Nigerian billionaire Aliko Dangote and Kenya's President William Ruto are set to break ground on a $16bn oil refinery in Lamu, on Kenya's northern coast. The refinery is expected to process 700,000 barrels of crude oil a day, making it East Africa's largest industrial project by capacity. Upon completion, the project is expected to have a significant impact on the region's economy. The refinery is Kenya's largest infrastructure project since independence.
Ahead of the launch, some local residents took to the streets to demand more compensation for land used for the refinery. Dangote dismissed the protests as games played by local marketers and international players, insisting the refinery would go ahead and would be ready by 2030 as planned. He disputed the compensation claims, saying the company took only the portion of land it needed from what the government made available.
The Lamu refinery is a significant project for Kenya, surpassing the $5.1bn Standard Gauge Railway. East Africa does not currently have any oil refineries. Dangote's refinery in Nigeria also has a processing capacity of 700,000 barrels a day. He plans to double that capacity after floating 4.1 million ordinary shares to raise up to $2.1b earlier this month.
At the height of construction, the refinery is expected to create 60,000 jobs, with the benefits extending beyond those employed directly by the project. Dangote said the people would benefit from the project, indicating he was not fazed by the protests. Critics have questioned the decision to build the refinery in Kenya, which is not an oil-producing country.
However, Kenya's Energy and Petroleum Minister Opiyo Wandayi said the refinery's location did not mean it would rely on oil from the region. He said refineries get crude oil from the market, and the market is open. Dangote made a similar point, citing Singapore as an example, which has a lot of refineries despite not producing a single drop of oil.
The refinery will also include a 1,000-megawatt power plant, which is designed to support Dangote's operations as well as other industries expected to set up in the area. Dangote sees reliable electricity as a critical constraint on industrialisation across Africa. He has about $50bn worth of projects in the pipeline, including plans to develop 10,000 megawatts of power generation capacity across Africa by 2030.
Construction of the refinery is due to begin on 1 November. Kenya has relatively high fuel prices, raising expectations that greater refining capacity could eventually help bring down pump prices. However, the price of crude oil, the main raw material for fuel, set by international markets, remains a major factor in what consumers pay at the pump.
Key points
- The refinery is expected to process 700,000 barrels of crude oil a day.
- The project is expected to create 60,000 jobs at the height of construction.
- The refinery will include a 1,000-megawatt power plant to support the project and other industries.
