Sh2 trillion Lamu refinery faces stranded-asset risk as world shifts to clean energy

The Sh2 trillion Dangote East Africa Petroleum Refinery in Lamu risks becoming a stranded asset as the global energy transition gathers pace, climate and energy experts have warned.

The project, designed to process 700,000 barrels of crude oil per day, is projected by authorities to create 60,000 jobs across construction and operations. However, experts warn that changing energy markets could undermine its long-term economic viability, leaving Kenya exposed to losses from an investment tied to fossil fuels.

Lancet Countdown executive director Marina Romanello said continued investment in oil and gas could leave countries with infrastructure that loses value as renewable energy becomes more competitive.

“We know that renewable energy is the energy of the future, it's cheaper, it's cleaner, it's more reliable, and we know that investments in fossil fuels are investments in an old dirty technology that has no way in a healthy future,” she said.

Romanello spoke when the Lancet Countdown unveiled a report showing that many health risks associated with climate change accelerated in the decade after the 2015 Paris Agreement compared with the preceding decade.

She said investments in fossil fuels risked generating lower returns as the energy transition progressed and markets increasingly favoured cleaner technologies.

“As these investments keep on growing, what we're also seeing is that those financial investments will not be able to give the return on investment moving forward, particularly because the transition will happen and we're seeing the market favouring these cleaner, cheaper technologies,” she said.

Romanello cited an estimate of $63.3 million in economic losses from stranded assets associated with coal-fired power plants in 35 countries in 2016, warning that continued investment in fossil fuels could increase the scale of future losses.

“The more that we invest in these dirty technologies, the bigger the volume of those stranded assets and lost investments will be,” she said.

She acknowledged that countries were still investing in fossil fuels to bridge immediate energy gaps as renewable infrastructure remained insufficiently deployed, but warned that locking economies into fossil-fuel infrastructure over the long term could bring greater losses.

Lancet Countdown working group co-chair and Imperial College London professor Ian Hamilton said the economic case for the Lamu refinery should be assessed by accounting for the full costs of its operations, including pollution and the effects on public health.

“Right now, a fossil fuel refinery might be seen as beneficial, cost-effective to the economy,” he said.

Hamilton argued that a comprehensive cost-benefit analysis would need to weigh the jobs created against the wider economic and health consequences of the project.

“The refinery will offer some jobs but it's going to be far fewer and the damages that this new refinery might have in that whole picture is going to be much bigger and that would change the equation,” he said.

He added that renewable energy investments generally carried lower overall environmental and health costs.

Power Shift Africa chief executive Mohamed Adow said the proposed refinery risked being overtaken by changes in transport technology and global energy demand.

“A refinery designed to operate for decades is fundamentally a bet on demand for petrol and diesel. Yet electric vehicles are expanding rapidly, battery technology is improving, renewable energy is becoming very competitive, and governments and manufacturers are investing heavily in electrification,” Adow said.

He cited global electric-car sales exceeding 20 million in 2025 as evidence of the changing transport market.

Adow warned that the refinery could become a stranded asset if it remained physically operational but lost economic value as demand and technology shifted.

“By the time this Sh2 trillion refinery is completed, the transport system will have moved further towards electricity, and so we are pouring our time and money into infrastructure designed for the economy of the past,” he said.

He also questioned whether sufficient locally sourced crude oil would be available to sustain a facility processing 700,000 barrels daily.

Without adequate domestic supplies, Adow said, the refinery would depend substantially on imported crude, exposing it to international oil prices, shipping costs, exchange-rate fluctuations and geopolitical disruptions, including instability around the Strait of Hormuz.

The concerns come against a backdrop of mounting climate-related health and economic pressures. The Lancet Countdown report found that annual average heat-related deaths rose by nearly 36 per cent globally after the Paris Agreement was introduced.

In 2023, heat was associated with a record 710,000 deaths, with more than 70 per cent of the toll attributed to human-caused climate change.

Extreme drought affected nearly 52 per cent of the world's land for at least one month in 2025, the second-highest level on record, while changing groundwater storage patterns raised concerns about food security and sanitation.

The report also highlighted the economic opportunities associated with the energy transition. Global clean-energy investment reached a record $2.1 trillion in 2025, almost twice the amount invested in fossil fuels.

Cleaner air has also helped prevent an estimated 323,000 deaths annually in at least 77 countries where air pollution from fossil fuels has declined since 2016.

Despite the growth in clean-energy investment, fossil fuels still account for more than 80 per cent of global energy supply.

The report said the world's 100 largest oil and gas companies were on track to exceed production levels compatible with limiting global warming to 1.5 degrees Celsius by 150 per cent by 2040, up from 138 per cent in the previous year's assessment.