Kenya will buy a stake in the planned 650,000-barrel-a-day oil refinery fronted by Africa’s richest industrialist, Aliko Dangote.
President William Ruto said the country will invest in the multibillion-shilling project through the National Infrastructure Fund, a State-backed investment vehicle created to mobilise long-term financing for major infrastructure projects.
The refinery could cost up to $20 billion (Sh2.58 trillion), an outlay that could see Kenya take a minority stake in the plant.
Mr Dangote recently said he prefers Kenya as the site for the mega refinery oil that will serve the Eastern Africa region, seemingly walking back on his previous push to build it in Tanzania.
Tanzanian President Samia Suluhu lashed at his Kenyan counterpart for announcing that Dangote’s refinery would be built in Tanga without consulting her.
‘We have an infrastructure project for the development of an East African refinery. Dangote tells me that this project will cost anywhere between $16.0 billion and $20.0 billion. Kenya will invest through the National Infrastructure Fund. We do not want to be held hostage any more by the Strait of Hormuz,’ President Ruto said.
Dangote Group is currently undertaking a feasibility study to determine which location among the ports of Mombasa, Lamu and Tanga would be best positioned to host the East African refinery.
A refinery is used to process and purify raw materials such as crude oil into usable products like petrol, diesel, kerosene and other industrial fuels.
For the raw materials, Dangote is focused on the oil discoveries in Uganda, which are expected to be exported through a pipeline to Tanzania. Kenya is also on course to start commercially producing oil in Turkana County.
For the East African refinery to get off the ground, Mr Dangote said, he would need Ruto to offer land, some East African finance and, most importantly, protection from what he called the dumping of cheap fuel from the likes of Russia or India.
East Africa currently imports all of ?its refined petroleum products, mainly from the Middle East, leaving the region vulnerable to the supply disruptions and price spikes that have been seen ?during the US-Israeli war on Iran.
Kenya, and many other African countries – including oil-producing nations – have to pay higher prices for petroleum products because the final cost includes refinery margins charged by foreign processors.
However, Dangote wants to change this, starting with his home country, Nigeria, a major crude oil producer that for years imported most of its refined petroleum products.
‘The ball is in the hands of President Ruto,’ he said, in reference to the Kenya refinery plan. ‘Whatever President Ruto says is what I’ll do.’
Dangote, who built his industrial empire through cement, has been expanding his footprint in Kenya through the acquisition of a tour company and restaurant chain Java House.
Alterra Capital, a private equity firm with wealthy backers including Mr Dangote, entered the East African tourism market last year through the full acquisition of Pollman’s Tours and Safaris Limited (Pollman’s). Alterra is said to have paid Sh4 billion for the acquisition.
Earlier in January, Alterra and another PE fund, Phatisa, signed an agreement in March to fully acquire restaurant chain Java House for an undisclosed amount from emerging-market investor Actis. The acquisition marked Dangote’s entry into the Kenyan market.
Talk of a new massive oil refinery in Africa follows the long-awaited completion of Dangote’s own $20 billion (about Sh2.6 trillion) refinery in Lagos, Nigeria’s coastal commercial capital.
It comes as the fallout from the war in Iran highlights the significance of local refining capacity.
‘I’m leaning more towards Mombasa because Mombasa has a much larger, deeper port.’ He compared Kenya’s port to Tanga, the proposed Tanzanian site for the refinery to process oil from Uganda and the open market. Dangote estimated that it would cost $15 billion to $17 billion to build.
‘Kenyans consume more. It’s a bigger economy,’ he said, adding that crude oil for the refinery could be transported by ship and need not be located near a pipeline that will carry oil nearly 1,500 kilometres from Ugandan oilfields to the Tanzanian coast at Tanga.
Dangote and Dr Ruto seem to have struck a chord, with the Nigerian featuring among the prominent individuals present at the Kenyan President’s inauguration ceremony in late 2022.
The visit signalled that Dangote could soon expand his business empire into Kenya, particularly in the areas of cement and fertiliser, which have been of interest to President Ruto’s administration.
Mr Dangote had previously tried to invest in Kenya, but in 2017 pushed back plans to set up his Dangote Cement plant in the country to 2021.
The company, which received a licence to prospect for limestone in Kitui County, was planning to set up two cement factories, one in Nairobi and another in Mombasa.
Mr Dangote already has cement factories in Ethiopia and Tanzania. The 2.5 million tonnes-per-year plant in Ethiopia was commissioned in 2015 and remains among the largest cement factories in the country.
In Tanzania, Dangote Cement operates a three-million-tonnes-per-year cement plant in Mtwara, commissioned in December 2015 and considered the largest cement factory in the country.
The Nigerian tycoon also has cement plants in Zambia with a production capacity of 1.5 million tonnes annually, Cameroon (1.5 million tonnes) and Congo Brazzaville (1.5 million tonnes). Dangote Cement now has a total production capacity of about 48.6 million metric tonnes annually across Africa.
According to Forbes, Aliko Dangote remains Africa’s richest man with an estimated net worth of about $28.5 billion, driven largely by his interests in cement, sugar and oil refining.
Dangote told Financial Times in an interview that for the East African refinery to get off the ground, he would need Ruto to offer land, some East African financing and, most importantly, protection from what he called the dumping of cheap fuel from countries such as Russia or India.
‘There is no refinery in the world that can survive without that protection,’ he said. ‘If we have an agreement, we can start this year.’