Dangote begins preliminary work on proposed $17bn Kenya refinery

Dangote Industries Limited has commenced preliminary works on its proposed $17 billion, 700,000-barrels-per-day refinery in Kenya, marking the first major step towards what is expected to become East Africa’s largest refining project.

The company said the project has progressed beyond the planning stage, with the site already selected, soil tests underway, and engineering and design works in progress ahead of construction.

According to Reuters, the refinery will be located on Lamu Island along Kenya’s coast and is expected to supply refined petroleum products to Kenya and neighbouring countries, reducing East Africa’s dependence on imported fuel.

Refinery to replicate Lagos facility

Bloomberg reported on Tuesday that President of the Dangote Group, Aliko Dangote, plans to build the refinery at an estimated cost of up to $17 billion as part of efforts to expand the company’s refining operations into East Africa.

According to the report, the proposed refinery will replicate the group’s Lagos refinery and process about 700,000 barrels of crude oil per day when completed.

“A new mega-refinery to be built at the Kenyan coast by Africa’s richest person will cost as much as $17bn,” Bloomberg quoted a spokesperson for Dangote Industries Limited as saying.

The report added that Mr Dangote personally assured the Presidents of Kenya and Uganda that he would establish the refinery in East Africa, recalling that Kenyan President William Ruto announced in May that construction would begin this year.

Kenya selected over Tanzania

Speaking to Reuters, Dangote Industries’ Vice President for Oil and Gas, Devakumar Edwin, said significant progress had already been made on the project.

“The site has been selected, soil tests are underway, and design and engineering work has commenced. Kenya was the choice from the beginning,” he said.

According to Bloomberg, the coastal town of Lamu was selected for commercial and technical reasons, while Tanzania, which was initially considered, was eventually dropped in favour of Kenya.

Financing and construction

Mr Edwin said the refinery would be financed through a combination of internally generated funds, bonds and proceeds from the company’s planned Initial Public Offering (IPO).

Although he declined to disclose the exact project cost, he said it would be comparable to the Lagos refinery, which eventually cost more than $20 billion before commencing operations in 2024.

Reuters reported that the project was initially estimated at about $9 billion in 2013, but costs increased following site relocation, engineering challenges, currency depreciation, the COVID-19 pandemic and global inflation.

Expansion across Africa

The Kenyan refinery represents Dangote Group’s biggest refining investment outside Nigeria and forms part of its broader strategy to expand refining capacity across Africa.

The company is also expanding the capacity of its Lagos refinery from 700,000 barrels per day to 1.4 million barrels per day by 2028, a move expected to make it one of the world’s largest refining complexes.

Dangote Industries has also announced plans to raise its combined refining capacity to 2.1 million barrels per day, comprising 1.4 million barrels per day in Nigeria and 700,000 barrels per day in Kenya.

Mr Edwin disclosed the expansion plans during a recent visit by officials of the Société Nationale des Pétroles du Congo, the Republic of the Congo’s national oil company, to the Dangote Petroleum Refinery in Lagos.

He also revealed that the group plans to invest an additional $46 billion between 2026 and 2028 across its refining, cement and fertiliser businesses to accelerate industrialisation across Africa.

Boost for Africa’s energy security

The proposed Kenyan refinery comes amid growing efforts by African countries to strengthen domestic refining capacity and reduce dependence on imported petroleum products.

Despite producing about seven per cent of global crude oil, Africa still exports roughly three-quarters of its crude oil while importing nearly 70 per cent of the refined petroleum products it consumes, according to the African Petroleum Producers’ Organisation (APPO).

Industry experts say the commissioning of the 650,000-barrels-per-day Dangote Petroleum Refinery in Lagos has begun reversing that trend by improving fuel availability in Nigeria and reducing reliance on imported petroleum products.

Beyond Kenya, countries including Mozambique and Uganda are also pursuing refinery projects aimed at strengthening regional energy security, reducing foreign exchange pressures and supporting industrial development across the continent.