Aliko Dangote has announced his plans to construct a massive oil refinery in Kenya, East Africa, with a capacity of 650,000 barrels per day and an estimated cost of between $15 billion and $17 billion.
This decision follows uncertainty surrounding an earlier attempt to build the refinery in Tanzania.
In an interview with the Financial Times, Dangote expressed a preference for Mombasa as the site for the refinery, citing its larger and deeper port compared to Tanga, the proposed location in Tanzania for processing oil from Uganda.
He emphasized that Mombasa offers a more advantageous position in the open market.
Tanzanian President Samia Suluhu Hassan last week complained angrily to her Kenyan counterpart William Ruto that she had not been consulted over the earlier plan to build it on her country’s coastline, which was announced in her absence last month at an infrastructure summit.
“Kenyans consume more. It’s a bigger economy,” he said, adding that crude oil for the refinery could be transported by ship and need not be located near a pipeline that will carry oil nearly 1,500 kilometres from Ugandan oilfields to the Tanzanian coast at Tanga.
“The ball is in the hands of President Ruto,” he said. “Whatever President Ruto says is what I’ll do,” the billionaire added.
For the East African refinery to get off the ground, Dangote said, he would need Ruto to offer land, some East African finance, and, most important, protection from what he called the dumping of cheap fuel from the likes of Russia or India.
“There is no refinery in the world that can survive without that protection,” he said. “If we have an agreement, we can start this year,” he explained. He told the FT he could still build the refinery in Tanzania “if they can sort themselves out”.
Dangote’s Nigerian refinery was built over 10 years entirely in-house, defying critics who doubted he could ever get it up and running after decades in which the Nigerian state had tried and failed to build meaningful refining capacity.
“Dangote feels vindicated, not only by succeeding technically in getting the refinery to work, but also succeeding commercially,” one Dangote executive said, speaking on condition of anonymity.
The plant, the biggest so-called single-train refinery in the world at 650,000 barrels a day, has hit full capacity just when other countries are struggling to access petrol, diesel, and jet fuel because most ships cannot transit the Strait of Hormuz.
Unlike several other African countries, such as Mauritius, Ethiopia, and Zimbabwe, which have had to ration fuel or dilute it, Nigeria has seen no lines at petrol stations and has not had to take emergency measures.
Dangote’s refinery has been able to divert jet fuel, at hefty premiums, to European airlines scrabbling for supplies to keep flying.
He has also prioritised sales to Ethiopian Airlines, by far Africa’s most important carrier, with a network that covers the entire continent.
The Dangote refinery is also a big exporter of urea fertiliser to the rest of the continent, with Nigeria absorbing only a fraction of its 3 million-tonne annual capacity.
The Iran war, and the resulting closure of the Strait of Hormuz, has been “payday” for Dangote’s business, according to the senior executive, who said fertiliser prices had doubled and margins on jet fuel widened significantly.
Dangote told the FT: “You can see all the other oil companies, their profitability has doubled. So you don’t expect us to do less.”
Kenya’s president has been fulsome in his praise of Dangote, saying that the Nigerian industrialist has demonstrated that Africans can build their own mega-projects.
“Nigeria has been a producer of oil for all the years that we know,” he said of Africa’s most populous country. “Yet, when you went to Nigeria, there were queues of people looking for fuel in petrol stations . . . until one African stepped forward and built a refinery,” he stated.
Dangote has made his fortune selling salt, sugar, flour, cement, and now petroleum products by persuading successive Nigerian governments to give him tax breaks and favoured access to foreign currency as well as protecting his business from import competition.
Dangote said he was already pressing ahead with plans to more than double the capacity at his Lagos refinery to 1.4 million bpd.
In 30 months, he said, he would have the equivalent of 10 per cent of US refining capacity and would be neck and neck with Reliance Industries, Mukesh Ambani’s company, which also refines about 1.4 million bpd.
“We’ll be price movers in the market,” Dangote said, adding that it was incumbent on Africans to invest in their own continent. “If we don’t, who else will?” he told FT.