Lamu vs. Tanga: Uganda at the Heart of East Africa’s Oil Rivalry

Tanzania, Uganda and Vitol plan a $20 billion-plus energy hub in Tanga.

Tanga and Dangote’s Lamu refinery could compete for East African markets.

Uganda sits at the center of the rivalry, with Hoima adding a third supply option.

Tanzania and Kenya have rival plans to reshape East Africa’s oil supply, with Uganda central to both as a source of crude and a key market.

On August 6, Tanzania and Uganda signed a memorandum of understanding with Vitol Bahrain to develop the Tanga Regional Energy Hub. Valued at more than $20 billion, the project is expected to include a refinery, storage terminal, marine jetty and infrastructure to transport petroleum products to Uganda.

The announcement comes weeks after Aliko Dangote selected Lamu, Kenya, for a planned regional refinery with capacity to process 700,000 barrels a day. The Nigerian group had considered Tanga, where the East African Crude Oil Pipeline (EACOP) terminates, but ultimately chose Lamu, citing among other factors Kenya’s port infrastructure and distribution links to neighboring markets.

The Tanga project changes that equation. Tanzania is no longer looking only to capitalize on the transit of Ugandan crude through its territory. With Vitol, it wants to establish its own regional refining and distribution hub.

Two Corridors Targeting the Same Market

EACOP is designed to carry crude from Uganda’s Tilenga and Kingfisher fields over 1,443 kilometers to the Tanga terminal, with projected capacity of about 230,000 barrels a day. The new hub would extend that infrastructure downstream by adding refining, storage and distribution.

For Tanzania, the goal is to ensure that EACOP becomes more than a transit route. Some crude could be processed in Tanga before refined products are distributed within Tanzania and back to Uganda. That is where Tanga begins to overlap with Lamu.

Dangote’s planned Lamu refinery would have capacity nearly 10 times that of the proposed Hoima refinery in Uganda and would use Kenya’s distribution network to reach markets across East and Central Africa. Uganda is among its intended markets.

The projects are not identical, but they could compete for some of the same demand. The broader contest is therefore less about two refineries than about two supply corridors serving a regional market that remains dependent on imported refined fuels.

Uganda at the Center of the Equation

Uganda’s planned Hoima refinery adds another layer. The 60,000-barrel-a-day facility is intended primarily to meet domestic demand.

Kampala and Dar es Salaam describe Hoima and Tanga as complementary. Hoima would strengthen Uganda’s domestic refining capacity, while Tanga would serve a broader regional role in storage, processing and distribution.

Lamu could also fit into this emerging supply structure. The question is therefore not necessarily which project will displace the others, but how regional demand will be divided among them.

For Uganda, having several options could prove advantageous. Hoima would provide domestic refining capacity, while Tanga and Lamu could offer additional sources of supply. Such diversification could reduce dependence on a single corridor and give Kampala greater bargaining power.

It could also intensify competition over prices, volumes and infrastructure reliability. Tanga will have to demonstrate that its direct connection to EACOP provides a sufficient advantage over Kenya’s distribution network. Lamu, meanwhile, will need markets capable of absorbing output from a refinery designed to process 700,000 barrels a day.

Vitol Brings a Different Model

Vitol gives Tanga a different advantage. The company is one of the world’s largest oil traders, with expertise in energy storage, logistics and marketing. It already operates in Uganda’s petroleum sector, including in storage and distribution.

Rather than competing with Lamu primarily on refinery size, Tanga could differentiate itself through an integrated supply chain. Crude would arrive through EACOP, be stored or refined on Tanzania’s coast, and then be distributed to regional markets, including Uganda.

Dangote’s decision also illustrates the challenge facing Tanzania. Proximity to crude alone is not enough to attract a major refinery. The Nigerian group favored a logistics network capable of reaching several markets efficiently. Tanzania must now demonstrate that access to Ugandan crude can be converted into a commercial advantage.

Over time, three hubs could shape the market: Hoima for Uganda’s domestic needs, Tanga as an EACOP-linked regional platform, and Lamu as a large refining center connected to Kenya’s distribution corridor.

Vitol’s project is therefore not necessarily a direct challenge to Dangote. It shows that the choice of Lamu has not settled how East Africa’s petroleum market will be organized. The emerging competition could be decided as much by infrastructure and distribution routes as by refining capacity.

Uganda sits at the center of that contest: it supplies the crude flowing through EACOP, plans to refine some of its own oil and represents a market both Lamu and Tanga want to serve.

Olivier de Souza