Idle refineries slow N22bn chemicals market growth

17 December 2015, Lagos – The growth of the nation’s oilfield chemicals markets is being hampered by the state of government-owned refineries, among other challenges, the Chief Executive Officer, Matrix Petro-Chem Limited, Dr. John Erinne, has said.

Warri Refinery

Warri Refinery

Nigeria’s production and process chemicals markets, which have seen steady growth over the years, are estimated to be worth $100m and $10m yearly, respectively.

Erinne stated this at the National Oil and Gas Production/Process Treatment Chemicals Seminar in Lagos, organised by the National Petroleum Investment Management Services, NAPIMS, and Nichem Ventures Limited.

The nation’s four refineries in Port Harcourt, Kaduna and Warri, which operated far below their installed capacities in recent years as a result of lack of maintenance, were recently shut down.

He said failures in the operations of the refineries had in particular impacted very negatively on the business of process chemicals vendors.

He stated that the non-passage of the Petroleum Industry Bill had also held back investment in the industry, impacting negatively on chemical treatment.

Erinne said, “The short-term prospects in the process treatment sub-sector are less bright, in view of the deplorable situation in the NNPC refineries. If government however has the political will to do the needful to reverse the dwindling fortunes of these refineries, prospects for treatment chemicals will also change for the better.”

According to him, the immediate major prospect for growth in the market is the ongoing Total Egina deep offshore project, which is expected to add nearly $10m to the market value when it comes on stream in 2017/2018.

He noted that the new 650,000bpd refinery being developed by the Dangote Group in Lagos State offered very exciting prospects for process and water treatment chemical.

Erinne said, “The recent thrust towards enhanced local content of products and service delivery in the industry by the government, culminating in the Nigerian content law, has generally been a major impetus for local production chemicals vendors in particular and has opened up prospects for increased participation and growth for them.”

He, however, said the industry was faced with a number of challenges which if not addressed or contained would hamper the realisation of such prospects.

“The prevailing DPR chemical certification regime is rather stiff and expensive. In principle, the necessity is well understood and agreeable but in practice, it is more of a discouragement to vendors. In particular, having to recertify each chemical every three years is considered rather draconian.

“Vendors are also faced with other similar regulatory bottlenecks at NAFDAC and sometimes SON. These regulatory hurdles combine to sap the energy of vendors,” he said.

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