NIGERIA. REFINING As refineries come into private ownership, the focus is on higher-value-added products
Motorists celebrate moves to a more liberal fuel market

Olefins, polyethelene and polypropylene are produced for export by the Eleme plant

A few years ago, Nigerians had to queue for hours at petrol stations just to put petrol in their cars because of chronic fuel shortages. In a country that produced just under two million bpd of crude oil, there was an unhealthy dependency on imported fuel products.
Today, the picture is very different. Improvements in the oil industry have been wide-ranging, not only resulting in higher production capacity and reserves, but also a more liberalised market structure and efficient downstream industries. Most importantly for the motorist, the queues have vanished.
Fuel marketing companies have been sold to private investors under the government’s privatisation initiative and there has been investment in the country’s four refineries in readiness for their eventual sell-off. Privatisation will soon bring new refineries and plants into full private ownership. There is also an increasing focus on higher-value-added areas such as petrochemicals.

The government’s strategy is to create a modern, diversified petrochemicals base

A case in point is state-owned Nigerian National Petroleum Corporation (NNPC), which owns a stake in many of these downstream companies as well as a large slice of the upstream sector through its production joint ventures with companies such as Shell and Mobil.
NNPC has settled the arrears in its financial obligations to its multinational partners, and this will in turn boost oil exploration and production work. It is also investing in its downstream businesses to ensure a more reliable and diverse fuel supply base. There is a new emphasis on service, accountability and transparency within the organisation.
NNPC group managing director JE Gaius-Obaseki says that priority should be given to professionalism in a bid to win back investor confidence. “It’s an industry that is capital intensive and demands the best in technology, so of course professionalism is an imperative,” he says.

In the refineries sector, the country is processing at near capacity and deregulation is having a positive impact on markets. “The refineries are all coming back,” he says. “In fact, today, in some of the products, gas oil and kerosene for instance, we’re producing much more than is required. Virtually every depot in the country is stocked with products. If we continue the way we’re going very soon we’ll have to export gas and kerosene.”
In the longer term this progression will see the development of a more sophisticated petrochemicals industry in Nigeria that will support both domestic industrial growth and contribute to export earnings.

The government has a three-phase strategy in place designed to create a modern and diversified petrochemicals industry based on its large oil and gas reserves. Phase one projects in the late 1990s included the establishment of plants in Kaduna and Warri producing a variety of petrochemical products such as carbon black and polypropylene – raw materials for a variety of industrial applications.
The establishment of the Eleme Petrochemicals Company in Port Harcourt was the second phase of the strategy. In the longer term, under phase three, there are plans for an aromatics complex to broaden and expand the production base.

Eleme – in which NNPC is a stakeholder – is an example of what can be achieved in the diversification of the Nigerian energy sector. About half of the output from the plant, which was only commissioned in 1999, is exported. The success of the project means not only diversification of the economy, but also savings in foreign exchange, the acquisition and development of new technology and the creation of jobs.
Eleme has an annual installed capacity of 300,000 metric tonnes of olefins, 250,000 metric tonnes of polyethylene and 80,000 metric tonnes of polypropylene, which is again used in a wide number of applications, from textiles to telecommunications.

‘We will have the confidence to get finance’ EA Dennar

Dr EA Dennar, Eleme’s managing director, says that the intention is to become one of the best producers in the world, but that the biggest constraint facing the plant at the moment is the lack of capital, a traditional Nigerian business complaint. It means future plans to produce xylenes and other complex materials are on hold for the time being.
“The NNPC has charged us with the responsibility of trying to stand on our own,” he says. “Once we can reach installed capacity and sustain it, then we will have generated the revenue and confidence to be able to go to the banks and other lending institutions and say we wish to proceed with the other phases. Completing those stages would enhance the plant’s finances and help the project.”

Despite these constraints on growth, the plant – complete with a technology development centre, research skills and highly-trained personnel – is still an important contribution to the Nigerian economy. The multiplier effect on the national economy, in terms of new skills as well as harder economic factors, will be crucial in the development of Nigeria’s modern energy sector.
Dr Dennar believes that if Eleme can prove its worth in the next few years, servicing its existing loan commitments and supplying customers on a reliable basis, it will have a bright future.
“The challenges will include getting new technology, being able to develop the people who can understand and operate it, as well as managers to handle such a plant,” he says. “Once we do that I believe we will be on the road to greater things.”