On 4 May, Tanzanian President Samia Suluhu chastised her Kenyan counterpart, William Ruto, for announcing a planned oil refinery project in Tanga (Tanzania), claiming that she was not consulted.
- The planned refinery project is set to be funded by prominent Nigerian businessman Aligo Dangote to serve the East African Community (EAC) regional bloc.
- However, the project could disrupt existing fuel development arrangements between Uganda and Tanzania, especially if plans to export the refiled oil through Kenya’s ports materialise.
- Although Ruto, who is leading engagements with Dangote, has a stronger bargaining power, he is unlikely to exclude Tanzania from the project for fear of disrupting geopolitical dynamics in the EAC.
- Instead, and with pressure from Uganda, Ruto will try to convince Tanzania to accept hosting the refinery as a compromise, leading to protracted negotiations that may delay the project.
- In the meantime, trade disputes between Kenya and Tanzania are increasingly likely, potentially causing brief disruptions to cross-border trade.
- Meanwhile, countries in the EAC will struggle to expand oil production in the coming years, as they face practical and environmental challenges.
Refinery project
The planned project was announced on 23 April during the Africa We Built summit in Nairobi, Kenya. Following discussions with Ruto, Ugandan President Yoweri Museveni, and other dignitaries, Dangote told the media that he would invest at least USD 40 billion to build a refinery with a production capacity of 650,000 barrels per day.
Ruto added that the planned refinery would be built in Tanga (Tanzania) and process crude oil from South Sudan, DRC, Kenya, and Uganda. All four countries are members of the EAC, but only the former two currently produce crude oil. Uganda is expected to start production in late 2026, after the completion of the East African Crude Oil pipeline (EACOP). The EACOP is set to transport crude oil from Hoima( Uganda) to Tanga for export. According to Ruto, an additional pipeline would be built from Tanga to the port of Mombasa (Kenya) for export to the EAC. The EACOP was supposed to be accompanied by a planned refinery in Hoima, but obtaining funding for this had proved difficult until a UAE-based firm (Alpha MBM Investments) acquired a 60% stake in the refinery in December 2025. A final investment decision is expected in July. Museveni said that the Dangote-backed refinery would process any surplus from the Hoima project.
However, following Suluhu’s rebuke of Ruto, Dangote said on 10 May that he would prefer to build the refinery in Mombasa rather than Tanga because the port of Mombasa is bigger, and Kenya has a larger economy.
Tanzania’s concerns
Navigating the diplomatic fallout resulting from the planned refinery will be difficult for investors. In the two scenarios proposed by Ruto and Dangote, the refined oil is exported through the port of Mombasa. This is a direct threat to the interests of Tanzania, which was hoping to export all the outputs from Uganda’s oil fields. Tanzania has made major investments to upgrade its ports (Dar es Salaam and to a lesser extent, Tanga). Tanzania lobbied heavily for the EACOP amid a campaign by environmental activists against the project. In this context, Tanzania will heavily push against and attempt to divert Ugandan oil away from Tanga/Dar es Salaam.
It appears that Ruto is hoping to leverage the promise of revenues, through the establishment of the refinery in Tanga, to soften Tanzania’s position and downplay the backlash. However, and as underlined by Suluhu’s rebuke of Ruto, this is unlikely to be enough. First, the investors will push for tax breaks to mitigate competition from fuel imports into the EAC. The country that hosts the refinery is likely to bear the brunt of these tax breaks, while most of the foreign earnings will benefit the country that exports/distributes the oil. Moreover, as Tanzania’s appetite for commercial loans continues to increase, so will the need for foreign exchange.
Difficult balance
Tanzania is unlikely to agree to host the refinery unless a good portion of the refined oil is exported through its ports. This is likely to be a point of major contention, as the balance of power is in Kenya’s favour. On 10 May, Dangote suggested that the choice of a location for the refinery was up to Ruto. Despite this, it will be a difficult decision for Kenya. Excluding Tanzania from the project would be too risky, even for Ruto, under whom Kenyan foreign policy has become more prone to faux-pas.
Despite periodic trade disputes and competition, Tanzania is an important trade partner for Kenya, providing staple foods and consuming Kenyan manufactured products. The two countries also share strong historical ties, which play a huge role in preserving cohesion in the EAC. Kenya will face heavy pressure from other EAC member states, especially Uganda, to adopt an inclusive approach. Museveni will be keen to appease Tanzania, particularly because it hosts the largest section of the EACOP.
These dynamics will prolong talks with investors, leading to delays. However, in our view, Tanzania and Kenya will eventually agree on an arrangement to split the oil export between their ports. In the meantime, these tensions will drive more trade disputes between Tanzania and Kenya, exposing cross-border trade to more frequent disruptions. Diplomatic spats are also likely to intensify, but these will be resolved amicably.
Production constraints
Meanwhile, in the long term, the plans to build a regional refinery could boost the resilience of the fuel market in the EAC in the face of global supply chain disruptions. However, this will depend on the extent to which EAC member states are able to increase production capacity, which currently falls below daily demand. The planned refinery will incentivise countries in the EAC to expedite prospective or stalled oil projects, but they will face serious challenges.
In the DRC, prospective oil fields are located in the Virunga and Salonga national parks. This is already a major hurdle to attracting investment due to heavy lobbying by environmentalists. The March 23 crisis, which has reduced the state’s presence in these areas, will further complicate the matter. Likewise, Kenya is keen to revive the oil project in Turkana County, which was acquired by Auron Energy E&P Limited, an affiliate of UAE-based firm Gulf Energy Limited in September 2025, completing the exit of UK-based firm Tullow Oil. However, Auron Energy is likely to face the same difficult community dynamics and funding constraints that forced Tullow to exit the project.
Overall, most countries in the EAC are likely to continue relying on fuel imports from the gulf even after the refinery is operational.
Sources
“Africa’s richest man eyes Kenya for new refinery” Financial Times
“Kenya, Tanzania and neighbours discuss joint refinery as Dangote offers to build it” Reuters
Samia reprimands Ruto over Tanga refinery plans, Nation
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