Renewed Interest to Put Nigeria on World Petrochemical Map

By Gideon Osaka

Nigeria is home to significant reserves of petroleum and natural gas, and has been major producer of crude oil for many years. Although the petrochemical segment of the industry has not experienced corresponding growth as the oil sector over the past decades, recent developments suggest there are better times for the petrochemical industry in Nigeria.

Valuechain reports that the petrochemical industry is made up of companies that produce a range of chemicals and products from petroleum and natural gas, including plastics, fertilizers, paints, and other industrial chemicals. 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.

Nigeria’s vast hydrocarbon resources and large consumer market provide it with a natural competitive advantage for the development of a strong and sustainable petrochemicals sector, an advantage the country has so far not capitalized on. The country’s failure to develop its petrochemical plants is largely the reason manufacturing companies are dependent on imports for over 80 per cent of their raw materials said to be worth over $10 billion (about N2 trillion) yearly. 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.

However, if recent developments are anything to go by, the needed boost for the country’s petrochemicals industry may have come, putting Nigeria on the petrochemicals map of the world.

One of the key drivers of the surge in the petrochemical industry is Nigeria’s population growth and the resulting demand from the plastics, automobiles, bottling, beverages, paints, pharmaceuticals, foam, and allied industries in Nigeria. As more people move into cities and begin to consume more goods, the demand for plastics, paints, and other petrochemical products continues to grow significantly.

Another important factor driving the growth of the petrochemical industry is the country’s increasing focus on industrialization and economic diversification which partly culminated in the declaration of 2021 to 2030 as the decade of gas by the Nigerian government to ensure Nigeria has the highest petrochemical production capacity in the world and to catalyse sufficient changes that will position the country as the largest Petrochem manufacturing hub in the world. The petrochemical industry is seen as a key part of this strategy, as it can help to create value-added products from the region’s petroleum resources.

With the imminent commencement of full operations of the Dangote Refinery and Petrochemical Company, Nigeria is set to witness groundbreaking development in not just the petroleum but also petrochemicals sector.

Refineries are very important to the petrochemical industry because they are major sources of feedstock used by petrochemical plants. Oil refineries produce olefins and aromatics which are very useful as raw materials and feedstock in chemical and plastic industries and in the production of synthetic rubbers. The Dangote Refinery and Petrochemical Company being the largest single-train petroleum refinery in the world, is poised to revolutionize Nigeria’s petrochemical market. The production of about 900K tons per annum polypropylene from the plant showcases the facilities’ versatility in the production of petrochemical products.

Activity in the petrochemicals industry in Nigeria is expected to receive a major boost with countries like China and India making in-roads in the sector. Apart from being a key investment player within Nigeria’s upstream industry, a significant amount of Nigeria’s crude oil and gas goes to China with petrochemicals (methanol in particular) exports much more limited in volume. However, China has recently taken the lead in venturing into other petrochemicals in Nigeria. In October 2023, Chinese firm China Road and Bridge Corporation signed an EPC agreement to build a methanol facility within the Brass Region of Bayelsa State in addition to constructing a port. The port is expected to have a capacity of 2 million MT of methanol to be exported to China. Methanol is one of the world’s most important chemical commodities and is gaining attention as a potential low-emission fuel among its already long list of industrial uses.

In September last year NNPC Ltd. and Indorama Eleme Petrochemicals Ltd. which owns the world’s largest single-train Urea Plant located in Port Harcourt, signed a Memorandum of Understanding (MOU) that will among others, unlock the petrochemicals subsector with downstream production of about 4.8 Million Tonnes Per Annum (MTPA) of products including methanol, urea, and fertilizer. Other benefits include the creation of about 55,000 direct and indirect employment opportunities, the development of a condensate refinery to boost petroleum product supply and reduce product importation, annual GDP contribution of over $3.8bn, and attraction of over $7bn of foreign direct investment into the country.

Despite the potential for growth in the petrochemical industry, several challenges remain unaddressed.  The country’s low refinery-capacity utilisation over the years continue to result in lower petrochemical yields, creating a need for imports. The refineries in Port Harcourt, Warri and Kaduna, with a combined capacity of around 445,000 barrels per day (bpd), operated well below full capacity owing to years of mismanagement and corruption.

Another challenge is the perceived lack of interest by the international oil companies to invest in petrochemicals in Nigeria. Most of the IOCs prioritize investments based on their core competencies, strategic goals and opt for investments in areas with more accessible technology and infrastructure. This prevailing situation has been noted by the Nigerian Senate which recently criticized the IOcs for not investing in the petrochemical industry and other associated manufacturing activities, whereas IOCs in other oil-producing jurisdictions make such investments and contribute significantly to those economies.

Speaking recently during a meeting with the Nigerian Content Development and Monitoring Board (NCDMB), in Abuja, the Chairman of the Senate Committee on Local Content, Natasha Akpoti-Uduaghan, said the Committee would invite the international oil companies on the need to invest in petrochemicals with a view to compel the companies to create tangible value in the Nigerian economy beyond the extraction and sale of crude oil.

Akpoti-Uduaghan was quoted as saying, “We need to get them round the table and tell them what we want as a country as against watching them export crude oil only.”

In his comment, the Executive Secretary NCDMB, Felix Ogbe, explained that most oil conglomerates have different arms, which include the downstream companies which make such investments in the petrochemicals and linkage sub-sectors.

He, however, noted that most operating companies in Nigeria do not have such subsidiaries in the country, hinting that the board is willing to support indigenous firms that are interested in such ventures.

Ogbe said, “The board lacked the mandate to compel the IOCs to change their business model in Nigeria, but was collaborating with some oil companies to develop the Nigerian Oil and Gas Parks Scheme which is designed to manufacture oil and gas equipment and components as well as other manufacturing and research and technology programmes”.