Dangote’s proposed Kenyan oil refinery faces hurdles, 

Less than three years after overcoming surging costs, swampy terrain and inadequate infrastructure to launch Africa’s biggest oil refinery in Nigeria, billionaire Aliko Dangote is set on replicating that project on the continent’s opposite coast.

But the construction of his company’s planned ​new 700,000-barrel-per-day Lamu refinery in Kenya promises to bring a whole new set of issues — not least where to secure crude supply in a country that, unlike oil-rich Nigeria, currently ‌has no commercial output.

A month later, Dangote told the Financial Times he was leaning toward building the plant in the Kenyan city of Mombasa, but by July, an executive announced it would be constructed in Lamu, a deep-water port crucial to the refinery’s success.

The company will hold a groundbreaking ceremony at the end of this month, and hopes to complete the refinery by 2030. Aliko Dangote has said he expects it to ​cost $15 billion to $16 billion.

The project is a test of whether the model that helped turn Nigeria from a major fuel importer into a growing exporter can be repeated in a region with fewer ​crude supplies and less developed energy infrastructure.

Asked about potential regulatory, finance and feedstock challenges for the project, Devakumar Edwin, vice president of Dangote Industries, said there were ⁠none to overcome. The company believes the project will enhance regional fuel supply and energy security, it has previously said.

However, “if not successfully implemented, it runs the risk of becoming a very expensive white elephant,” Brendon Verster, ​senior economist at Oxford Economics, said.

In July, a company executive shared that Dangote Group plans to fund the Kenyan refinery using internal cash flow, bonds, and an initial public offering. The company is also preparing an IPO for its Lagos refinery, which is set to be the largest in Africa’s history.

If the Lagos playbook is followed, Dangote could also add in a mix of his own equity, commercial bank loans and development finance institutions such as Afreximbank.

The company has more major expansion plans, announcing on Monday it will spend $14.3 billion to double the processing capacity of its Lagos plant. With several oil-related projects already underway for Dangote, analysts suggest that securing funding might be a challenge.

“Given that the group is seeking some $40 billion (including Lamu) between 2025 ​and 2030 for announced energy projects, raising the capital for Lamu could become a formidable challenge,” said Kaase Gbakon, a petroleum economist formerly with state-owned Nigerian oil company NNPC.

East African nations such as Rwanda, South Sudan, ​Tanzania and Uganda could take up a combined 30% equity stake, which would open another funding stream and tie governments to the project, Dangote has also suggested, though no details have been given on potential deals.