan refinery would be financed through the company’s internal cash flow, bonds and an initial public offering (IPO).
The funding could also include equity from Dangote, commercial bank loans and support from development finance institutions such as Afreximbank.
However, analysts say raising the required funds could be difficult because Dangote Group is pursuing several major energy projects at the same time, according to Reuters.
Kaase Gbakon, a petroleum economist and former official of Nigeria’s state-owned oil company, said the group could require about $40 billion between 2025 and 2030 for its announced energy investments, including Lamu.
East African countries may provide funding
Dangote has also suggested that Rwanda, South Sudan, Tanzania and Uganda could collectively acquire as much as a 30% stake in the refinery.
Such investments could provide another source of funding while giving regional governments a direct interest in the project. However, no firm agreements have been announced.
The proposed refinery would be located within the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) special economic zone near Lamu Port.
Crude supply remains a major concern
Securing enough crude could prove even more challenging.
Kenyan media have quoted President William Ruto’s chief economic adviser as saying the refinery could source up to 600,000 barrels of crude per day from East Africa, including Kenya, Uganda and South Sudan.
However, the region faces significant supply constraints. Kenya has proven oil reserves but has yet to achieve commercial production, although limited output is expected later this year.
A proposed pipeline connecting South Sudan’s oil fields and Kenya’s Lokichar Basin to Lamu Port has also made limited progress. South Sudan’s oil exports have been disrupted by insecurity in neighbouring Sudan, while Uganda currently sends its crude to Tanzania through the East African Crude Oil Pipeline.
The alternative would be importing crude by sea, with the Middle East being the nearest major source. However, disruptions linked to the Iran war are creating additional uncertainty around regional oil supplies.
Lamu Port itself also lacks operational crude storage facilities. Although the LAPSSET project includes plans for 1 million to 1.5 million barrels of oil storage and marine facilities capable of handling Suezmax vessels, much of the infrastructure is yet to be built.
Source: UGC
Tanzanian billionaire shows interest in Dangote Refinery
Meanwhile, Legit.ng earlier reported about Tanzania's richest businessman, Mohammed Dewji, who has offered to invest $100 million in Dangote's proposed refinery in Kenya.
Amid strong interest from both regional and international investors, the proposed refinery has the potential to transform the energy landscape of East Africa.
If successful, it could not only bolster local economies but also create thousands of jobs and reduce reliance on imported refined petroleum products.
Source: Legit.ng
