Kenya breaks ground on a major new oil refinery

Leanna Byrne (0:01)

Ground breaks on the $16 billion bet on Africa's energy future, but not everyone wants it. It's World Business Express from the BBC World Service. I'm Leanna Byrne. Donald Trump weighs up whether to curb US diesel exports as fuel prices soar at home, and Mark Zuckerberg makes a very local donation in Ireland. We'll look at where the money is going and why.

Aliko Dangote (0:30)

This is Africa coming together to build Africa.

Today, we're not simply breaking ground for a refinery. We're breaking ground for a new chapter in Africa's industrial journey to a brighter future.

Leanna Byrne (0:47)

That's Africa's richest man, the Nigerian billionaire Aliko Dangote. Speaking earlier today at a groundbreaking ceremony for a major new oil refinery in Kenya, part of a wider push to reduce Africa's reliance on imported fuel. But the project is not without controversy. There have been clashes between police and protesters who say the land where the refinery is being built belongs to them. The $16 billion project is in Mlamou, on Kenya's northern coast. And when it's completed in 2030, it's expected to process up to 700,000 barrels of crude oil a day. The BBC's Nkechi Ogbana has been following events from Nairobi.

Nkechi Ogbona (1:23)

It is significant for the whole East African region, because what that means is that crude oil that is sourced from Tanzania, sourced from South Sudan, which is the biggest producer in the region, will be refined within a 500-kilometer radius. Nigeria is a huge oil producer, but because of the lack of local refineries, it had a huge dependence on imported fuel for local needs to run machineries, to run businesses, and all of that.

Leanna Byrne (1:51)

Now, some local communities in Lamu have concerns over this project. What are those concerns that are being raised?

Nkechi Ogbona (1:57)

They say lands were grabbed, that ancestral lands were taken for the purpose of the construction of this refinery. They also believe that it would have environmental impact. Lamu also houses a UNESCO World Heritage Site. About 133 residents took the government and Aliko Dangote to a high court in Kenya, and the case is going to be heard on the 14th of October. But whilst that is in the works, the court has said that the status quo should continue, but construction should not begin until after the hearing on the 14th. There were also protests by these persons and residents, some residents in Lamu on Tuesday. Police fired tear gas. They had a clash with the local police there, trying to obstruct the construction and the groundbreaking ceremony, which is happening today in Lamu.

But Mr. Dangote and President William Ruto have stated emphatically that these are sponsored protests by people who he described as brokers in the oil space, major marketers of oil who he alleged do not want this project to take effect. President Ruto also stated that they would be met with force, much force for force if they push harder on obstructing the construction of this refinery.

Leanna Byrne (3:20)

That was in Ketchy, Ogbonne in Nairobi.

US. President Donald Trump has not ruled out banning diesel exports and as his administration looks for ways to bring down soaring fuel prices at home. Diesel has climbed above $6.50 a gallon in some parts of the country, putting pressure on farmers, businesses and consumers. So, why has diesel become so expensive in the US and how might an export ban affect the rest of the world? Here's our North America business correspondent, Michelle Flurry.

Michelle Fleury (3:47)

I mean, as ever, it comes down to basic economic supply and demand. And in the case of diesel, the issue is supply. It is a very highly manufactured product. It requires a lot of refining. And that global refining capacity has dropped substantially. Initially, from the pandemic era, it was affected then. But obviously, aggravated by the geopolitical situation right now, which has affected major oil corridors. So you put all of that together. And that is why we're seeing these increases in diesel prices in the UK, obviously hitting an all time high.

Leanna Byrne (4:22)

Well, President Trump is considering restricting exports because of that. So how is that supposed to bring prices down at home?

Michelle Fleury (4:29)

It's this idea of, well, if we restrict exports, wouldn't that then mean there was more supply for the domestic market? The problem is the market is a lot more complicated than that. The danger is that these refiners might actually reduce capacity if they think there is less demand for their product and thus actually prices could end up staying high and you would have less supply in the long term. So that's why experts caution, actually, this isn't the answer.