Growth in petrochemicals in South Africa and Nigeria dependent on refinery capacity

14-May-10
The petrochemicals market is the foundation of many chemicals industries, as it provides the building blocks for most chemical products used in end-user markets such as paints, plastics, explosives and fertilizers. Frost & Sullivan finds that the Nigerian petrochemicals market (excluding exports of crude oil) was worth US$14.03 bln in 2008 and forecasts it to reach US$29.7 bln by 2015. South Africa's petrochemicals market was worth US$18.37 bln in 2008 and is forecast to increase to US$24.5 bln by 2015. Demand for petrochemicals products is highly driven by activities in the end-user segments. South Africa has a well developed manufacturing sector, which provides a ready market for end products of the petrochemicals market. South Africa's petrochemicals market is more developed than other sub-Saharan markets, with the capacities of the local refineries exceeding domestic demand. South African refineries operate at optimum capacity and this enables the country to export to other countries in the region. The South African market is unique in the region because of the production of petrochemicals from coal and gas feedstock using coal-to-liquid (CTL) and gas-to-liquid (GTL) technologies. Nigeria depends on imports of petrochemical products, despite the presence of large crude reserves. This is attributed to the country's low refinery-capacity utilization (approximately 40% of the full capacity), which results in lower petrochemical yields, creating a need for imports. Restructuring of the operation of Nigerian refineries, with greater private sector participation, is likely to increase the capacity utilization of the refineries, improving the cost structure of the Nigerian petrochemicals market. Crude is the main feedstock for the production of olefins and aromatics in Nigeria and South Africa. Although Nigeria has an abundance of crude oil deposits, the cost of production of petrochemicals is high. This is due to issues such as disruptions in supply of crude to the refineries due to militant activity, general corruption in the country and inefficiency in the way refineries operate. Steps by the Nigerian Government to increase the benefits derived by communities in the oil regions are expected to bring stability and minimize disruptions. For the South African market, coal is a crucial feedstock for the country's unique synfuels and petrochemicals industry and it reduces the country's dependence on crude. Despite the increasing global refinery capacity, sub-Saharan Africa has been reliant on imports. South Africa has plans to build another refinery by 2015 in the Coega Industrial Development Zone. The refinery could enable sub-Saharan Africa to become independent with regard to its petrochemical needs. A debate rages about the prudence of this refinery on stream amid a supply glut and spare refinery production capacities in the Middle East, India and South Korea.
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