Dangote To Finance 700,000bpd Kenya Refinery With IPO, Bonds

Dangote Group, has unveiled plans to finance the construction of a proposed 700,000 barrels-per-day (bpd) oil refinery in Kenya through a combination of internally generated cash, bond issuance and proceeds from a planned Initial Public Offering (IPO), as it deepens its footprint in Africa’s downstream oil sector.

The planned refinery, which will be located on Lamu Island along Kenya’s coast, is expected to become East Africa’s largest refining facility and strengthen the region’s energy security by reducing dependence on imported refined petroleum products.

According to Reuters, the project, which is expected to take about three years to complete, will supply refined petroleum products to Kenya and neighbouring countries, while advancing Dangote Group’s strategy of expanding refining capacity across the African continent following the commencement of operations at its 650,000bpd refinery in Lagos.

Vice president, Oil and Gas at Dangote Industries, Edwin Devakumar, revealed that preliminary works have already begun on the project. “The site has been selected, soil tests are under way, and design and engineering work has commenced. Kenya was the choice from the beginning,” Devakumar told Reuters.

He explained that funding for the refinery would come from a blend of internally generated revenue, debt raised through bond issuances and proceeds from the group’s proposed IPO.

Although he declined to disclose the exact cost of the project, Devakumar said the investment would be comparable to the cost of the group’s refinery in Lagos.

The Dangote Refinery, developed by Aliko Dangote, Africa’s richest man, eventually cost more than $20 billion before it commenced commercial operations in 2024, significantly above its initial estimate of about $9 billion announced in 2013.

The project’s cost escalated over the years due to site relocation, engineering complexities, the depreciation of the naira, disruptions caused by the COVID-19 pandemic and rising global inflation.

The Kenyan refinery represents Dangote Group’s largest refining investment outside Nigeria and underscores its ambition to become a leading supplier of refined petroleum products across Africa.

Dangote Group had previously explored plans to establish a refinery in the Tanzanian port city of Tanga but later shifted its attention to Kenya after assessing infrastructure availability, logistics and market opportunities.