Petro­chem­i­cal in­dus­try in dire state

Business a.m. - - FRONT PAGE - Sto­ries by Bukola Od­u­fade

THE ABYSMAL STATE of Nige­rian re­finer­ies has led to the near death of one of the most im­por­tant com­po­nents of the oil and gas busi­ness, the petro­chem­i­cal in­dus­try. The petro­chem­i­cal in­dus­try, a sub­sec­tor of the oil and gas in­dus­try lives on the back

THE ABYSMAL STATE of Nige­rian re­finer­ies has led to the near death of one of the most im­por­tant com­po­nents of the oil and gas busi­ness, the petro­chem­i­cal in­dus­try. The petro­chem­i­cal in­dus­try, a sub­sec­tor of the oil and gas in­dus­try lives on the back of the crude oil re­fin­ing ca­pac­ity but Nige­ria, with four re­finer­ies, pro­cesses far less than 445,000 bar­rels of crude oil per day, in­deed far less than 30 per­cent of their uti­liza­tion ca­pac­ity.

The uses of petro­chem­i­cals can­not be over ex­ag­ger­ated as they can be found in ev­ery in­dus­try, rang­ing from ser­vices to man­u­fac­tur­ing and even phar­ma­ceu­ti­cals. The In­ter­na­tional En­ergy Agency (IEA) de­scribed petro­chem­i­cals as an “en­ergy blind spot” be­cause pol­icy mak­ers barely pay at­ten­tion to it and Nige­ria too is guilty of this. So much fan­fare is made of the re­finer­ies such that an in­te­gral part is of­ten over­looked.

Petro­chem­i­cal prod­ucts, like olefins (eth­yl­ene, propy­lene, bu¬ta­di­ene) and aro­mat­ics (ben­zene, toluene, xy­lene) are used in end- user mar­kets such as paints, plas¬tics, ex­plo­sives and fer­til­iz­ers sub-sec­tors. They are also re­quired to man­u­fac­ture many parts of the mod­ern en­ergy sys­tem, in­clud­ing so­lar pan­els, wind tur­bines, bat­ter­ies, ther­mal in­su­la­tion and elec­tric ve­hi­cles.

The coun­try cur­rently has just one fully-fledged petro­chem­i­cal plant, In­do­rama Eleme Petro­chem­i­cals Com­pany Lim­ited. In­do­rama Eleme Petro­chem­i­cal Lim­ited (IEPL) lo­cated in Port Har­court, Rivers State, has re­mained a lone ranger in Nige­ria’s petro­chemi¬cal in­dus­try, and as at 2013, the firm had an an­nual in­stalled ca­pac­ity of 300,000 met­ric tonnes of ole¬fins, 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 for­eign ex­change if ex­ported.

Even the Warri and Kaduna re­finer­ies that ought to pro­vide the much-needed leap for the coun­try’s petro­chem­i­cals in­dus¬try ap­pear to have failed to pro¬duce 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 de­ter¬gents. But this ca­pac­ity has also been af­fected by the low crude oil re­fin­ing ca­pac­ity in both firms.

The coun­try’s pol­icy mak­ers and op­er­a­tors of the na­tion’s oil and gas in­dus­try have failed to see the in­her­ent po­ten­tials in de­vel­op­ing the petro­chem­i­cal in­dus­try and us­ing it as a pro­pel­ler to launch Nige­ria into in­dus­trial de­vel­op­ment.

Com­ment­ing on the vi­a­bil­ity of the petro­chem­i­cal in­dus­try and how it can boost the economy, Abi­ola Ke­hinde, a pro­fes­sor at Univer­sity of La­gos, in a re­search study dis­closed that the Nige­rian petro­chem­i­cals mar­ket (ex­clud­ing ex­port of crude oil) was worth $14.03 bil¬lion in 2008 with fore­casts pro¬ject­ing it could hit $29.7 bil­lion by the end of 2015.

Ac­cord­ing to a re­cent re­port by IEA, petro­chem­i­cals will drive more than a third of the growth in world oil de­mand by 2030, and nearly half the growth by 2050, adding nearly seven mil­lion bar­rels of oil a day.

Fatih Birol, ex­ec­u­tive di­rec­tor of In­ter­na­tional En­ergy Agency, also said petro­chem­i­cals are par­tic­u­larly im­por­tant given how preva­lent they are in ev­ery­day prod­ucts.

“Our economies are heav­ily de­pen­dent on petro- chem­i­cals, but the sec­tor re­ceives far less at­ten­tion than it de­serves. Petro­chem­i­cals are one of the key blind spots in the global en­ergy de­bate, es­pe­cially given the in­flu­ence they will ex­ert on fu­ture en­ergy trends.

“In fact, our anal­y­sis shows they will have a greater in­flu­ence on the fu­ture of oil de­mand than cars, trucks and avi­a­tion,” he said.

De­mand for plas­tics, ac­cord­ing to the study re­mains the key driver for petro­chem­i­cals from an en­ergy per­spec­tive, adding that it has out­paced all other bulk ma­te­ri­als (such as steel, alu­minum, or ce­ment), nearly dou­bling since 2000.

Nige­ria needs to speed up the re­vamp­ing of its re­finer­ies to catch up with the rest of the world, even Saudi Ara­bia, a lead­ing oil pro­ducer an­nounced a part­ner­ship with SABIC to build a $20 bil­lion petro­chem­i­cal plant.

Ex­perts like Abi­ola have main­tained that a re¬struc­tur­ing of the op­er­a­tion of Nige­rian re­finer­ies, with greater pri­vate sec­tor par­tic­i­pa­tion, would likely 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 Nige¬ria,” he wrote.

IEA also re­ported that ma­jor oil com­pa­nies were in­creas­ingly pur­su­ing in­te­gra­tion along the petro­chem­i­cal value chain.

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