Kenya has revived plans to build a pipeline from its Turkana oil fields to Dangote's East African refinery in Lamu, a move that is expected to make the country's crude a key raw material for the Nigerian billionaire's project. The pipeline project was previously abandoned due to doubts about securing funding. However, with the Dangote refinery on board, the project has become bankable, according to President's Council of Economic Advisors Chairman David Ndii.
The decision to transport crude to the port via rail came before Dangote announced his plan to build a Sh3.1 trillion ($24 billion) oil refinery in Lamu. The government had sought to extend its metre gauge railway (MGR) to South Lokichar at an estimated cost of Sh220 billion to truck the country's crude by rail to the port of Mombasa. However, with the pipeline project back on track, the rail-road option may no longer be necessary.
Gulf Energy, the company licensed to produce oil in Block T6 and Block T7 in South Lokichar, is set to resume drilling this month, ahead of producing Kenya's first crude on December 1. The first exports of Kenya's crude are targeted for March next year, where trucks will initially be deployed in shipping the product to Mombasa for export. The country expects to ride on the chosen name for its crude oil to market its product, which has been described as light sweet.
The construction of a heated pipeline to evacuate Kenya's waxy crude is expected to support the increased production of Kenya's crude to a peak of 100,000 stock barrels per day (stb/d). Kenya previously planned to build an 892-kilometre pipeline from the production fields in South Lokichar to the port of Mombasa. However, doubts about securing at least $1.5 billion (Sh193.87 billion) needed to fund the line and fears of delays in delivering the project forced a change in plan.
The Kenya Pipeline Company (KPC) is expected to play a crucial role in the construction of the pipeline infrastructure. Mr Dangote acquired a 24.99 percent stake in KPC and committed to spend Sh195 million to expand the firm's pipelines. The Lamu refinery cost is expected to reach up to Sh3.1 trillion ($24 billion), including the cost of infrastructure like port, pipelines and water.
The refinery is expected to generate revenues of up to Sh3.9 trillion ($30 billion) per year, increasing the share of Kenya's manufacturing by up to four percentage points. The sale of products from the refinery is expected to fetch foreign exchange for Kenya, while the country is expected to save on foreign exchange as part of the products from the Dangote refinery are sold in the local market in shillings.
The foreign exchange impact from the project has been estimated at Sh1.68 trillion ($13 billion), including Sh1.16 trillion ($9 billion) net exports and Sh519.8 billion ($4 billion) in forex savings from forgone petroleum imports. Kenya's annual fuel import bill in 2025 stood at Sh583.7 billion ($4.5 billion), suggesting that output from the Dangote refinery can cover up to 89 percent of Kenya's demand for fuel and lubricants.
Key points
- The pipeline project is expected to make Kenya's crude a key raw material for the Dangote refinery.
- The construction of the pipeline is expected to support increased production of Kenya's crude to a peak of 100,000 stock barrels per day.
- The refinery is expected to generate revenues of up to Sh3.9 trillion ($30 billion) per year.
