ListFree.org (Press Release) - Friday, January 29th, 2010 -

Long-term structural and political factors will continue to hold back the Nigerian petrochemicals industry over the medium-term with little prospect of significant investment in the sector over the next five years, according to BMI’s latest Nigeria Petrochemicals Report. One of the many problems facing the Nigerian petrochemical industry is the lack of competitively priced and reliable feedstock supplies. While Nigeria is only just beginning to tap into its potential in natural gas, which can serve as an important source of competitively priced feedstock, the country’s refining sector is still insufficient to process all the nation’s crude output or provide sufficient low-cost naphtha. Nigeria’s state-held refineries (Port Harcourt I and II, Warri, and Kaduna) have a combined nameplate capacity of 550,000 barrels a day (b/d) (less than a quarter of typical crude output), but problems including sabotage, fire, poor management and lack of regular maintenance contribute to a low current capacity of less than 300,000b/d. Oil production has also been unreliable, due to political instability. In October 2008, Nigeria announced that its output had fallen to around 1.5mn b/d. The figure is a worrying reflection on the problematic security situation, which has caused Nigerian output to remain well below the country’s capacity of 2.2mn b/d. A number of petrochemical project proposals have been announced in recent years only to be scrapped due to political and security issues. Much is likely to depend on political stability, and how the government fares in handling the growing labour unrest over the proposed privatisation of the sector. There is also government resistance to companies’ demands for operational control of the proposed joint venture entities and that the chemicals output sold on the local market should be priced at international market levels. The most promising development is the US$2.5bn Viva Methanol methanol-to-olefins (MTO) project will have a positive impact on the country’s petrochemicals sector. The facility is scheduled for start-up in 2012 with capacity of 1.3mn tonnes per annum (tpa) of ethylene and propylene, 2.5mn tpa methanol, 400,000tpa of PP and 400,000tpa of HDPE. However, judging by the country’s past experience with handling large petrochemicals developments, the MTO project will face delays and BMI does not envisage it coming onstream over the forecast period to 2013. Poor infrastructure, political instability, labour militancy, sabotage, poor management and corruption will remain barriers to investment which raised the risks and start-up costs of downstream projects. Unless these are addressed, it remains doubtful that the government would be able to expand the petrochemicals sector. Consequently, BMI forecasts that Nigerian petrochemicals capacity will remain at current rates: 300,000tpa of ethylene, 125,000tpa of propylene, 250,000tpa of PE and 80,000tpa of PP. The petrochemicals sector has been targeted for privatisation in order to improve efficiency and add value to Nigeria’s oil and gas output. BMI doubts that any serious investor would consider Nigeria a viable option for developing and expanding its petrochemicals sector. This has been proven by the government’s repeated failure to attract any interest in its proposed privatisation of petrochemicals companies. Nigeria comes last in BMI’s Business Environment Rankings for the Middle East and Africa with 25.2 points, 14.0 points behind Algeria. With its relatively small petrochemicals industry unlikely to expand significantly over the next five years, Nigeria is not expected to improve its position. Despite the country’s obvious potential, there are a multitude of structural problems to overcome before investors can take Nigeria seriously.

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Categories:	Business, Free
Tags:	bd, Energy, ethylene, Industrial, nigerian, petrochemical, petrochemicals, poor, priced, privatisation, proposed, Research, start-up

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