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Weekly UpdatesThe petrochemical sector in Nigeria has suffered considerably since 2006 due to rebel attacks affecting the country's four oil refineries. Only one of these plants, the Warri refinery, is operating but at much below its capacity. There has been no investment of consequence in the petrochemical sector for many years.
The other three refineries have been short of crude oil. The entire refining sector has been running at 87,750 b/d of crude oil. The other plants have been short of crude oil supplies (see down6NigrRefAug10-09). The country's crude oil production remains far below its capacity and exports have declined considerably (see omt7NigrExp&GlobalPerspAug17-09).
President Umaru Yar'Adua, like his predecessor Olusegun Obasanjo, has failed to revive the petrochemical and refining sectors. But his powerful Petroleum Minister, the veteran Rulwanu Lukman, is bent on reforming the entire petroleum sector and is behind a wide-ranging Petroleum Industry Bill (PIB) which, among other things, is to transform the state-owned Nigeria National Petroleum Corp (NNPC) into an efficient and profitable entity. The PIB calls for privatisation and deregulation of the downstream branches of the petroleum industry and for incentives to lure foreign investors into refining and petrochemical ventures (see Lukman's profile in omt8NigrWhoAug24-09).
Like Obasanjo, Yar'Adua wants to see Nigeria turned into a centre for production and export of petrochemicals in West Africa and is promoting the coastal area of Lekki as a special industrial park. Called Export Processing Zone (EPZ), this is a 200-hectare park where investors get a variety of advantages ranging from low gas prices to fiscal incentives, cheap labour, etc.
Personally promoting EPZ-based projects, Obasanjo in October 2002 laid the foundation of a $3bn gas-to-petrochemicals complex at Lekki whose promoters then said this would be on stream in 2006 - though no progress on this has been made so far. The JV was to consist of a single-train, 2.5m t/y methanol plant - the biggest of its kind in the world. The plant was to feed a methanol-to-olefins (MTO) unit to produce 400,000 t/y of polypropylene (PP) and 400,000 t/y of high density polyethylene (HDPE).
The proposed investor, Eurochem Technologies of Singapore, set up two firms to operate the plants: Viva Methanol for the GTM venture and Axinova Polyolefins for the downstream units. They were designed to consume 220 MCF/day of natural gas (see background in down7NigrPetchAug15-05).
Nigeria is rich in natural gas produced at relatively low cost. It has been said for years that, if the incentives improved, low-priced gas feedstocks should attract investors in new petrochemicals projects from among Western companies operating Nigeria's main petroleum JV. But these firms want to see security and political stability in Nigeria established before they actually commit themselves to such projects.
Foreign companies producing oil and gas in Nigeria have proposed several big JVs to produce olefins and polymers, a range of aromatics, methanol and oxygenates. They have pledged to finance these projects. But their main conditions, as ExxonMobil keeps demanding, are that they should control such JVs and that prices of their chemicals sold on the local market are set at international market levels.
The petrochemical sector is controlled by NNPC which has a monopoly on the main chemicals sold in the country. But President Yar'Adua says he is determined to see the downstream sector, including the petrochemical business and oil refining, deregulated and privatised. Due to the global recession which has hit both the petrochemical and refining businesses badly since mid-2008, however, Nigeria will have to await a world economic recovery and the return of strong demand for chemicals in the coming years.
Nigeria has had a three-phase master plan, launched in the 1970s, to produce a wide range of petrochemicals. But so far only two of the phases have come on stream, after many years of delay in each phase caused primarily by lack of financing and bad management by successive military regimes.
The petrochemical sector reached an important threshold in late 1995 with the completion of the Phase Two plants. But the sector has experienced a number of problems, mainly due to gross inefficiency and corruption.
Local production of a wide range of chemicals is vital to Nigeria as it should help substitute products currently being imported at high cost, thus saving hard currency. Exports to nearby countries would generate income much needed in the downstream sector for expansions, maintenance, spare-parts, etc.
Construction of new plants is always delayed. Work on the Eleme polyethylene plant near the Port Harcourt oil refining complex was delayed for ten years because of the government's heavy debts to French and Japanese contractors working on the project. Now the plant's operations have been badly affected by lack of repairs at the Port Harcourt refining complex which can only produce HSFO. But this refining complex now is short of crude oil due to damage to the pipeline feeding it.
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