There was considerable euphoria across the country when it was reported in April 2026 that plans were under way to build an oil refinery in Tanga. The refinery was expected to be jointly owned by oil-producing countries in the region in collaboration with Dangote. Our hopes, however, dissipated after the location of the project was changed from Tanga to Lamu, Kenya, under circumstances that are well known.
However, Tanzania has made a dramatic comeback and our hopes have been restored following the signing of a Memorandum of Understanding (MoU) on 6 August 2026 between the Tanzania Petroleum Development Corporation, Uganda National Oil Company and Vitol Bahrain. The MoU envisages a broad energy hub incorporating refining, storage, marine infrastructure and petroleum-product distribution. The investment associated with the energy hub is expected to be about US$20 billion.
Vitol Bahrain’s involvement is crucial to the project’s success. For a refinery to be viable, it requires three essential elements: a reliable supply of crude oil, refining capacity and customers. Vitol could connect all three elements in this project.
A glance at Vitol’s profile indicates that it trades about eight million barrels per day (bpd) of crude oil, charters more than 6,000 sea voyages annually, owns or has investments in approximately 1.2 million bpd of refining capacity, and has long-term assets worth more than US$13 billion.
The capacity of the proposed project has not yet been determined. Assuming that it is decided to begin with a capacity of 400,000 bpd, with the intention of scaling up gradually, Vitol could readily supply whatever additional crude oil is required beyond the 246,000 bpd expected to be supplied through EACOP.
Some people have viewed this project as a rival to the proposed refinery in Kenya. I view it from a slightly different perspective. Lamu’s proposed 700,000 bpd refinery will inevitably compete with Tanga for regional customers and petroleum-product markets.
However, the two facilities could serve different geographical markets and collectively reduce East Africa’s dependence on imported refined petroleum products. Tanga could concentrate on Tanzania, Uganda, Rwanda, Burundi, Malawi, Zambia and eastern Democratic Republic of Congo, while Lamu could serve Kenya, Ethiopia and South Sudan.
Tanzania and Uganda should address one important issue as they negotiate the project agreement: Vitol’s potential conflict of interest and how it should be managed.
Under the proposed arrangement, Vitol is envisaged as the financier, partial crude supplier, trader, product offtaker and logistics provider. Such an integrated chain offers tremendous commercial efficiency.
However, it also creates potential transfer-pricing and conflict-of-interest concerns. Tanzania and Uganda must ensure that crude oil prices are transparently benchmarked, freight charges are competitive, refinery processing costs are transparent and product offtake prices are market-based.
These safeguards should be built into the shareholders’ agreement and project-finance documents. This should not be viewed as reflecting a lack of trust in Vitol. Rather, Tanzania and Uganda should ensure that they do not surrender excessive commercial value through opaque long-term agreements.
Finally, Tanzania and Uganda should not attempt to build the biggest refinery, but rather the best-integrated one. If properly designed around EACOP, Tanga Port, Vitol’s global network and the growing Great Lakes market, the project could transform Tanga into a major regional energy hub.
