Africa's richest man offers East Africa 30% of his $16 billion Kenya refinery

Aliko Dangote has offered East African governments a combined 30% stake in the $16 billion oil refinery he is building in Lamu, Kenya, and Kenya, Rwanda and Ethiopia have all signaled interest in taking part.

The offer emerged as Dangote and Kenyan President William Ruto broke ground on Wednesday on the 700,000-barrel-a-day refinery at the Port of Lamu, formally starting construction on the project, Daily Trust reported.

Kenya is considering a 10% stake worth about $500 million, according to David Ndii, an economic adviser to Ruto. He said Ethiopia and Rwanda had also expressed interest.

"The total for the region is about $1.5 billion," Ndii said.

Those figures suggest the governments would be buying into an equity base of about $5 billion, with the rest of the $16 billion cost expected to come from debt and other financing.

Ndii said the arrangement could go ahead even if some of the participating countries did not commit to buying fuel from the refinery. "If some of them are not off-taking we will backstop," he said.

Kagame confirms talks

Rwandan President Paul Kagame confirmed that Rwanda had held preliminary discussions with Dangote about joining the project.

"Rwanda would be happy to be part of this investment," Kagame said, adding that "it is too early to talk about the details."

Bringing in governments as shareholders would give Dangote political partners across the region he plans to supply, and could help secure demand for the refinery's output in landlocked countries that now import nearly all of their fuel through Kenyan and Tanzanian ports.

A refinery for the region

The Lamu project is designed to be one of the largest refineries in Africa. Alongside the refinery, the complex will include a 1,000-megawatt power plant and facilities for petrochemicals and other industrial products.

Dangote described the project at the ceremony as "a new chapter in Africa's industrial journey" and compared it with his refinery in Lagos, which is already operating and being expanded. "Lekki proved that it can be done, Lamu must prove that it can be repeated," he said.

He pledged to complete the refinery within 40 months. Ruto has said the project could create about 60,000 jobs and strengthen Kenya's position as a regional energy and industrial hub.

Dangote said the plant would buy crude from several suppliers rather than relying on a single source. "You don't go and build a refinery for only one source of crude. You take different types: Middle East crude, American, and WTI, so you mix them up," he said.

Uganda is expected to be an important potential supplier of crude. Kenya is also working on plans to develop its oil fields in Turkana and transport the crude to Lamu.

Legal and environmental hurdles

The project still faces challenges on the ground. A Kenyan court has ordered the parties in a land dispute involving 133 residents of Chandavai in Lamu to maintain the status quo on the disputed land until the case is heard on Oct. 14. The order did not stop the groundbreaking, but it could affect work on the disputed site. Dangote Group had said the ruling would not halt the ceremony.

Environmental groups have also raised concerns about the refinery's potential impact on Lamu's marine ecosystem and on nearby communities.

The Lamu project is the largest step yet in Dangote's push to expand his oil business beyond Nigeria. His Lagos refinery is currently in the middle of a public share offering that is open to retail investors across Africa.