Kenyan President William Ruto says his country is ready to break ground on a proposed oil refinery in Lamu being developed with Nigerian industrialist Aliko Dangote.
Ruto made the announcement after meeting Dangote and Africa Finance Corporation President and Chief Executive Samaila Zubairu on the sidelines of the United Nations General Assembly in New York.
The discussions focused on financing and final preparations for the project. The groundbreaking ceremony is planned for 30 September.
“We are ready to break ground on the East Africa refinery in Lamu,” Ruto said, describing it as a project that could strengthen regional energy security, support local production, create jobs and advance industrialisation.
A major regional investment
The proposed refinery is estimated to cost about $17 billion, or 2.2 trillion Kenyan shillings. It is expected to process as much as 700,000 barrels of crude oil per day and supply petroleum products to Kenya and other markets across East and Central Africa.
If completed as planned, it would become East Africa’s largest refinery and Dangote Group’s biggest refining investment outside Nigeria.
The project is expected to be built within the Lamu Port-South Sudan-Ethiopia Transport Corridor special economic zone. The location offers access to a deep-water port, which could allow crude oil and finished petroleum products to be transported by sea.
Dangote has said the refinery could take about three years to complete. The company aims to begin operations by 2030.
Plans to reduce fuel imports
Kenya currently imports most of the refined petroleum products used in the country. Its previous refinery in Mombasa stopped processing crude oil in 2013.
Ruto said the new facility could reduce the region’s dependence on imported fuel while creating new economic opportunities and strengthening supply chains.
The project would also support Kenya’s plan to develop Lamu as an energy, industrial and logistics centre.
According to Reuters, Dangote Group intends to finance the refinery through a combination of internally generated funds, bonds and proceeds from an initial public offering. Site selection, soil testing and engineering work had already begun by July. (reuters.com)
Challenges remain
Despite the planned groundbreaking, the refinery remains a proposed project and will face major financial, environmental and logistical tests before construction is completed.
Kenya does not currently produce crude oil commercially on a large scale. This means the refinery may initially depend on supplies brought in by sea unless planned regional pipelines and oil-production projects become operational.
There are also concerns about the infrastructure required to support a refinery of this size. Oil-storage facilities and some transport links planned for the Lamu corridor have yet to be completed.
Environmental groups have raised concerns about possible effects on marine habitats and nearby Lamu Old Town, a UNESCO World Heritage Site. Reuters has also identified financing, crude supply and coordination among regional governments as significant challenges facing the project. (reuters.com)
The groundbreaking ceremony will mark the formal start of the development phase, but the refinery’s progress will depend on whether its financing, approvals, infrastructure and crude-supply arrangements are secured.
