Inside Aliko Dangote’s Sh2tn Lamu Oil Refinery Bet

Africa’s richest man, Aliko Dangote, is preparing to make a Sh2 trillion bet on Lamu, with plans for a 700,000-barrel-a-day refinery that could change how East Africa gets its fuel.

The Nigerian billionaire, with a net worth of about $31.3 billion, expects to break ground in October, with construction scheduled to take less than four years.

“By October this year, we will be groundbreaking. Once we break the ground, we will begin the construction,” Mr Dangote said in a recent press interview.

At full capacity, the proposed Lamu oil refinery would be bigger than Dangote’s 650,000-barrel-a-day plant in Lagos and among the largest single refineries in Africa.

The refinery is being planned as a regional facility, supplying fuel to East African markets and potentially reaching as far north as Egypt. Lamu’s location offers a natural advantage, with the port providing a route for crude imports and a potential export channel for refined products.

But the scale of the project raises a basic commercial question that remains unanswered: where will the crude come from, given that Kenya’s Turkana oil is not yet in production?

Uganda is one possible source, although its crude development is tied to the East African Crude Oil Pipeline to Tanzania. South Sudan has oil but remains exposed to political and pipeline disruptions, while the DRC has relatively modest production.

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The Lamu oil refinery could also bring in crude by sea. That would give it access to the global market, but it would also leave it exposed to international oil prices and shipping costs.

For a plant of this size, having crude available is not enough. Dangote will need long-term supply contracts at prices that allow the refinery to run profitably.

The financing is just as important.

Dangote puts the cost at $16 billion (Sh2.1 trillion), with 70 per cent financed through debt and 30 per cent through equity—about Sh1.47 trillion and Sh630 billion, respectively.

“It will cost less because this one will be faster. In terms of financing costs, it will be less, and also we are wiser as a company than the time we built the refinery in Lagos,” he said.

Beyond the commercial question, another concern is whether there will be enough customers. Kenya cannot absorb a 700,000-barrel-a-day refinery’s output alone, leaving the project dependent on regional demand and the storage, roads and pipelines needed to move fuel.

That makes Lamu more than a refinery project. It is a calculated bet on the growth of East Africa’s fuel market and on how easily those markets can be connected.

However, that bet faces risks beyond the market. Communities around the proposed site have raised concerns about compensation, environmental assessment, fishing livelihoods and jobs.

Through their elected leaders and social activists, residents are demanding compensation for displaced people, a share of the refinery’s benefits and greater local participation.

Beyond local politics, the project still needs environmental clearance, community agreements, crude supply, offtake commitments, contractors and financing before construction can begin.

The October groundbreaking may therefore provide the much-needed political and commercial optics of progress, but for Dangote, the real gamble begins when the cameras leave.

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