Dangote’s proposed Lamu oil refinery faces hurdles, not least with crude supply
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.
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 said 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 said he expects it to cost $15 billion to $16 billion.
The project is a test of whether the model that helped turn Nigeria from a major fuel importer into a growing exporter can be repeated 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, said 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.
RAISING CAPITAL
A company executive said 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 being pursued by Dangote, securing money 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,” said 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.
CRUDE SOURCES
In terms of feedstock, Kenyan President William Ruto’s chief economic adviser has said the plant could secure 600,000 barrels of crude oil supply a day from within East Africa, including South Sudan, Uganda, and Kenya itself, according to Kenyan media reports.
But none of those sources is straightforward. Kenya has proven oil reserves but has struggled for years to start producing, though small-scale output is expected later this year.
A proposed crude pipeline linking fields in South Sudan, which has seen its oil exports disrupted by insecurity in neighbouring Sudan, and Kenya’s Lokichar Basin to Lamu Port remains a distant prospect.
Uganda’s barrels are routed to Tanzania via the EACOP pipeline, while South Sudan’s exports leave through Sudan, Maximillian Ezeude, an oil and gas lawyer in Lagos, told Reuters.
“That leaves the coastal facility dependent on a volatile international seaborne market,” Ezeude said.
The nearest large source of seaborne crude imports is the Middle East, where the Iran war is disrupting exports.
The refinery will be built inside the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) special economic zone close to Lamu Port, which currently has no operational oil storage terminals.
The LAPSSET Corridor project makes provision for oil storage terminals at Lamu of 1 million to 1.5 million barrels, as well as marine loading facilities capable of handling vessels up to Suezmax class.
However, that infrastructure remains largely unbuilt.
PROJECT WILL SPUR GROWTH, PRESIDENT SAYS
There are also concerns the refinery may impact Lamu Old Town on Lamu Island, a World Heritage site 10 km (6 miles) from Lamu Port. Greenpeace Africa has also called for the project to be halted on concerns about habitat destruction and marine degradation.
Kenya’s Ruto has said the country — whose only refinery was closed by India’s Essar Energy in 2013 — believes the new plant will eradicate costly fuel imports and spur growth.
It spent roughly $4 billion (511.5 billion Kenyan shillings) on petroleum products last year, the country’s top import, according to official data.
“We have to make those decisions that will change our country, that will transform our country,” Ruto said of the Lamu project.
But the challenge represented by the project “remains substantial”, said Benjamin Oluwatobi Ajayi, an energy analyst based in Lagos.
“The size of the debt requirement, ESG-related financing constraints, competition for capital across multiple projects, and the need to coordinate numerous lenders and stakeholders within a compressed timeframe all increase execution risk,” he said.
Shows
See AllAM Live
AM Live is NTV's morning current affairs show that sets the agenda for the day with insightful panels every weekday.
Business Redefined
Business Redefined is Kenya’s premier thought leadership platform for unpacking matters regarding economic and finance policy as well demystifying complex developments in the region’s capital markets.
Comedies
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Creatives & Coins Podcast
A podcast that dives deep into the vibrant and rapidly evolving digital creative economy in Kenya. This show explores the lives, challenges, and triumphs of individuals who are successfully navigating the gig and creative economies. From digital artists and content creators to freelance writers and tech entrepreneurs, we spotlight the voices that are shaping the future of work in Kenya.
Documentaries
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Entertainment
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Fixing The Nation
Fixing the Nation is a bold and groundbreaking show that will take an unflinching look at challenges facing the Kenyan society and the solutions that can move us forward. It is anchored by respected journalists Eric Lattif, Janet Mbugua, and Mariam Bishar. Podcast created by: Nation FM
Fixing the Nation
Fixing the Nation is a bold and groundbreaking show that will take an unflinching look at challenges facing the Kenyan society and the solutions that can move us forward. It is anchored by respected journalists Eric Lattif, Janet Mbugua, and Mariam Bishar
Full Episodes
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Gumzo La Sato
Gumzo La Sato is a live social issues show that aims to create awareness about issues affecting the larger society. The discussions range from Parenting, Marital bliss and struggles, Oppression, violence, and all matters of the Heart.
Health Diary
Health Diary is a weekly show that highlights different types of diseases/conditions and seeks ways to prevent, treat/manage them. The show debunks this through real life stories and also feature specialists in different fields, to offer medical advice on the same.
Letter To My Younger Self
Letter To My Younger Self is a podcast where guests get to write a letter to their younger self, from which Maxine formulates questions to ask them during the hour-long show.
Lunch N Rants
Take a minute outside your schedule to have a good laugh and conversations that resonate with you. Welcome to Lunch N Rant podcast where we talk about anything and everything life.
Nation Reports
Nation Reports is a weekly podcast offers an opportunity for listeners to interact with various reporters and journey with them as they unravel the biggest most emotive stories.
One Health Lens Podcast
Discussing health matters and human stories from Kenya and across Africa. We talk big picture from people to policy, ecosystems, and everything in between. Follow us on LinkedIn: https://www.linkedin.com/company/onehealthlens
Paradise Lost
Paradise Lost peeks through the story of Louis Otieno, the times, and everything in between.
Primetime
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Speaking of GEN Z
Speaking of Gen Z brings you entertaining but meaningful conversations about a generation that is trying to navigate through adulthood. Join hosts Michelle, Jackie and Esther as they unravel all things Gen Z.
Sport On
Sport-On is a 30-minute sports magazine show on NTV and 3 hours on NATION FM. The show seeks to give the sports “fanatics” and “funatics” comprehensive and in-depth coverage of sports both locally and internationally.
Tech-over
The extent of technological growth is beyond mere acknowledgment; it has seamlessly integrated into our daily existence. A few years ago, the notion of paying electricity bills through mobile money or recharging with 'tokens' in Kenya seemed inconceivable. Online product sales were considered distant, and artificial intelligence is rapidly reshaping various facets of our lives. Amidst these technological leaps, those with a solid understanding of tech can navigate challenges, seize opportunities, and build a sustainable livelihood. Tech over Show aims to be the platform facilitating discussions among thought leaders, innovators, tech companies, and the government, addressing challenges and opportunities in Kenya's thriving tech industry.
Thamani
Thamani is a business show which is dedicated to emerging issues regarding micro, small and medium size businesses.
The Politalk podcast
This is The Politalk podcast. Here we look into the ins and outs of everything Kenyan politics. We pull no punches and have no reason to sugarcoat anything that matters to Kenyans.
The Trend
A two-hour-long live show that airs on Fridays. The show focuses on what is current in the entertainment industry, controversial and popular across all media platforms targeting those aged between 25 and 35 years.
The trend podcast
The trend podcast highlights and captures the best of banter from #TTTT segment that airs every Friday on NTV. It's the TTTT EXTRA
The Wicked Edition
The Wicked Edition with Dr. King’ori seeks to address serious issues through humour and relatable wit. It is a two-part half hour show filmed in front of a live audience
Trending
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Twende
Twende is a travel show that highlights beautiful, unique, diverse locations, people, and cultures. The show offers fresh perspectives on familiar locations and memorable experiences in new ones.
Unscripted
This Saturday evening lifestyle show lets viewers share their stories and life experiences as openly & honestly for the purpose of shifting the culture of silence.
VIP Access
VIP ACCESS is Anyiko Owoko’s YouTube and podcast show on Music and Culture dedicated to promoting Africa’s most promising talent and creatives. This podcast grants you VIP access into timeless interviews while providing a platform for rising as well as established artists across the continent. Since launching in 2018, Anyiko has interviewed over 70 African music stars.
WADR
This weekly news show aims to have all sides of debate but not be constrained by it, listen to main voices in the contest but not allow them to hold the viewers hostage, entertain debate but allow push back with all due respect.
When death do us part
In this podcast, three widowers openly speak about the process of grief, how they found themselves exposed to the emotional turmoil of losing their wives, and how society still does not know how to deal with them.
Your World
Your World is a health, wellness and variety show. It provides a platform for audiences and experts to share their experiences on how to improve or manage health issues, across Kenya and the Africa region.