By Benadeta Mwaura - Reporter
Kenya, August 21 ,2026 - Kenya could take a 10% stake worth about KSh64.7 billion ($500 million) in a proposed KSh2.59 trillion ($20 billion) oil refinery planned for Lamu, as the project moves closer to construction.
President William Ruto's economic adviser David Ndii said on Thursday that the project is expected to break ground in September, with Kenya, Ethiopia and Rwanda among East African countries being offered a combined 30% stake valued at about KSh194.2 billion ($1.5 billion).
Speaking at the Mwango Capital Markets Forum in Nairobi, Ndii said Kenya's proposed investment would amount to about KSh64.7 billion, while Ethiopia and Rwanda have also expressed interest in participating in the regional shareholding.
“The total for the region is about KSh194.2 billion ($1.5 billion),” Ndii said.
The proposed refinery is being backed by Nigerian billionaire Aliko Dangote and is planned for Lamu, with a processing capacity of up to 700,000 barrels of crude oil per day.
The facility is intended to serve the wider East African market rather than Kenya alone, potentially supplying refined petroleum products to several countries in the region.
If Kenya takes up the proposed 10 per cent share, the investment would give the government an ownership interest in one of the region's largest planned energy projects.
The government has previously said it intends to participate in the refinery through public investment, with President Ruto announcing in May that Kenya would co-invest in the project to help de-risk the development while sharing in future returns.
The proposed investment also comes with a strategic consideration for Kenya: ensuring that a refinery built on its coast becomes commercially viable and serves a regional market.
Ndii said countries that may not commit to purchasing products from the refinery could still be accommodated through a backstop arrangement, potentially giving the project a wider regional customer base.
A key issue for the proposed refinery will be securing enough crude oil to operate at its planned capacity.
Ndii said East Africa has potential regional crude production of more than 600,000 barrels per day, citing South Sudan at about 350,000 barrels, Uganda at 250,000 barrels and Kenya at about 120,000 barrels per day.
The figures point to the intended regional model behind the project: crude from producing countries would feed a major refinery on the Kenyan coast, with refined products subsequently distributed across East Africa.
Kenya's choice of Lamu as the site was formally confirmed in July after months of speculation over whether the project would be located in Kenya or Tanzania. Dangote Industries said technical, commercial and logistical considerations informed the decision.
But the refinery's biggest challenge may ultimately be its ability to compete once it starts producing fuel.
Dangote recently called on the Kenyan government to protect the planned refinery from what he described as competition from cheaper imported petroleum products, particularly products coming from countries such as Russia and India.
He said the project would require government support on land, regional financing and a policy framework capable of providing a stable market for the refinery.
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That request is significant because Kenya is currently heavily dependent on imported refined petroleum products.
For the proposed refinery to recover billions of dollars in investment, it will need reliable crude supplies, sufficient demand and a market environment that allows locally refined products to compete with imports.
The latest September target is earlier than the timeline Dangote himself gave earlier this month.
On August 8, Dangote said construction would begin by October 2026, with preparations already at an advanced stage. He said the refinery would take less than four years to complete once construction begins.
He also revised the estimated cost downward from about $17 billion to roughly $16 billion for the refinery itself, attributing the reduction partly to lessons learned from constructing the Dangote refinery in Nigeria and lower financing costs resulting from a faster construction period.
The wider project, including additional port infrastructure, is now being reported at approximately $20 billion.
The refinery is expected to replicate the model of Dangote's Nigerian facility, which has a capacity of 700,000 barrels per day.
The proposed Lamu refinery is therefore shaping up as more than another Kenyan infrastructure project.
It is being designed as a regional energy hub, with Kenya providing the location and potentially a significant share of the capital, while neighbouring countries participate as investors, crude suppliers or customers.
For the Kenyan government, the proposed KSh64.7 billion investment raises the potential for future returns from the project but also exposes public finances to the risks associated with a massive, long-term energy investment.
For Dangote, securing regional government participation could provide both capital and political backing for a refinery that needs a large and predictable market to succeed.
And for East Africa, the project's success could eventually reduce dependence on imported refined petroleum products.
The immediate test, however, is whether the September groundbreaking target translates into actual construction, and whether Kenya and its regional partners are prepared to put billions into a refinery that will have to compete with fuel already flowing into the region from global markets.