Nigeria - The Existing Plants.

Phase One of the nation's master plan was funded entirely by the government, through a combination of soft and commercial loans. Finance for the second phase involved both government funding and a combination of soft and commercial loans and participation by foreign companies.

The Phase One plants were originally to be completed during the Fourth Development Plan (1981-1985). But they came on stream in 1987. Plants for the second phase were to start-up in 1987; they were completed in 1995.

Under a separate $1bn plan in the early 1980s, NNPC contracted Foster Wheeler of the US to study a project to produce 12 chemicals and plastics. This did not materialise, however.

Phase One: In normal conditions, feedstocks for the Phase One plants should come from the Warri and Kaduna oil refineries. The plants in Warri are operated by Warri Refinery & Petrochemicals Co. (WRPC). The Kaduna Refinery and Petrochemicals Co. operates those located in the Kaduna refining complex. But both refineries have been out of operation.

The Warri complex is designed to provide decanted oil for the production of six grades of carbon black, and propylene monomer from its fluid catalytic cracking (FCC) unit to produce polypropylene.

When in operation, the Kaduna oil refinery supplied reformate and paraffin-based kerosine from Venezuela's Lagomar crude oil, for production of linear alkyl benzene (LAB), heavy alkylate and benzene.

Production levels at these plants are usually well below capacity and now they are affected by the suspension of the refineries' operations. This is despite the fact that domestic demand for products from the Phase One plants has been very strong, particularly in the case of polypropylene (PP). Even before early 2006, production had been affected by repeated breakdowns of various units at the Warri and Kaduna refineries.

Problems began in 1988, the first year after Phase One came on stream. A scarcity of hard currency led to shortages of raw materials and spare-parts, with plants often shut down as a result. The carbon black plant was running at just 60% capacity in 1988-89. At the time NNPC's prices of carbon black, a major component in tyre manufacturing, were competitive when compared with the cost of imports. Despite the low cost, the main customers, the Nigerian associates of Dunlop and Michelin, continued to buy most of their needs from overseas suppliers because the plant produced only three of the five hard grades required for tyre manufacture.

The range could only be expanded at a very high cost. The situation since then has not improved.

Before early 2006, a shortage of raw materials had resulted in some Phase One plants resorting to the recycling of scraps, and this had led to a progressive degradation in the quality of products (see background in Vol. 57, No. 7).

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