Neglect of Petrochemical Industry Costing Nigeria $30bn Yearly

The Sun
Adewale Sanyaolu

The inability of the Nigerian government to utilise its refiner­ies to full capacity has led to the abysmal deterioration of the pet­rochemicals industry, making the country to lose over $29.7 billion annually in revenue. The signifi­cance of a vibrant petrochemical industry to an economy with dai­ly crude consumption of about 445,000 barrels but still largely dependent on product exports cannot be over-emphasised. For Nigeria, the petrochemicals in­dustry, a sub-sector of the petro­leum industry, occupies a key place in the world economy as it produces the crucial raw ma­terials from petroleum, including kerosene, liquefied natural gas (LPG), diesel, ethane, plastic, rubber, yarn and other intermedi­ary goods consumed across the world.

It was little wonder therefore that the country’s failure to har­ness these resources has left many companies that ordinarily should depend on raw materials from domestic petrochemicals in comatose, while those struggling to survive are doing so at a huge cost in the face of the nation’s dwindling foreign exchange in­flow.

That explains why demand for petrochemicals products is driving activities in the end-user segments, which include a well-developed manufacturing sector, that provides a ready market for end-products of the industry.

For Nigeria, the challenge has not been the lack of investment but that even a firm like Indorama Eleme Petrochemical Limited (IEPL) located in Port Harcourt, Rivers State, has remained lone range in Nigeria’s petrochemi­cal industry. As at 2013, the firm had an annual installed capacity of 300,000 metric tonnes of ole­fins, 250,000 metric tonnes of polyethylene and 80,000 metric tonnes of polypropylene, which are high value raw materials that could earn the country so much in reserve if exported.

Even the Warri and Kaduna refineries that ought to provide the much-needed leap for the country’s petrochemicals indus­try appear to have failed to pro­duce products that will meet the yearning of their stakeholders.

For instance, at inception, the two refineries were designed to produce Carbon Black and Linear Alkyl Benzene (LAB) used in the manufacture of deter­gents. But this capacity has also been affected by the low crude oil refining capacity in both firms.

Observers have often la­mented that despite the country’s large deposits, it still depends on imports of petrochemical products for raw materials for its manufacturing companies. It is estimated that Nigeria utilises less than 40 per cent of capacity utilisation, which results in lower petrochemicals yields, thereby creating a need to augment with imported raw materials.

Petrochemical products, like olefins (ethylene, propylene, bu­tadiene) and aromatics (benzene, toluene, xylene) are used in end-user markets such as paints, plas­tics, explosives and fertilizers sub-sectors.

Daily Sun learnt that Nigeria’s failure to develop its petrochemi­cal plants is largely the reason manufacturing companies are depending on imports for over 80 per cent of their raw materi­als worth over $10 billion (about N2 trillion at the rate of N200 to a dollar) yearly. It is also the reason many manufacturers are going out of business since the Central Bank of Nigeria’s (CBN) forex restriction on 41 firms is hurting efforts to get its raw material.

In Nigeria and across the world, foam, plastic, paint and textile manufacturing companies depend on derivatives of petro­chemicals most of which are im­ported because the local industry has not received due attention.

Commenting on the viability of the petrochemical industry and how it can boost the economy, a don in the Chemical Engineer­ing Department, University of Lagos (UNILAG), Prof. Abiola Kehinde, in a research document entitled, “Strategy for the Devel­opment of the Petrochemicals Industry in Nigeria,” disclosed that the Nigerian petrochemicals markets (excluding export of crude oil) was worth $14.03 bil­lion in 2008 with forecasts pro­jecting it could hit $29.7 billion by the end of 2015.

Abiola maintained that a re­structuring of the operation of Nigerian refineries, with greater private sector participation, was likely to increase the capacity utilisation of the refineries.

‘‘Once this is instituted, the cost structure of the Nigeria’s petrochemicals market would improve as crude oil is the main feedstock for the production of olefins and aromatics in Nige­ria,” he wrote.

But a former Project Manager and Managing Director of the NNPC’s Eleme Petrochemicals Company Limited, Dr. Edet Oa­himin-Akhimien, believes that the decision to privatise the firm was a bad business decision tak­en by the Federal Government and implemented by the Bureau of Public Enterprises (BPE).

He said the decision to privatise a company that was running for close to 10 years was not in the best interest of Nigerians.

The complex, according to him, rolled out its first product in August 1995 and was for­mally commissioned by the then Head of State, General Abdusalami Abubakar (repre­sented by the then Chief of Air Staff) in May 1999, and the privatisation of the company was in 2005/2006.

He regretted however that since the privatisation, the country has continued to import petrochemicals, thus depleting its lean foreign ex­change reserves while equally depriving Nigerians of job op­portunities.

But the Managing Direc­tor of Idorama Eleme Pet­rochemicals, Mr. Manish Mundra, believes that the buy-over of the company by Indorama has provided a lee­way for local manufacturers by saving them the challenge of sourcing foreign exchange in the face of its contribution to import substitution, that is, producing the raw materials that were hitherto imported into the country.

The company, he said, has immensely contributed to employment generation by employing more than 1, 200 Nigerians from the Niger Delta region and other parts of Nigeria.

‘He said: ‘I must tell you that through our exports, we have also put Nigeria on the petrochemicals map of the world and earned foreign ex­change for the country. We have contributed significantly to the industrial development and economic growth of Ni­geria.

“We have created mas­sive wealth and employment opportunities (direct and in­direct) for many Nigerian people. And very importantly too, we have been expand­ing our operations in Nigeria: In 2012, we built and com­missioned a new PET plant, the only one in sub-Saharan Africa. We also commenced construction of a new fertil­izer plant in 2013; the plant is now ready for commis­sioning, alongside two other complementary projects – an 84-kilometre gas pipeline and a port terminal at Onne Port in Port Harcourt. These three projects were all completed on schedule.”

He explained that as part of efforts to boost the economy, Indorama Corporation has invested about $3.5 billion in Nigeria since it became the core investor in Eleme Petro­chemicals in 2006.

‘‘I have mentioned some of our various projects. In the near future, we will also be investing in methanol and NGL plants. And by 2019, we would have invested a total of $4.7 billion to realise our vision of building the largest petrochemicals hub of Africa in Nigeria,” he said.

Meanwhile, most com­panies in the plastics, au­tomobiles, bottling, bever­ages, paints, pharmaceuticals, foam, and allied industries in Nigeria have, in the past eight years, sourced almost all their raw materials for products or packaging from Indorama El­eme Petrochemicals. This can be confirmed from such com­panies and the Raw Materials Research & Development Council of Nigeria. “Our mar­keting policies and practices have been designed to meet the needs of the Nigerian mar­ket with warehouses in Lagos, Kano, Port Harcourt,’’ he in­sisted.

But despite the claims by Indorama to have provided the needed boost for the country’s petrochemicals industry, the Nigerian Society of Chemical Engineers (NSChE) recently raised the alarm that the N20 billion ($100 million) annual investments in Nigeria’s oil and gas process chemical industry is in recession. The group maintained that the depression in the processed chemical industry was caused by the grounding into a total halt of the four refineries in Nigeria.

Former President of the NSChE, Dr. John Erinne, however, called on govern­ment to save revenues loss from refineries by speeding up its privatisation programmes.

Erinne, who gave an over­view of the oil and gas treat­ment chemical in Nigeria, disclosed that a surge of es­timated investments worth $7 million to $10 million per annum could be secured if the refineries are working opti­mally.

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