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NIGERIA - The Petrochemical Sector.

The civilian government of President Olusegun Obasanjo, wanting to turn Nigeria into a centre for production and export of petrochemicals in West Africa, is promoting the coastal area of Lekki as a special industrial park. Called Export Processing Zone (EPZ), this is a 200-hectare park where investors get a variety of advantages ranging from low prices for gas feedstocks to fiscal incentives, cheap labour, etc.

President Obasanjo, personally promoting EPZ-based projects, in October 2002 laid the foundation of a $2.5 billion gas-to-petrochemicals complex at Lekki. To be on stream in 2006, this will consist of a single-train, 2.5 million tons a year methanol plant - the biggest of its kind in the world. The plant will feed a methanol-to-olefins (MTO) unit to produce 400,000 tons/year of polypropylene (PP) and 400,000 tons/year of high density polyethylene (HDPE).

The investor, Eurochem Technologies of Singapore, has set up two companies to operate the plants: Viva Methanol for the GTM venture and Axinova Polyolefins for the downstream units. They will consume 220 MCF/day of natural gas.

Obasanjo wants Eurochem to speed up work on this project and says the EPZ will attract plastics converters to use the polyolefins as well as other industries. He points to strong domestic demand for chemicals, "very competitive" natural gas prices, and excellent export opportunities to neighbouring countries.

Nigeria is rich in natural gas feedstocks produced at relatively low cost. It has been said for years that, if the incentives improved, these feedstocks should attract investors in new petrochemicals projects from among Western companies operating Nigeria's main petroleum ventures.

Foreign companies producing oil and gas in Nigeria have proposed several big joint ventures to produce olefins and polymers, a range of aromatics, methanol and oxygenates. They have pledged to finance these projects. But their main conditions, as ExxonMobil keeps demanding, are that they should control these ventures and that prices of their chemicals sold on the local market are set at international market levels.

Now the petrochemical sector is controlled by the state-owned Nigerian National Petroleum Corp. (NNPC) which has a monopoly on the main chemicals sold in the country. But President Obasanjo is determined to see the downstream sector, including the petrochemicals business and oil refining, deregulated and privatised.

Nigeria has had a three-phase master plan, launched in the 1970s, to produce a wide range of petrochemicals. But so far only two of the phases have come on stream, after many years of delay in each phase caused primarily by lack of financing and bad management by successive military regimes.

The petrochemicals sector reached an important threshold in late 1995 with completion of the Phase Two plants. But the sector has experienced a number of problems mainly due to gross inefficiency and corruption.

Local production of a wide range of chemicals is vital to Nigeria as it should help substitute products currently being imported at high cost, thus saving hard currency. Exports to nearby countries would generate income much needed in the downstream sector for expansions, maintenance, spare-parts, etc.

As in the oil refining sector (see DT No. 6), existing petrochemical plants in Nigeria often operate below capacity or are shut down as a result of poor maintenance, lack of feedstocks due to refinery breakdowns, debts, etc.

Construction of new plants is always delayed. Work on the Eleme polyethylene plant near Port Harcourt was delayed for eight years because of the government's heavy debts to French and Japanese contractors working on the project.
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Publication:APS Review Downstream Trends
Date:Aug 15, 2005
Previous Article:NIGERIA - GTL Venture.
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