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NigeriaNigeriaNigeriaPresented at the NSChE/MAN Petrochemicals

WorkshopLagos, September 6, 2012

Dr. Iheanyi Nwa Ohiaeri, C.Eng., FNSChE, FIChemE

CEO, PKA Energy Limited

TUNISIA

MAP OF AFRICAMOROCCO

ALGERIA

Mediterranean SeaTUNISIA

LIBYA

MALI

MAURITANIA

WESTERNSAHARA

LIBYAEGYPT

NIGER

SIERRA

SENEGAL

GUINEA

COTE

BURKINAFASO

BENIN

NIGER

NIGERIA

CHADSUDAN

ERITREA

ETHIOPIASIERRALEONE LIBERIA

TOGO

D'IVOIRE

GHANA

GABON

EQUATORIALGUINEA

CENTRAL AFRICAN REPUBLIC

CAMEROON

KENYA

UGANDA

South Atlantic Ocean

ANGOLA-CABINDA

CONGO

BURUNDI

DEMOCRATIC REPUBLICOF CONGO

TANZANIA

RWANDA

MALAWI

0 500

Km

1000

ANGOLA

NAMIBIA

ZAMBIA

MALAWI

ZIMBABWE MOZAMBIQUE

Presentation OutlinePresentation Outline• Overview of Nigerian Oil & Gas IndustryOverview of Nigerian Oil & Gas Industry• Gas Utilization Projects• Introduction to PetrochemicalsIntroduction to Petrochemicals• The Case for Petrochemicals Development• Other Country Comparisons• Other Country Comparisons• Petrochemicals Development Strategy• The Future Beckons• The Future Beckons

Nigerian Oil & Gas: An Overview

Af i ’ L t P d f C d OilUpstream:• Africa’s Largest Producer of Crude Oil

•Daily Production > 2.50 million barrels per day (Year 2011)•Proven(2P) Oil Reserves 26.5 billion barrels (2011)•Govt. Aspiration 40 billion barrels of Proven Reserves by 2020 with

4 5 million barrels per day production capacity4.5 million barrels per day production capacity

• Deepwater Activities – PSCs Licensing On-going>40 PSCs signed so far>40 PSCs signed so far

• Operating Arrangements: Joint Venture PartnershipsProduction Sharing ContractsProduction Sharing ContractsSole Risk Arrangements

Nigerian Oil & Gas: An Overview

Downstream:

• Current Refining Capacity – 445,000 bpd( i d t f i d ti d d)( inadequate for growing domestic demand)

• Downstream Sector fully Deregulated•18 licenses for New Refineries Granted

• Privatisation of NNPC’s Refineries Planned

•2 New Grassroots Refinery JVs Planned by NNPC and Foreign Investors

Privatisation of NNPC s Refineries Planned

Nigerian Oil & Gas: An Overview

• Nigeria is 7th Largest Gas Resource GloballyGas:• Nigeria is 7 Largest Gas Resource Globally

•Daily Production 2.14 Tcf (2010)•Gas Reserves 153.2 Tcf (2010) ( )•Gas Utilisation 1.37 Tcf (2011)•Flare Ratio 12% (2010)•Govt Objective Flare Out by Year 2013•Govt. Objective Flare Out by Year 2013•Committed Gas Reserves represents 42% of Total Reserve•R/P ratio > 100 Years; Sector vastly Underutilised

NIGERIA’S Gas ReservesAssociated Gas Reserves

By CompanyA iMobil

TOTAL (2P)RESERVES 153.2 TCFDec. 2010

ELF

Chevron7%

Agip9%

Mobil21%Proposed

22%

Other4%

3%

Existing Projects

18%

Undeveloped Gas 58%

Shell56%

Mobil7%

Agip10% Ch

Future Projects

7% 10% Chevron6%

ELF 6%

Other7%

Non - Associated Gas Reserves By

Shell64%

7%G s ese ves yCompany

Oil & Gas Fields Map of Nigeria

Gas Utilisation ProjectsExisting & On-Going Key Projects

• Bonny NLNG Trains 1 - 6• Escravos GTL and LPG Gas Projects by

Ch

Existing & On-Going Key Projects

Chevron• West African Gas Pipeline Project• AGIP 450 MW IPP• Shell 936 MW IPP• Shell 936 MW IPP• Notore Fertiliser , Onne• Eleme Petrochemicals

Proposed Projects • Bonny NLNG Train 7 • Brass LNG Project• OK LNG Project• Exxon Mobil IPP Project• Trans-Saharan Gas Pipeline Project

Introduction to PetrochemicalsDefinition

• Petrochemicals are products

Definition

based on chemicals derived from the processing of oil, natural gas and coal.

Feedstock Options• For Nigeria, the optimum feedstock option is natural gas for reasons of availability and cost

The Role of Natural Gas in Petrochemicals e o e o atu a Gas et oc e ca sDevelopment

• Country of over 150 million people has only two petrochemicals manufacturers – Notore & Eleme Petrochem

• Almost all petrochemicals demand is met by importsAlmost all petrochemicals demand is met by imports

• Government has no defined petrochemicals• Government has no defined petrochemicals development Policy

Th St t f P t h i l D l tThe Status of Petrochemicals Development

• The foregoing poses a dilemma for the industrial and i d l t f t f Ni ieconomic development future of Nigeria

• A serious re-think on the development of the chemicals industry in Nigeria is an economic imperative

• The idea of the Vision 20:20:20 agenda, in the absence of a thriving chemical industry ridicules the nation’sof a thriving chemical industry, ridicules the nation s policy makers

Natural Gas Production and Usesatu a Gas oduct o a d Uses

-

 Natural Gas Production & Uses

The Case for Petchem DevelopmentThe Case for Petchem Development

• Nigeria needs to develop a petrochemicals industry in d t dd l t d l ti t l ( ilorder to add value to a depleting natural resource (oil

and natural gas)

• The current hydrocarbon resource development strategy which emphasizes the export of raw materials is sub-optimal for the realization of national developmentoptimal for the realization of national development objectives.

• The current emphasis on the export of oil and natural• The current emphasis on the export of oil and natural gas will not create the skills and jobs pool required for the realization of even the Millennium Development Goals, let alone the Vision 20:20:20 aspirations , p

The Case for Petchem Development 2The Case for Petchem Development 2

• The Nigerian oil and gas industry is very capital and k l d i t i d h littl i t th lknowledge-intensive and has little impact on the general population and GDP

• The petroleum industry employs less than 30,000 people directly

• Nigeria LNG, with an investment of over $25 billion, employs less than1,200 people

• Eleme Petrochemicals Limited, with an investment of ,under $1billion, employs over 2000 staff and impacts on the local economy through the supply of hitherto imported raw materials to the local plastics industry in dditi t taddition to exports.

Other Country ComparisonsOther Country Comparisons

• Nigeria (and Angola) are the only OPEC countries that do not haveNigeria (and Angola) are the only OPEC countries that do not have

a well-developed petrochemicals industry. Angola’s case is

understandable

• Saudi Arabia, Iran, Iraq and Kuwait who all have larger gas reserves

than Nigeria and smaller populations, do not export natural gas but g p p p g

instead have invested heavily in petrochemicals development.

• Trinidad and Tobago, a small Caribbean country with only 10% of g y y

Nigeria’s gas reserves and 1% of its population, has developed an

industrial complex at Port Lisas which is home to 15 methanol and

15 fertilizer plants of the size as the original Notore plant at Onne.

Other Country Comparisons(2)

• Nigeria imports the bulk of its fertilizer requirements from T i id d d T bTrinidad and Tobago

• Our tiny neighbour, Equatorial Guinea, has developed a y g q ppetrochemicals policy that will ensure a rapid inflow of FDI to the local industry. The country has a 4,000MTD methanol plant, which is the source of Nigeria’s methanol imports for natural gasmethanol imports for natural gas processing.(Unbelievable, but true)

Th f i i i t bl f ti l• The foregoing scenario is untenable for any national development agenda.

• A petrochemicals development strategy is therefore a national development imperative

Petrochemicals Development Strategy for Nigeriaet oc e ca s e e op e t St ategy o ge a

The strategic goals of the National Petrochemicals D l t h ld bDevelopment program should be :

• To optimize the use of abundant natural resources (oil and natural gas)

• To support and develop domestic capacity in critical petrochemical products and technologies

• To enhance national competitiveness in the downstream petroleum businessp

• To build local technological capacity which will support the national development agendathe national development agenda

Petrochemicals Development Strategy for Nigeria I l t ti I ti– Implementation Imperatives

• This petrochemicals development strategy must necessarily involve incentives and subsidies on gas pricing and capital allowances asincentives and subsidies on gas pricing and capital allowances as currently offered to the oil and gas exploration companies

• The adoption of a fully commercial gas price regime will scuttle the p y g p gdevelopment of a thriving petrochemicals industry in Nigeria.

• If Government can spend billions of dollars subsidising the

i t ti f t l d t it t l t f timportation of petroleum products, it can at least forgo some tax

income (through subsidies) in order to realize a national industrial

development imperativedevelopment imperative• National aspirations and sheer “business sense” requires an

expedited development of petrochemical resources for the realization of Government’s aspirationsp

Elements of Petrochemicals Development PProgram

A National petrochemicals development program will involve the following process:following process:

-identifying the key needs of the nation for petrochemical products

and technology

-defining a vision and mission for Nigeria’s petrochemicals program

-identifying the Strengths, Weaknesses, Opportunities and Threats

(SWOT) of the Nigerian petrochemicals business, and

-defining the key technologies and other areas needed to address

the nation’s needs in petrochemicals technology

SWOT Analysis For Nigerian Petrochem Developmenty g p

In a SWOT analysis, terms are defined as follows:

Strengths : attributes of the organization that are helpful for achievingth bj tithe objective.

Weaknesses: attributes of an organization that are harmful for achieving the objectiveachieving the objective.

Opportunities: external conditions that are helpful for achieving the objectiveobjective.

Threats: external conditions that are harmful to achieving the objectivej

SWOT Analysis For Nigerian Petchem Development(2)y g p ( )

Strengths WeaknessesAvailability of raw materials (natural gas and crude oil)Potentially low raw material

Absence of petchemdevelopment policyUnstable policy regime(gas y

priceLocal pool of skilled labourLarge local market

p y g (gpricing, incentives, development thrust)Poor local investor baseLarge local market

OpportunitiesL i l k t

ThreatsAlternative regionalLarge regional market

(ECOWAS, Africa)Globalization and investor i t t

Alternative regional investment(FID) destinationsCompetition from established suppliersinterest suppliers

The Future BeckonsThe future success of the petrochemicals business in Nigeria will

depend on the following critical factors that have been proven in the

successful petrochemical business countries(Saudi Arabia, Qatar,

Singapore , Malaysia , Brazil, etc.):

• Establishment of Petrochemical Special Economic Zones

(Petzones) with vital manufacturing infrastructure (power, water, raw

t i l d kill d l b ) t id it bl diti f FID imaterials and skilled labour) to provide suitable conditions for FID in

the petrochemicals sector of the economy.

The Future Beckons (2)Petrochemicals industry development will be private sector led as• Petrochemicals industry development will be private sector-led as the history of Nigerian business has shown this to be the only option for success.

• Incentives for Prospective Investors

• A Petrochemicals Advisory Council, comprising Government,

Industry(MAN &NSChE) and Academia representatives shall see to

the implementation of the foregoing strategies for national

petrochemicals development. The Council will advise Government

on the implementation of the development plan.