Dangote Industries’ planned 700,000-bpd Lamu refinery in Kenya faces a major crude supply challenge, with the country yet to establish commercial oil production and regional alternatives constrained by transport infrastructure, Reuters reported.

The Nigerian conglomerate, founded and led by Aliko Dangote, already operates a $20bn refinery of the same capacity in Nigeria. It plans to hold a groundbreaking ceremony for the $15bn-$16bn Kenyan refinery at the end of September, with completion targeted for 2030. Financing, crude-supply arrangements and supporting infrastructure have not been finalised.

Kenyan media have quoted President William Ruto’s chief economic adviser as saying the refinery could eventually source about 600,000 bpd from Kenya, Uganda and South Sudan. If achieved, that regional supply estimate would cover about 86% of the refinery’s 700,000-bpd nameplate capacity, leaving roughly 100,000 bpd to be sourced elsewhere if the plant operated at full capacity.

The project’s location has shifted rapidly. Discussions were focused on Tanzania as recently as April, before Dangote indicated in May that Mombasa was the likely site and then settled on Lamu in July.

Lamu Port provides deep-water access but currently has no operational oil-storage terminals, while much of the supporting infrastructure planned under the Lamu Port-South Sudan-Ethiopia Transport Corridor (LAPSSET) remains unbuilt. LAPSSET plans storage capacity of 1mn-1.5mn barrels and facilities capable of handling Suezmax tankers.

More importantly, much of the cited regional crude is not currently available to Lamu. Kenya has yet to begin commercial oil production, although small-scale output is expected later in 2026. Uganda’s crude is committed to the East African Crude Oil Pipeline (EACOP) to Tanzania, while South Sudan depends on an export route through Sudan. A proposed pipeline linking South Sudan’s oilfields and Kenya’s Lokichar Basin to Lamu remains a distant prospect.

Unless those constraints change, the refinery would likely have to rely heavily on seaborne crude imports, with the Middle East the nearest major source. “That leaves the coastal facility dependent on a volatile international seaborne market,” Maximillian Ezeude, an oil and gas lawyer in Lagos, told Reuters.

Financing presents a second major challenge. A Dangote executive said in July that Lamu could be funded through internal cash flow, bonds and an initial public offering, but the group is simultaneously pursuing several other capital-intensive energy projects.

At the same time, the Lagos refinery is seeking about $1.6bn through an IPO, while Dangote plans to spend $14.3bn to double the plant’s capacity to 1.4mn bpd by 2029.

Petroleum economist and former Nigerian National Petroleum Company Limited (NNPCL) official Kaase Gbakon estimated that the group would need to raise about $40bn, including for Lamu, for announced energy projects between 2025 and 2030.

“Given that the group is seeking some $40bn (including Lamu) between 2025 and 2030 for announced energy projects, raising the capital for Lamu could become a formidable challenge,” Gbakon said.

Benjamin Oluwatobi Ajayi, an energy analyst in Lagos, told the news agency that financing, environmental requirements and the number of stakeholders involved could further increase execution risks.

Dangote Industries VP Devakumar Edwin told Reuters that the company saw no regulatory, financing or feedstock challenge that could not be overcome. Dangote has said the refinery would strengthen regional fuel supplies and energy security.

Brendon Verster, senior economist at Oxford Economics, warned that the project could become a costly white elephant if it fails.

Dangote has suggested that Rwanda, South Sudan, Tanzania and Uganda could together take a 30% equity stake in the refinery, although details of any potential deals have not been disclosed.

The project is planned for the LAPSSET special economic zone near Lamu Port. Lamu Old Town, a World Heritage site, lies about 10km from the port, while Greenpeace Africa has called for the refinery project to be halted over concerns about habitat destruction and marine degradation.

Kenya’s president has backed the refinery as a way to cut fuel imports and spur economic growth. The East African country has had no operating oil refinery since its previous facility closed in 2013, leaving it dependent on imported petroleum products.

Kenya spent about $4bn on petroleum products in 2025, according to official data, making fuel the country’s largest import category.