Lamu — Nigerian industrialist Aliko Dangote and Kenyan President William Ruto are set to break ground on Wednesday for a proposed $16 billion oil refinery in Lamu, a project designed to meet rising demand for petroleum products across East Africa.

The refinery is expected to be completed by 2030 and would seek to reduce the region's dependence on imported refined fuel, lower energy costs and conserve foreign exchange.

Dangote is seeking to replicate the model of his 700,000-barrel-per-day refinery in Nigeria, which has helped Nigeria move from being heavily dependent on fuel imports toward becoming an emerging refined-product exporter.

“What we are trying to do is to make sure that we become self-sufficient in whatever we consume,” Dangote said in Nairobi.

Regional governments offered stake

Dangote has offered East African governments a combined 30% stake in the refinery, potentially giving countries across the region a direct interest in the project.

Regional petroleum demand is estimated at between 20 million and 30 million metric tons annually, according to David Ndii, chief economic adviser to President Ruto. Meeting that demand would require more than 1 million barrels per day of refining capacity, according to a financier involved in African refinery projects.

The project comes as East African countries seek greater energy security, with Kenya and Uganda developing their own crude oil production capabilities.

Major challenges remain

Despite the project's scale, questions remain over whether Kenya and its neighbours can provide sufficient crude oil and whether the region has the infrastructure needed to support a refinery of this size.

The project has also faced opposition from environmental campaigners and conservationists concerned about its potential impact on Lamu Old Town, a UNESCO World Heritage site and surrounding marine ecosystems.

Kenya's High Court has ordered parts of the project site to be preserved pending a hearing in a case brought by local residents, creating another potential obstacle to construction.

Dangote has rejected the opposition, arguing that some resistance comes from traders and businesses whose existing profit models could be threatened by a large regional refinery.

The central test for the project will be whether Dangote can reproduce the Nigerian refinery's transformation of the fuel market in a region where crude supply, infrastructure and environmental concerns remain significant challenges.

Source: Reuters
Reporting: Edwin Okoth
Editing: Karin Strohecker & David Goodman