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It is coming a bit late, but for Nigeria it is better late than never. Africa’s largest oil producer is on its way to becoming a petrochemical hub with three plants expected to bring fertilizer output to 7.2 million metric tons next year, along with 900,000 thousand metric tons of polypropylene and 860,000 metric tons of polyethylene.
BusinessDay research reveals that these capacity additions could value Nigeria’s petrochemical market at $5.8 billion per annum by 2018.
Nigeria’s current biggest fertilizer producer, Indorama Eleme Petrochemical Limited, commissioned its expanded plant in July 2017, pushing capacity to 1.5 million metric tons of urea and 4,000 metric tons of NPK fertilizer.
The company’s plant is also designed to produce 120,000 metric tons of polypropylene and 360,000 metric tons of polyethylene per year. Ethylene is the foundation for making plastics essential to consumer and industrial goods.
Processing plants like Indorama’s then turn the chemical into polyethylene, the world’s most common plastic used in garbage bags and food packaging.
Notore Chemical Industries is also expanding its facilities and plans to ramp up production by 1.75 million metric tons of urea and 1 million metric tons of NPK.
Dangote Fertilizer Plant, the biggest planned capacity in the world, is set to come on stream in January 2018, producing about 3 million metric tons of urea yearly. It will also produce about 780,000 metric tons of polypropylene and 500,000 metric tons of polyethylene.
These plants will raise Nigeria’s fertilizer capacity to 7.2 million tons per annum (p.a) at an average cost of N150,000 per metric ton, putting the value of output at N1.088 trillion ($3.5bn).
According to S&P Platts, the average price of polypropylene is $1,212 per ton.
Dangote’s plant is expected to add 780,000 capacity of polypropylene while Indorama currently does 120,000 metric tons of polypropylene, valuing the combined output at $1.09 billion.
Dangote also plans 500,000 metric tons of polyethylene capacity while Indorama currently produces 360,000 metric tons of the product, putting the expected value at $1.1 billion at the average price of $1,357.18 per ton, according to Platt’s data.
The growth of Nigeria’s middle class over the past decade is driving the consumption of petrochemical products, and analysts say the value to the economy is enormous.
Nigeria currently exports over 1.8 million barrels of crude oil per day without adding much value to it and benefiting from its vast derivatives. The petrochemicals industry traditional rule of thumb is that chemicals demand grows at 1.3 to 1.4 times the rate of GDP.
“Value added to oil and gas output needs to urgently improve by implementing diversification within the sector. This requires investments across the downstream sector to develop petrochemicals, fertilisers, methanol and refining, industries relevant in both industrial and consumer products, which Nigeria currently imports,” say analysts at PwC in a study urging Nigeria to look beyond oil.
Petrochemicals will drive 70 percent of the growth in demand for oil through 2035, according to McKinsey and Co. estimates. Nigeria’s increased petrochemicals production would also lead to increased demand for domestic gas.
Producers often use gas as a raw material for ethylene and also to power their massive cracking furnaces and other equipment.
Dangote Industries Limited is planning a 1,100km gas pipeline capable of evacuating 3 billion standard cubic feet of gas, while Indorama’s facility expansion is adding 83km of gas pipelines.
“In addition to the hundreds of thousands of Nigerians employed in the oil and gas sector, gas exploration and processing may very well lead to a revival of manufacturing in Nigeria. Natural gas will help Nigeria to develop clean alternative energy sources in various ways, including fertilizer for ethanol, methane for hydrogen and power generation,” Olufolu Wusu, an energy lawyer and co-founder of Megathos Law Practice, said of the expected value from increased domestic gas.
Nigeria currently experiences severe shortage of gas to industries with operators complaining of non-freeing up of gas prices fixed at $7 per scf by the Ministry of Petroleum Resources.
Before the completion of the 1,100km gas pipeline, Dangote’s Fertilizer plant would first be powered by the Escravos-Lagos Pipeline System (ELPS), which starts at Escravos Gas Plant (EGP) operated by Chevron, and has 680 MMcf/d capacity to ease local supply to domestic market, according to those familiar with the matter.
The EGP facilities currently deliver 215MMcf/d to the domestic gas market by Escravos–Lagos Pipeline.
Nigeria’s bourgeoning petrochemical sector is attracting big players like DowDuPont Inc. Chemical Company, one of the world’s biggest petrochemical firms.
The company estimates that the plastics industry in Nigeria is growing at 6 percent per annum.
DowDuPont Inc. said last year that Nigeria was a key market for the packaging industry with almost 50 percent of the population living in urban areas and a new generation of consumers driving GDP growth.
ISAAC ANYAOGU
