Attaining West Africa’s petrochemicals sector potential

Industry watchers attribute the surge in demand for petrochemicals to the presence of raw materials in Middle East and Africa. They also acknowledge rising shale gas exploration in North America and oil exploration in China as possible contributors.

According to a Grandview Research published in March, it predicted that global petrochemical market will reach over $750 billion dollars by 2020. It noted that increasing demand for petrochemical products in industries including transportation and construction is expected to drive growth over the next seven years.

An OPEC-sponsored publication, Petrochemical Outlook: challenges and opportunities published last year clarified the process of achieving petrochemical derivatives. It says there the two most common petrochemical classes: olefins (including ethylene and  propylene) and aromatics (including benzene, toluene and xylene isomers).

The report states that oil refineries produce olefins and aromatics by fluid catalytic cracking of petroleum fractions. Chemical plants produce olefins by steam cracking of natural gas liquids like ethane and propane. Aromatics are produced by catalytic reforming of naphtha. Olefins and aromatics are the building-blocks for a wide range of materials such as solvents, detergents, and adhesives. Olefins are the basis for polymers and oligomers used in plastics, resins, fibers, elastomers, lubricants, and gels.

Some petrochemical products are leading the fray in investments in the sector. Since 2014 ethylene has been accounting for over 25 percent market share due to increasing use of polyethylene in the packaging industry. It is projected to drive demand for ethylene over the forecast period.

Also propylene, a product widely used across industries such as packaging, rubber, electronics and plastics is also gaining traction. Increasing use of propylene derivatives along with adoption of improved technologies such as light steam cracker accounted for over 15 percent of the market share since 2014 and is expected to have a positive impact on growth.

Vast potentials, teething challenges

Industry data indicate that Africa is not reaching its full potentials for petrochemicals utilisation hence this has limited investments in the sector. Africa has 10 percent of the world’s oil reserves and proven reserves have grown by nearly 120 percent in 30 years. Nigeria alone has a proven reserve of 185 trillion cubic feet of natural gas, and currently up to 35 percent of associate natural gas produced is flared. Ghana’s Jubiliee fields alone have over 3 billion reserves.

According to a KPMG chemical study, energy analysts project that Africa will increase its production of oil from 9.4 million barrels per day in 2011 to 12 million barrels per day by 2020. In West Africa, the Gulf of Guinea remains a significant producer of hydrocarbons, supplying European and American markets.

The Organisation for Economic Co-operation and Development (OECD) estimates that 1.25 trillion will be invested in 30 years in African energy with upstream exploration and investments getting the biggest share of the pie.

Industry watchers say the challenges militating against investment in the sector are worsened by government policies and poor regulatory framework. Due to lack of full utilisation of refineries, West Africa’s petrochemical industry suffers neglect with huge costs to the economy.

In Nigeria, the most viable petrochemical company, Indorama Eleme Petrochemical Limited (IEPL) located in Port Harcourt, Rivers State, has an annual installed capacity of over 300,000 metric tonnes of ole¬fins, 250,000 metric tonnes of polyethylene and 80,000 metric tonnes of polypropylene, high value raw materials that could drive investments in paints, plas¬tics, explosives and fertilizers but this pales into insignificance in comparisons to the need for petrochemical products.

The company is currently the largest integrated olefins producer in West Africa with 82 percent market share in Nigeria. It completed construction of a mega-sized fertilizer project recently comprising 1.4 M MTPA nitrogenous fertilizer, a gas pipeline and jetty projects.

There a few other companies making strides in West Africa such as BASF and Indo-Ghana industries limited and analysts say more of this kind of initiative is required, considering it an aberration that West Africa with 7 refineries with a combined capacity of close to 800,000 barrels per day according to the data accessed from the world refinery list relies heavily on imports to meet her raw materials needs.

Africa holds just 5 percent of the 90 million barrels per day global refining capacity which is about 3 million barrels per day. West Africa has less than 25 percent of Africa’s refining capacity with most refineries commissioned in 1970s and 1990s operating below capacity.

“Industrial derivatives such as petrochemicals, chemical solvents, fertilizers, and plastics sectors can generate economic and industrial multiplier effects,” says Mordecai Ladan, director, Nigeria Department of Petroleum Resources (DPR), an upstream regulatory agency.

He adds, “Nigeria holds a great potential of developing its downstream sub-sector into becoming a refining and petrochemical regional hub for West Africa and Africa at large.”

Policy inadequacy is compounded by limited technology, infrastructural deficit and lack of funding.

Charting viable solutions

Analysts are of the view that the best way to benefit from investments in the sector is to create favourable policies will drive manufacturing which is currently weak in Africa. A recent KPMG study estimated Africa’s manufacturing market is about $250 billion which falls below averages in Europe and America.

West Africa’s infrastructural deficit presents another critical challenge especially the unavailability of power supply for over 600 million people in Africa. This only raises the cost of production and setting up petrochemical plants.

Availability of feedstocks such as crude oil and natural gas, experts say is a big  plus in developing a profitable petrochemicals sector. Pragmatic strategy is required to harness West Africa’s potential.

Abiola Kehinde of the chemical engineering Department University of Lagos suggested that one way to tackle the problem of refineries is for the paints, packaging, pharmaceuticals, textile, minerals and other companies that utilize its products as well as companies involved in the importation of fuel products to be encouraged to mobilize funds for the rehabilitation of the existing refineries.

West Africa with a population of over 350 million people has a bourgeoning consumer retail market which spells huge potential for petrochemicals. End users of petrochemicals including construction, packaging, agriculture, industrial production, automotives and fibres are in emerging sectors in the West African market will be best served by a thriving petrochemicals sector.

ISAAC ANYAOGU