East Africa: three refinery projects and a market to win

East Africa could soon have refining capacity far above its current demand. Projects announced in Lamu, Kenya, Hoima, Uganda, and Tanga, Tanzania, would together represent nearly one million barrels per day, while regional petroleum product consumption is estimated at approximately 416,000 barrels of oil equivalent per day. This difference does not doom the projects, but makes their success a commercial challenge: the ability to supply customers at the best cost will matter more than stated nameplate capacity.

The comparison between the three projects extends recent coverage of Lamu’s industrial ambitions. The focus here is different: assessing market size, logistics routes and the risk of excess capacity if several facilities begin operating without secured outlets.

Lamu brings scale but needs export markets

The Lamu project promoted by the Dangote group is presented with processing capacity of 700,000 barrels per day. Alone, it exceeds current refined-product consumption across East Africa. The project could benefit from economies of scale and target customers beyond Kenya, but this ambition requires reliable crude supplies, transport infrastructure and sufficient commercial contracts.

Mombasa’s port currently serves as the main regional gateway for petroleum products. A substantial share of volumes distributed in Kenya is then re-exported to landlocked countries, particularly Uganda, Rwanda and South Sudan. Lamu must therefore build its own hinterland: pipelines, storage, terminals and distribution networks capable of moving products inland.

This logistics chain will determine delivered costs. A coastal refinery can import crude and export products, but inland customers must still be reached at competitive prices. The project’s scale is a potential industrial advantage; it also becomes a constraint if the plant cannot operate at high utilization.

Hoima has a domestic market but reassesses regional ambitions

Uganda’s Hoima refinery is designed around initial capacity of 60,000 barrels per day, with possible expansion to 120,000 depending on market performance. The project serves a strategic goal: processing some crude domestically, reducing dependence on refined-product imports and retaining more value in the country.

Uganda has an identifiable domestic outlet. The country consumes approximately 6.5 million liters of petroleum products per day and spends several billion dollars annually on fuel imports, according to data cited by the national operator. This market can support a smaller refinery than Lamu, although viability will depend on financing, processing costs and the ability to supply required products regularly.

The arrival of a large coastal facility nevertheless changes the export equation. If Hoima planned to sell a substantial share of output regionally, it will now have to compete with products potentially supplied from Lamu and Tanga. The refinery’s priority could therefore shift toward domestic supply, with exports becoming a complementary outlet rather than the foundation of its business model.

Tanga focuses on connections and transit

The Tanga project is associated with proposed capacity of 200,000 barrels per day. Tanzania already has port infrastructure dedicated to liquid products and could strengthen its regional trading role. The port also lies at the outlet of Uganda’s crude export pipeline, which will connect the Lake Albert fields to Tanzania’s coast.

This position gives Tanga a role in an energy network under construction, but transporting crude intended for export does not by itself guarantee supply to a local refinery. Projects must clarify crude sources, delivery contracts and facility access terms. For refined-product markets, pipelines and terminals connected to landlocked countries could be a decisive advantage.

The three projects therefore differ in more than size. Lamu relies on massive capacity and broad markets; Hoima can draw on a domestic market and processing its own crude; Tanga seeks to capitalize on its logistics position and regional connections. Their models can coexist if supplies, products and outlets are sufficiently differentiated.

Future demand alone cannot secure investment

Projections of regional and African demand growth give promoters an argument. However, long-term forecasts replace neither purchase contracts nor robust profitability studies. If the three refineries produce similar fuels for the same customers, they risk competing on prices, transport costs and margins.

Utilization will be a central indicator. A facility designed to process several hundred thousand barrels per day needs regular crude supply and sufficient demand for its different products. High theoretical capacity can conceal lower actual output, particularly if shutdowns, supply constraints or distribution difficulties increase costs.

Investors and governments must therefore verify several conditions before treating announced capacity as secured: final investment decisions, full financing, supply contracts, sales agreements, permits, complementary infrastructure and construction schedules. Project announcements and launch ceremonies are milestones, but demonstrate neither profitability nor commissioning dates.

East Africa seeks to reduce dependence on refined-product imports and retain more value in its oil chain. Success will not depend on the number of refineries announced. It will depend on each project’s ability to supply competitive products, operate consistently and serve identified markets without relying solely on optimistic forecasts.