Petrochemicals and Adventurous Diversification Expedition

John Sculley a U.S. businessman, entrepreneur and investor in high-tech startups in this technology quote said ‘’We try to picture what the products will be and then say, what technology should we be working on today to help us get there?’’ That should be the spirit in finding solutions to complex problems but who leads the symphony orchestra?

That is our failing and melancholy as a nation. Buhari-oil President Muhammadu Buhari’s administration in the last 15 months has been grappling with a myriad of problems occasioned by low crude oil prices in the international market. Glutted market has continued to lower oil prices, reduce revenues, tighter budget implementation with economic desperation and a risk of social instability.

We have to do a lot more to bring researchers and industry practitioners together in our genuine quest for diversification. Government campaign should be spiced in the short-to-long term development model for infrastructure,agriculture, agro-processing, housing and labour-intensive manufacturing.

Incidentally all have critical petrochemical elements and components that would ensuresuccess in the diversification we yearningly crave for. Education and health are not ruled out as critical inputs. A reflation of the economy through spending in projects and programmes that would generate employment should be uppermost probably from domestic borrowing.

Experts believe we must address the country’s economic recession which our fiscal authorities have technically declared. Spending in these areas may have inflationary tendencies but their effects are milder than unemployment and youth restiveness. We commend this government for blending seamlessly in completing some projects of the past administration.

But it should not forget the Nigerian Industrial Revolution Plan (NIRP) of January 2014 which would significantly address the national emergency development question. The Plan’s preamble is: ‘’ that no country has ever become rich by exporting raw materials without also having an industrial sector. The more a country specializes in the production of raw materials only, the poorer it becomes’’.

Petrochemicals are chemicals from crude oil and natural gas. They can also be got from coal as a fossil fuel. Base petrochemicals are either from olefins (ethylene, propylene and butadiene) or aromatics (benzene, toluene and xylene). We should be thinking about investing in where we want to be by adding value in these areas. Management inefficiency had stared us in the face for a very long time. That was the justification for the sale of our wholly owned petrochemical plant at Eleme in 2006.

The Eleme plant was built in 1990 as the largest integrated producer of olefins, including polyethylene and polypropylene in West Africa. It has the capacity of producing over 335000 tons of poly olefins annually. The two refineries in Warri and Kaduna have petrochemical components that are not working. The profitability in olefins investment cannot be quantified especially as it can soak unemployment in our army of youths.

Jason Sullivan in Listverse urged us to look around and find the scarily endless list of petrochemical products, including plastics. Many lubricants and cleaning substances are petrochemicals. In food production, many fertilisers, pesticides, herbicides as well as preservatives, flavourings, colourings are petrochemicals. We cultivate more food, faster, and keep it fresh for long with petrochemicals. Synthetic fabrics are readily available, durable, and easy to maintain with petrochemicals.

Most manufacturers prefer synthetic rubber to latex because of its strength and thermal stability. Many medications are derived from the petrochemical building block of benzene. Almost all over-the-counter pain medications including aspirin, ibuprofen, etc. are from petrochemicals. We spend several billion dollars importing petrochemical products and base raw materials annually.

Imagine the cost of importing the following fashion, beauty and daily care products – toothpaste, toothbrush, soap, face powder,  Vaseline, body lotion, perfume,lip stick, lip gloss, lip plumper,foundation,  mascara, concealer, makeup remover, eye liner, eye makeup,  eye shadow, sunscreen, nail polish, hair brush,  shampoo, hair gel, hair spray,  hair conditioner, hairbands, bobby pins, tampons, sanitary pads, socks, buttons, stretchy parts of underwears, all bras, running shoes, stretchy jeans, shirts, plastic earrings, bracelets, necklaces, sunglasses etc.

Industry experts say petrochemical plants account for about 8 percent of global energy demand and could increase to 15 percent by 2040. As global population and living standards continue to increase, the demand for petrochemicals will continue to grow. The IHS research estimates more than 24 million metric tons of new polyethylene capacity equivalents to a quarter of global consumption would come online by 2020. About 8 million metric tons of the new production will come from the United States which has about 250 petrochemical projects expected to come on stream by 2023.

Fuelflex reports a boom along the Gulf of Mexico fueled by cheap and ample amounts of natural gas and gas to liquids got from the U.S. shale through unconventional drilling and hydraulic fracturing. The ethane from natural gas converted into ethylene is the primary building block for most plastics that is transformed into polyethylene. The ultimate goal is for U.S. plastics manufacturing to supply much of the developing world in Asia, Africa and beyond.

ExxonMobil Chemical is investing several billion dollars in the production of ethylene and polyethylene, the world’s most common plastics at its Baytown and Mont Belvieu plants in Texas with completion in 2017. Exxon and Saudi Arabia Basic Industries Corporation, SABIC have completed plans to build a multi dollar petrochemical complex in Texas. A shift from the west to the east in petrochemicals with the Middle East emerging as global production hub with natural advantages of low cost feedstock. Major consumption centres are shifting to Asia given the rapid growth in demand in China and India on account of chemical intensive and export driven industry.

OPEC de facto leaders, Saudi Arabia is increasing its participation in the refined and petrochemical product market to diversify the economy from reliance on oil export revenue. Saudi Arabia has since 2014 when oil prices fell suddenly and heavily, intensified efforts in diversification. According to the German-Saudi Business Magazine, Saudi decision makers have put unprecedented efforts in down streaming to establish a forceful labour-intensive industry.

Saudi Arabia in 2014 marshaled a five-year plan for 68 projects with an investment value of US$61 billion for petrochemicals. The goal is to become a global leader in the petrochemical industry. The Kingdom has direct access to the required raw materials and plenty of energy needed to produce petrochemical products. The alliance with German suppliers is for machinery, equipment, technology, services and transfer of know-how from Germany to Saudi Arabia. We should not pray for the price of crude to increase to get more revenue for sharing, but for investment that should expand the horizon for inclusive participation to take our youths off the streets. A plan for the petrochemicals sector should have a bipartisan support to perk up the welfare and wellbeing of our people through diversification of our economy. We have relative comparative and competitive advantages in petroleum with considerable vertical linkages for sustainable development.

Source: Vanguard

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