Transcript Enhancing Employment And Development Opportunities Through

Enhancing Employment and Development
Opportunities through Gas, Petroleum Refining,
Petrochemicals and Fertilizer Industries
By
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August 2014
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Dr. Timothy Okon
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Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Outline
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• Nigeria’s Resource Endowment
• Resource Diversification and Monetization
• The oil and gas value chain
• Resource diversification from oil to gas
• Resource diversification from Refining to manufacturing (fuels
to non-fuels)
• Diversification approaches: global best practices
• Strategies to support employment and wealth creation
in Nigeria
• Closing remarks
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Resource Diversification and
Monetization
P O R AT I O
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The Oil & Gas Value Chain
Upstream
Midstream
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Enhancing Employment and Development Opportunities through Gas, Petroleum
Refining, Petrochemicals and Fertilizer Industries
Resource Diversification
P O R AT I O
Activities related to winning of crude oil and gas, drilling and
operation of oil and gas producing wells, construction and operation
of oil and gas gathering, separation and treatment facilities and
transportation of personnel and equipment to and from upstream
petroleum locations.
Construction and operation of crude oil and gas transport pipelines,
oil refineries and gas processing facilities, oil and gas storage
facilities and coastal or ocean going tankers, rail cars and trucks for
transporting and marketing petroleum products on wholesale basis.
Downstream Construction and operation of pipelines for distributing and
marketing petroleum products and gas to small customers, storage
tank farm for petroleum products and city gate reception terminals
for gas Distribution and the sale, marketing and retailing of
petroleum and gas products
Also touches consumers through thousands of products such as fuels (gasoline, diesel,
jet fuel, heating oil and non-fuels (asphalt, lubricants and no, synthetic rubber, plastics,
fertilizers, antifreeze, pesticides, pharmaceuticals)
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The Importance of Resource Diversification
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Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Diversification (2)
P O R AT I O
Beyond primary use of hydrocarbons, there are significant secondary
derivatives that are essential for a modern economy
Majors
Upstream
2
Midstream
Downstream
Diversification involves two major activities
•Diversifying the energy mix (rebalancing crude oil versus gas exports)
•Value adding activities for the domestic manufacturing sector
Chemicals &
Petrochemicals
Gas Transmission
and Marketing
Retailing
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Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification (3)
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Diversifying the Energy Mix from Oil to Gas
P O R AT I O
Exportation
(LNG)
Primary Use
Supply to Domestic Market for
Power Generation, LPG ,
Petrochemicals and Cement
Production
Gas
Increased Supply to Domestic
Market to include the Production of
Glass, Rubber, Paper, Aluminum,
Iron and Methanol
Secondary
Use
▪ Gas is a major catalyst in industrial development
– Gas fired power generation vital to jumpstart manufacturing sector / small scale businesses
– Gas intensive industries (feedstock for fertilizers, petrochemicals)
– Gas light industries (as secondary input and/or heat generation, e.g. paper mills, glass
manufacturing)
 Significant multiplier potential on domestic economic through linkages with power, agricultural
and manufacturing sectors.
 The case for diversification from oil to gas is further compelling since a significant quantity of the
resource is currently being flared.
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Gas to Power
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Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Oil to Gas
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Potential for Gas use in Power Generation
Nigeria’s significant power supply gap represents one
of the largest strains on economic growth and job creation
Nigeria power generation capacity shortfalls
GW, 2010
P O R AT I O
N
Capacity
Peak demand upper
estimates
Implications of power supply constraints
MWh/capita/year, 2008
▪ Electricity consumption levels in Nigeria are low
201
12.83
World
average
6.63
4.35
US
8.6
SA
1.34
Brazil
Egypt
0.12
0.04
Nigeria Ethiopia
▪ Supply constraints and shortages are a strain on economic
-6.8GW
5.4
101
3.2
Installed
capacity
Germany
2.19
Average
capacity
not
available
Average
hourly
generation
Peak demand1
▪
growth and industry competitiveness
–
World Bank enterprise survey indicates that typical gridconnected enterprises operate on 9 days of power
outages/month and lose 9% of sales
–
Over 90% of larger businesses and ~80% of micro
enterprises rely on back up power generation for ~60% of
their power needs
–
Diesel is the top spend item for many industries, including
banks and telecoms
Increasing power supply will enable unlocking GDP growth
and creating jobs
1 Peak demand estimates vary significantly, but indicate that if demand was not suppressed by supply constraints it would be at least 10 GW
SOURCE: NBS fact sheet 2009, CBN quarterly economic reports, EIA, World Bank, UCT Graduate School of Business
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Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Oil to Gas (2)
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Power Consumption and Impact on GDP Growth
P O R AT I O
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Power consumption correlates strongly with GDP per capita world-wide and
for countries with lower GDP
Countries with GDP below $15,000
Strong statistical correlation between power consumption and GDP per capita (R 2 above 80%) with every KWh
leading to ~$2.5/GDP capita increase on average
All countries
Countries with GDP below $15,000
GDP/capita, USD 2009
GDP/capita, USD 2009
75,000
15,000
y = 3.3083x0.9294
1.1341
y = 0.9582x
R2 = 0.8306
2
R = 0.8562
12,500
60,000
10,000
45,000
7,500
30,000
5,000
15,000
2,500
-
0
5,000
10,000
15,000
20,000
0
25,000
Power consumption
KWh per capita 2009
2,000
4,000
6,000
8,000
Power consumption
KWh per capita 2009
SOURCE: WEO, 2010; Team analysis
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Gas for Industrialization:
Petrochemicals & Fertilizer
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Major Hydrocarbon sources for Petrochemicals Production
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Enhancing Employment and Development Opportunities
through Gas, Petroleum Refining, Petrochemicals and Fertilizer
Industries
P O R AT I O

The adjacent diagram schematically depicts
the major hydrocarbon sources used in
producing petrochemicals are:

Methane, ethane, propane and butanes:
Obtained primarily from natural gas
processing plants.

Naphtha obtained from petroleum refineries.

Benzene, toluene and xylenes, as a whole
referred to as BTX and primarily obtained
from petroleum refineries by extraction from
the reformate produced in catalytic
reformers.

Gas oil obtained from petroleum refineries.
N
• Gas-based petrochemicals offers certain advantages in Nigeria than oilbased petrochemical industry. This is largely due to feedstock costs and
the environmental benefits of gas flare reduction that would arise from
greater use of associated gas. Nigeria’s attempts at oil-based
petrochemicals via attachment of petrochemical plants to the refineries
faltered due to the historical epileptic performance of our refineries.
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Enhancing Employment and Development Opportunities through
Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource conservative growth, the Nigerian market will require another
Assuming
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Gas for Petrochemicals:
Impact
on Economy
high-performing
mid-sized
ethylene
plants by 2020
Room for additional domestic supply capacity
Ethylene Feedstock for plastics, rubbers, petchem 1
695
Capex,
USDm
505
Capacity
mmtpa
Net Imports
590
Current domestic production
495
Feedstock as
LPGs would
require ~2.32.4t of butane
or propane per
t of ethylene
Gas needs
mmscfd
Jobs, FTE
▪ Direct
▪ Total
GDP impact
$ mn
305
<1 plant
190
Current
Consumption
20
400
~1 plant
190
2015
Consumption
+6
190
2020
Consumption
+10
1 200
+3 400
+4 300
6 700
+14 100
+18 000
280
+580
IO
N
Example of a typical plant
(000’s tonnes, industry)
Potential demand
P
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PRELIMINARY
Gas needs
mmsfcd
Direct jobs
FTE
Time to build
years
+730
▪
1bn-3bn USD, some projects dip
below 1bn to 800 million
▪
Recent projects included:
– PE: 400-600 kt/y
– Ethylene: 500-900 kt/y
– HDPE: 400-450 kt/y
– Aromatics: 500 kt/y
– LDPE 4000-450 kt/y
– MEG 550 kt/y
▪
A small/mid-sized ethylene
cracker of 450kt/y would require
210-230 mmscfd
▪
From Middle-East comparables,
a 1bn USD cracker might employ
300-500 people
▪
2-4 years depending on size and
complexity
1 Includes ethylene and inferred feedstock needed to replace plastic, rubber, and chemical imports by ethylene feedstock needs
2. Assumes average plant size is 450K mpta, no need for large dedicate natural gas feedstock as most would come from LPGs
SOURCE: TECHNON, press clippings, expert interviews SRI; Team Analysis
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The petrochemical cluster in Nigeria is comprised of traditional
petrochemicals alongside finished plastic goods and rubber
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Enhancing Employment and Development Opportunities through
Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource
The Petrochemical Value Chain
P O R AT I O
N
Detailed in
next page
C2 chain
C3 chain
C4 chain
C5 chain
A viable petrochemical industry would
require inputs of Naphta from crude as well
as LPGs from natural gas to function fully
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Enhancing Employment and Development Opportunities through
Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
The Global Fertiliser Competitiveness
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
Fertilizer is any organic or inorganic material of natural or synthetic origin (other than liming
materials) that is added to a soil to supply one or more plant nutrients essential to the growth of
plants.[1]

Conservative estimates report 30 to 50% of crop yields are attributed to natural or synthetic
commercial fertilizer Global market value is likely to rise to more than US$185 billion. The
European fertilizer market will grow to earn revenues of approx. $20 billion per annum.
Fertilizers typically provide, in varying proportions:
Six macronutrients: nitrogen (N), phosphorus (P), potassium (K), calcium (Ca), magnesium (Mg),
and sulfur (S);
Eight micronutrients: boron (B), chlorine (Cl), copper (Cu), iron (Fe), manganese (Mn),
molybdenum (Mo), zinc (Zn) and nickel (Ni) (1987).
The macronutrients are consumed in larger quantities and are present in plant tissue in
quantities from 0.15% to 6.0% on a dry matter (0% moisture) basis (DM). Micronutrients are
consumed in smaller quantities and are present in plant tissue on the order of parts per million
(ppm), ranging from 0.15 to 400 ppm DM, or less than 0.04% DM.






Only three other macronutrients are required by all plants: carbon, hydrogen, and oxygen.
These nutrients are supplied by water (through rainfall or irrigation) and carbon dioxide in the
atmosphere.
Nitrogenous fertilizer based on combination of Nitrogen and Hydrocarbon these are ammonia
based fertilizer such as urea. These can then be blended with phosphate and potash to yield
NPK fertilizer blend.
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Enhancing Employment And Development Opportunities Through
Gas, Petroleum Refining, Petrochemicals And Fertilizer Industries
Schematic of Fertiliser Manufacture Process
P O R AT I O
N
• Nitrogenous fertiliser manufacture involves the combination of nitrogen and methane
to produce ammonia and ultimately urea.
• About five (5) new urea plants are proposed in Nigeria, plus an existing plant owned
by Notore.
• About 70 mmscfd of gas is required per 1MTPA fertiliser plant
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Enhancing Employment and Development Opportunities through
Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
Global Fertiliser Intensity
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Africa has a high yield improvement potential because of its current low
fertilizer use
Fertilizer intensity1
Kilograms/hectar
248
China
South Africa
241
WesternEurope
170
NorthAmerica
Sub-Saharan Africa
115
Latin America
114
Egypt3
Middle East
111
Morocco
Africa
World total
mn tons
257.8
60.0
68.6
30
9.3
4.5
4.2
3.9
Congo
0.9
0.01
Cape Verde
2.7
0.01
30
24
141
32
8.8
Nigeria
93
India
45
109.9
Malawi
105
Eastern Europe
23
143.4
Maghreb2
Asia
FSU
Share of African
fertilizer use
%
Fertilizer intensity
Kilograms/hectar
Africa total
mn tons
4.3
1 Total N, P, and K consumption in relation to area harvested (2002)
2 Algeria, Egypt, Libya, Morocco, and Tunisia
3 Showing the four countries with highest fertilizer consumption and the two with the lowest
SOURCE: FAO; Global Insights WMM; team analysis
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Enhancing Employment and Development Opportunities through
Gas, these
Petroleum
Refining,
Petrochemicals
andfor
Fertilizer
Industries
With
bottlenecks
removed,
there is room
one fertilizer
plant to
Gas for
Fertiliser:
on tons
Economy
meet
local
demandImpact
of 2.4mm
by 2020
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Example of a typical plant
Room for additional domestic supply capacity1
Million tons, Urea fertilizer
P O R AT I O
2.4
Capex,
USDm
Potential demand
Imports
▪
▪
US$1.2bn – US$1.8bn
$1,200 per ton of annual capacity
▪
1.0mm – 1.5mm tons/annum
▪
50 – 80 MMSCFD
▪
▪
300-400 direct jobs (regional avg.)
3,000 total jobs from bagging,
marketing, and distribution
▪
3-4 years
Current domestic production
1-2 plants
1.4
0.7
Capacity
mmtpa
90% capacity
utilisation
0.3
Gas needs
mmsfcd
0.5
Gas needs
mmscfd
Jobs, FTE
▪ Direct
▪ Total
GDP impact
$ mn
Current
Consumption
2015
Consumption
2020
Consumption2
~25
+50
+100
400
+1,650
+3,700
3,700
+7,000
+15,500
150
+280
+625
Direct jobs
FTE
Time to build
years
1 Assumes that kg/ha urea usage increases from 21 kg/ha to 40 kg/ha in 2015, to 60 kg/ha in 2020, and that area harvested increases 20% by 2020.
2 In a “Green Revolution” scenario, Nigeria would need 4.4mm tons per annum, or the equivalent of 4 new plants
SOURCE: IFDC Africa Report, FAOStat as of 2009; Team analysis; Fertecon Limited (Nov 2009); Based on comparables.
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Enhancing Employment and Development Opportunities through
Developing
the fertilizer
chain requires
several
critical
building
Gas,
Petroleum
Refining,value
Petrochemicals
and
Fertilizer
Industries
blocks
Key Building Blocks in the Fertiliser Value Chain
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N
Ammonia: Production to Distribution
Raw material
sources
Processing
plant
Distributor/
wholesale
Farm
supply store
Value Chain
▪ Abundance
Dependencies
of cheap gas
(< 1.50 USD
mm/btu to be
globally
competitive)
Key
questions
▪ Pipeline/
transport infrastructure
1
Which fertilizer
component to focus
on? Full-chain NPK
or urea production?
▪ Processing plant
for mid to largescale urea
production
▪ Must master
manage
inventory stocks
with seasonal
consumption
▪ Requires existence of comprehensive
transport, distribution and logistics
infrastructure
▪ Requires significant breadth across
Nigerian market to reach consumer
base in rural areas
▪ High transport cost and low margins
make moving product twice almost
prohibitively expensive
2
Priority focus on
which regions and
geography? Export
or domestic focused?
▪ Requires dynamic
understanding of
farmers' behaviors,
needs, and
economics for a
good supply chain
management
(e.g., seasonality)
and advisory role
toward farmers
3
Focus on production
or build-out
downstream logistics
and distribution?
SOURCE: McKinsey analysis
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Enhancing Employment and Development Opportunities through
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Gas Supply Requirement for Petrochemical / Fertiliser Industries
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• About 30 million standard cubic feet per day (mmscfd) of propylene rich
gas will yield 1MTPA of polypropylene.
• Similarly, about 2.3 – 2.4 tons of NGLs will yield 1 ton of polypropylene.
• In general, current plans for both fertiliser and petrochemicals will require
about 500 – 750 mmscfd of rich gas. This requirement is applicable to
domestic demand for fertiliser and petrochemicals. However, Nigeria can
capture a portion of the global market for petrochemicals and fertiliser
and the potential in this regard is huge.
• 19
• Gas availability is a key requirement for building a successful
petrochemicals and fertiliser industry. Rising domestic demand for gas
means that a rationalisation and ranking based on the economic value
for which gas can create is necessary.
• Some analysis based on this yields some interesting results.
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Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
Impact of Gas Utilisation Plants to Job Creation
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N
Mapping the relevant industries across the 3 dimensions show no clear
“winners” across all criteria
Absolute import to Nigeria
(2009, Mn USD)
Energy competitiveness
Mmscf gas used per m$ output, Nigeria(2)(3)
Illustrative, relative mapping
of Power and Export
Power generation
LNG export
110
100
Methanol
90
Cement
80
70
• 20
Nitrogenous fertilizers
60
50
40
Aluminum
30
Pulp
20
Corn
Iron & Steel
10
Petrochemicals (ethylene from LPGs) Downstream plastics
Glass
Paper
Synthetic rubber
0
0
100
200
300
400
500
600
700
800
900
1,000
1,100
2,400
Total job impact
Total jobs created per mmscfd of gas used, Nigeria1
1 Estimate based on USA impact and x3-4 ratio for job creation and x1,2 energy efficiency between developed and developing countries
2. Ethylene feedstock in Nigeria would be LPGs, consumption of natural gas is only utility needed for conversion vs feedstock. Downstream
plastics, only non-ethylene energy required is taken into account not initial feedstock needs.
SOURCE: OECD; US federal statistic office; McKinsey analysis
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Imports
▪ Import substitution through
domestic production
Energy competitiveness
Mmscf gas used per m$ output, Nigeria(2)(3)
110
100
Methanol
90
Cement
80
70
70
Nitrogenous fertilizers
Nitrogenous fertilizers
60
Nitrogenous fertilizers
60
50
60
50
Pulp
20
50
40
Aluminum
30
Corn
Iron & Steel
10
Petrochemicals (ethylene from LPGs) Downstream plastics
Glass
Paper
Synthetic rubber
0
40
Aluminum
30
Pulp
20
Corn
Iron & Steel
10
Petrochemicals (ethylene from LPGs) Downstream plastics
Glass
Paper
Synthetic rubber
0
100
200
300
400
500
600
700
800
900
1,000
1,100
2,400
Plastics
Glass and glass products
Paper and paper products
Ethylene (from LPG)
Synthetic rubber
Iron & steel
Food products (agroprocessing)
8. Pulp
9. Aluminium
10. Nitrogenous fertilisers
11. Cement
12. Methanol
Aluminum
30
Pulp
20
Corn
Petrochemicals (ethylene from LPGs) Downstream plastics
Glass
Paper
Iron & Steel
10
Synthetic rubber
0
0
100
200
Total job impact
Total jobs created per mmscfd of gas used, Nigeria1
1.
2.
3.
4.
5.
6.
7.
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Cement
80
0
Methanol
90
Cement
70
Power generation
LNG export
110
100
Methanol
80
• 21
Energy competitiveness
Mmscf gas used per m$ output, Nigeria(2)(3)
Power generation
LNG export
110
90
Industry
prioritisation
based on
leading
dimension
Energy competitiveness
▪ Creation of competitive global
players supported by low gas price
Energy competitiveness
Mmscf gas used per m$ output, Nigeria(2)(3)
Power generation
LNG export
40
N
Priority industries
Total job impact
▪ Job creation driven by
domestic economic growth
100
P O R AT I O
Leading dimension
analysed further
in this document
Leading dimension
Economic
agenda
priorities
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Making any of the dimensions leading to meet the economic
agenda, generates a distinct pecking order list for industries
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Enhancing Employment and Development Opportunities through
Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
Impact of Gas Utilisation Plants to Job Creation (2)
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300
400
500
600
700
800
900
1,000
1,100
2,400
0
Total job impact
Total jobs created per mmscfd of gas used, Nigeria1
1.
Food products (agroprocessing)
2. Plastics
3. Iron & steel products
4. Synthetic rubber
5. Ethylene
6. Paper
7. Aluminum smelting
8. Cement
9. Glass
10. Fertilizers
11. Methanol
12. Pulp
100
200
300
400
500
600
700
800
900
1,000
1,100
2,400
Total job impact
Total jobs created per mmscfd of gas used, Nigeria1
1.
2.
3.
4.
5.
6.
Methanol
Cement
Fertilizers
Aluminum smelting
Pulp
Food products (agroprocessing)
7. Iron & steel products
8. Ethylene
9. Synthetic rubber
10. Paper
11. Glass
12. Plastics
Fairly similar prioritisation
SOURCE: McKinsey analysis
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Power, current
Industry, current
Current demand, 2010
Power, new
3
Power & Existing Industry, 2020
• 22
Total employment potential
Thousand jobs, 2020
3,335
21
Plastics
32
Rubber
43
Methanol
Total shortlisted users
Base case scenarios
▪ Gas availability
▪ Power supply roll-out
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2,300
Ethylene
Cement
Imports substitution
$bn, 2009 imports
0
24
Aluminium smelting
GDP impact potential
$bn GDP, 2020
1,035
Pulp & Paper
Iron & Steel
Additional domestic
gas demand
335
10
Fertilizers
N
700
Glass
Agro-processing (Corn)
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Potential gas use
Mmscfd, 2020
P O R AT I O
Existing demand
Impact of gas allocation to achieve domestic self-sufficiency
and maximise job creation and GDP under the Base Case
Gas users
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Enhancing Employment and Development Opportunities through
Gas, Petroleum Refining, Petrochemicals and Fertilizer Industries
Impact of Gas Utilisation Plants to Job Creation (3)
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0.0
12
0.5
25
18
1.5
16
91
0.2
0.6
99
255
2.61
3.1
36
196
0.6
0.7
74
104
0.2
0.9
3.7
151
2-3
5.8
29
0.9
0.5
1.0
475
54
2.8
0.3
2
0
0
0.0
4,650
513
20.7
7-9
4,200 mmscfd
Gas available
domestically in 2020
460 thousand
jobs
$18.0bn
GDP2
1 Imports of ethylene, plastics and rubber
2 GDP impact of Power has estimated using potential sales recovery and savings from substituting diesel generation with grid power; assuming
demand continues to surpass supply by 2020
3 Includes demand for new cement capacity additions to meet local demand by established Nigerian players
SOURCE: NNPC, US RIMS II Multipliers (2005), industry reports, expert interviews, MGI; McKinsey analysis
$7-8bn
imports
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P O R AT I O
 Create national focal point for developing industries beyond fuels.
E.g Saudi Arabia Basic Industries Corporation (SABIC)
 A clear fiscal system that is supportive of high value hydrocarbon
spin-off industries but not dependent on cost recovery from
upstream oil activities.
 Right Incentives through price deregulation in order to support a
commercial framework for the development of refineries.
 Industrial parks with pre-investment in infrastructure by the State.
LEUM
RO
ET
TIONAL P
NA
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries Resource
Strategies to Support Development of World Class Petrochemical /
Fertiliser Industry
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
C
OR
Resource Diversification:
Refining to Manufacturing
P O R AT I O
N
TIONAL P
NA
NIGERIAN
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification
OR
C
Fuels to Non-Fuels
P O R AT I O
Exportation
Primary Use
Domestically Refined White Products
PMS, DPK (HHK & ATK), AGO, LPFO
Oil
Feedstock Materials for other
Sectors
(Benzene, Toluene, Xylene Ethylene,
Propylene)
Secondary
Use
•
•
•
Oil contributes over 80% of Nigeria’s revenue stream but only about 13% of GDP due to its
limited linkages to the domestic sector of the economy.
Nigeria currently exports about 2.2 mmbbl/d mostly crude oil. However, nearly 80% of the fuels
demand in Nigeria is imported (about 30 Million litres /day of PMS), fuelling a significant part of
our current account deficit.
Diversifying refined products from fuels only (PMS, AGO, Kero, LPFO) to value added feedstock
for domestic manufacturing is vital to link the oil sector to the domestic economy and increase
the contribution of the oil industry to GDP growth.
25
N
NIGERIAN
LEUM
RO
ET
SADAF
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel
Economic Benefits of Downstream Non-Fuels Industrial Developments
P O R AT I O
SABIC
26
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (2)
Potential Hydrocarbon Value Chain Options
P O R AT I O
N
Diversification further downstream will add maximum value to the Nigerian Economy
through these Industries:
27
NIGERIAN
LEUM
RO
ET
28
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (2)
Potential Hydrocarbon Value Chain Options
P O R AT I O
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas, Petroleum
Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (3)
P O R AT I O
Benefits of Non-Fuels Diversification - Packaging
29
N
NIGERIAN
LEUM
RO
ET
Benefits of Non-Fuels Diversification - Automotive
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (4)
P O R AT I O
30
N
NIGERIAN
LEUM
RO
ET
Benefits of Non-Fuels Diversification – Building Materials
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (5)
P O R AT I O
31
N
TIONAL P
NA
NIGERIAN
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (5)
OR
C
Benefits of Non-Fuels Diversification - Electronics
P O R AT I O
32
N
NIGERIAN
LEUM
RO
ET
Benefits of Non-Fuels Diversification – Textiles and Sportswear
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas, Petroleum
Refining, Petrochemicals and Fertilizer Industries
Resource Diversification: Fuels to Non-fuel (6)
P O R AT I O
33
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
C
OR
Diversification Approaches: Global Best
Practice
P O R AT I O
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Diversification Approaches: Global Best Practice
C
OR
Nigeria’s Export vs. Import
P O R AT I O
N
Industrialisation could enable Nigeria to substitute imports (e.g.,
plastics, rubber, food) and help diversify its exports base
Exports, USD bn, 2009
Imports, USD bn, 2009
Total exports : 49,9 bn$
45.1
Gas (2.9)
2.7
Minerals &
other materials (0.2)
2.1
Other (0.1)
Metals
(0.2)
Chemicals
Food (1.1)(0.5)
Oil (42.2)
Machinery &
advanced
goods
(0.6)
Cocoa (1.4)
Other
materials
(0.7)
Oil & gas
Primary sector,
excl. oil & gas
Manufactured
goods
Total imports : 33,9 bn$
28.6
Glass (0.2)
Other (0.3)
Fertilizers (0.2)
Metals (1.1)
Iron & steel
(2.4)
Chemicals
(2.7)
5.3
Pulp & paper (0.6)
Other materials (1.4)
Plastics & rubber
(2.6)
Wheat
(1.1)
Oil & Gas
(0.3)
Rice
(0.5)
Minerals &
Other
materials
(0.8)
Vehicles
(6.6)
Electrical and electronic equipment,
machinery & advanced goods
(10.5)
Manufactured
goods
Food
(2.6)
Primary sector
SOURCE: International Trade Center; UN Comtrade; McKinsey analysis
3
Country
Diversification agenda / vision
NIGERIAN
OR
C
Resource Diversification: Case Studies in the Middle East
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Diversification Approaches: Global Best Practice (2)
P O R AT I O
Specific initiatives
Examples from Top 10 gas-rich countries
Qatar
▪
Release of 2030 Vision with
diversification goals
▪
Saudi
Arabia
▪
Release of 2025 Vision with
diversification goals
▪ Leveraging on existing experiences (e.g., Jubail,…)
▪ Targeting initiatives to improve ease of doing business
▪ Plan to build six economic cities, for several sectors:
Set up of specialist, autonomous free-zone business
districts (e.g., Qatar Science & Technology Park)
–
–
Energy-intensive (Plastic, Steel); Transportation
Knowledge based (ICT, Healthcare, Education)
▪
Release of 2030 Vision identifying
growth sectors and setting non-oil
trade balance parity as a goal
▪
▪
▪
Set up of industrial zones (e.g., Petrochem, Aluminium)
Investment in infrastructures and logistic centres
Investment in zero-emission city as free zone and R&D
centre
▪
Promotion of trade and
manufacturing
▪
Set-up of numerous Economic Cities (e.g. dredging of
Dubai Creek, Jebel Ali Port, Jebel Ali Free Zone)
Bahrain
▪
Development of Vision 2030 with
diversification agenda
▪
▪
Development of banking, aluminium and IT
Heavy promotion of tourism (mainly regional)
Oman
▪
Vision for Oman Economy 2020
with 81% non-oil GDP
▪
▪
Focus on tourism and energy-intensive export sectors
Policies for promotion of local employment
(‘Omanisation’), privatization and FDI attraction
Abu
Dhabi
Dubai
Other examples
SOURCE: Press searches, Expert interviews
N
NIGERIAN
LEUM
RO
ET
Successful Case Studies of industrial Development by Resource Rich Nations
TIONAL P
NA
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Diversification Approaches: Global Best Practice (2)
P O R AT I O
N
Successful case studies of industrial development by resource rich nations
show focused diversification of economy
Norway (1960)
Highlights of actions taken
Outcomes

Established transparent Petroleum Fund as
fiscal to smooth out spending of oil
revenues and act as a long-term savings
vehicle
Resource-based economy dominated by oil
and gas served as a source of funds
Strong investment in technology and
infrastructure knowledge

Broad-based improvement in poverty
reduction through the creation of
alternative employment options not
redistribution
Copper fueled growth drove diversification of
economy and promotion of Chilean exports
Other economic sectors have benefited from
the presence of mining and have delivered
inputs to mining and associated activities

Recovered from severe economic crisis by
successfully reorienting entire economy
around telecommunications cluster
Resource-based economy dominated by
wood, pulp, and paper exports to spur growth
Fall of Soviet Union devastated export
industries (GDP fell >10% from 1990 to 1992)




Chile
(1970)




Finland (1990)







Traded goods sector did not shrink or
disappear as a result of targeted public
investment
By the 1990s, Norway had forged ahead of
neighbors on economic production per capita
Onshore industries have benefited to a limited
extent from technology spillover effects
Clear economic diversification with spill
over benefits to other sectors
− Copper exports 45% (2005) vs. 80% (1976)
− Besides manufacturing exports, exports
substantial quantities of chemicals
− Developed new sectors like telecomm.,
construction, banking and retail
Leading development indicators in S. America
Poverty reduced 42% (1990) to 18% (2005)
Technology-based economy – Growth
dominated by ICT sector (rising from 4% of
GDP in 1993 to 18% in 2008)
Strong GDP per capita growth (3.5%) since 93
Developed global centre for innovation in
telecommunications and other knowledge
industries (e.g., biotech, environmental)
SOURCE: Team analysis
16
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
C
OR
Strategies to Support Employment & Wealth
Creation in Nigeria
P O R AT I O
N
NIGERIAN
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Wealth Creation in Nigeria
LEUM
RO
ET
TIONAL P
NA
P O R AT I O
N
 Create national focal point for developing industries beyond fuels.
E.g SABIC/SADAF in Saudi Arabia.
 A clear fiscal system that is supportive of high value hydrocarbon
spin-off industries but not dependent on cost recovery from
upstream oil activities.
 Right Incentives through price deregulation in order to support a
commercial framework for the development of refineries.
 Industrial parks with pre-investment in infrastructure by the State.
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (2)
C
OR
National Focal Point for Creating Value Added Oil Derivatives: SABIC Case Study
P O R AT I O
N
SABIC
PERFORMANCE
CHEMICALS
CHEMICALS
OLEFINS
OXYGENATES
AROMATICS
CHEMICAL
INTERMEDIATES
GLYCOL
INDUSTRIAL GASES
FERTILIZERS
PLASTICS
BASE PRODUCTS
FUNCTIONAL
CHEMICALS
PVC &
POLYESTER
FUNCTIONAL
POLYMER
POLYOLEFINS
UREA
AMMONIA &
PHOSPHATES
METALS
INNOVATIVE
PLASTICS
FLAT STEEL
PRODUCTS
LONG STEEL
PRODUCTS
• Saudi Basic Industries Corporation (SABIC) is a diversified manufacturing company,
active in chemicals and intermediates, industrial polymers, fertilizers and metals.
• SABIC was founded in 1976 by Royal Decree to convert oil by-products into value
added chemicals, polymers and fertilizers.
• It is the largest public company in Saudi Arabia with the Saudi government still
owning 70% of its shares.
• SABIC employs over 40,000 people globally and has 60 manufacturing and
compounding plants in more than 40 countries.
40
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
National Focal Point for Creating Value Added Oil Derivatives: SABIC Case Study (2)
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (3)
P O R AT I O
Key Features of SABIC:
• Focuses on manufacturing, using oil by-products as feedstock.
• It is a Holding Company, with investment in Joint Ventures with oil
majors. (SADAF)
• It is not an operator and does not have 100% ownership.
• The structure ensures commercial operations and commercial viability of
its business arrangement across the world.
• Its investments are not only domestic, but international, to secure
markets for its oil by-products.
• SABICs diversification strategy includes market diversification
41
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (4)
C
OR
National Focal Point for Creating Value Added Oil Derivatives: SADAF Case Study
P O R AT I O
N
SADAF
ETHYLENE
CRUDE INDUSTRIAL
ETHANOL (CIE)
ETHYLENE
DICHLORIDE (EDC)
CAUSTIC SODA
(CA)
STYRENE
MONOMER (SM)
METHYL TERTIARY
BUTYL ETHER
(MTBE)1
• Saudi Arabia Petrochemical Company (Sadaf) was established in 1984 and is the
largest petrochemical complex in the Middle East.
• It Owned jointly by Shell Chemicals Arabia LLC and Saudi Basic Industries
Corporation (SABIC).
• The Sadaf complex covers a 460-acre site in the Industrial City of Al-Jubail. It
contains six-world scale petrochemical plants with a total average output of more than
4.7 million metric tons per year of various chemicals.
42

NIGERIAN
OR
C
Clear Fiscal System for Midstream Oil with Fiscal Rules of General Application
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (5)
P O R AT I O
N
There has not been a clear fiscal system for the midstream oil sector. As such, IOC
carry on midstream projects but integrate it with upstream investment. The
midstream is defined as
“Construction and operation of crude oil and gas transport pipelines,
oil refineries and gas
processing facilities, oil and gas storage facilities and coastal or ocean going tankers, rail cars
and trucks for transporting and marketing petroleum products on wholesale basis”

CITA section 39 which applies to gas utilisation may be applied to midstream gas
but not midstream oil.

A clear fiscal system that is supportive of high value hydrocarbon spin-off industries
but not dependent on cost recovery from upstream oil activities.

Fiscal rules of general application are important because they lay the foundation
for non-discriminatory fiscal system which are most desirable in giving investors
confidence.

The PIB intends to address this by amending CITA section 39 to include midstream
oil activities.
43
Create Right Incentives through Price Deregulation
TIONAL P
NA
NIGERIAN
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (6)
C
OR
P O R AT I O
• Our experience from price regulation in the downstream petroleum sector shows
that regulation has the following downsides:
a) Discourages investment: Companies invest where there is clear and transparent
mechanism to recover cost and earn a profit
b) Lacks fiscal sustainability: Subsidy funds are required for other critical sectors of the
economy
c) Distorts markets: Encourages hoarding and smuggling and creates arbitrage opportunities
(black markets)
d) Benefits mainly the wealthy and middle classes, with a limited share going to those
Nigerians most in need.
•
Under section 6 (1) of the Petroleum Act, pricing of petroleum products are to be
approved by the Minister of Petroleum Resources. It states as follows:
“The Minister may by order published in the Federal Gazette fix the prices at which
petroleum products or any particular class or classes thereof may be sold in Nigeria or
in any particular part or parts thereof.”
•
Under the powers of the Minister to regulate the industry, the pricing of petroleum
products could be based on a market determined mechanism through a pricing
formula.
44
N
KERO (NWE) $/bbl
PMS (ROTT) $/bbl
Crude _PMS Regression Analysis
160
140
120
100
80
60
40
20
0
y = 0.9577x + 10.378
R² = 0.9449
0
20
40
60
80
100
50
0
0
20
40
60
80
100 120 140 160
Crude Brent ($/bbl)
NIGERIAN
50
0
0
20
40
60
80
100 120 140 160
Crude Brent ($/bbl)
Fuel Oil (NWE) $/bbl
AGO (NWE) $/bbl
R² = 0.9833
N
100
Crude _AGO Regression Analysis
150
P O R AT I O
y = 1.2123x + 3.6963
R² = 0.9479
150
100 120 140 160
y = 1.2156x + 2.5348
OR
Crude _KERO Regression Analysis
200
Crude Brent ($/bbl)
200
LEUM
RO
ET
Relationship Between Crude Oil Prices and Product Prices: Fuels
TIONAL P
NA
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (7)
Crude _Fuel Oil Regression Analysis
120
100
80
60
40
20
0
y = 0.8421x - 4.4656
R² = 0.9162
0
20
40
60
80
100 120 140 160
Crude Brent ($/bbl)
Relationship Between Feedstock Price and End Product Price
700
600
y = 0.4039x - 166.73
R² = 0.9994
FRP ($/Ton)
500
400
300
FRP=0.409PRP-175
200
100
0
0
500
1000
1500
PRP ($/Ton)
2000
2500
NIGERIAN
OR
C
Relationship Between Crude Oil Prices and Product Prices: Non-Fuels
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (8)
P O R AT I O
N
• Market derived pricing is a key incentive for
investors in the petrochemical and manufacturing
sectors of hydrocarbon derivative industries.
The benefits of the market derived pricing
mechanism are as follows:
• Requires
minimal
government
intervention
therefore minimizes arbitrage opportunities
• Protects payment securitization system by
avoiding fixed pricing floors.
• Self adjusting to reflect current market conditions
which should also be captured by the end
products.
NIGERIAN
C
OR
16.00
14.00
14.00
12.00
8.00
8.00
6.00
6.00
4.00
4.00
Ammonia
Methanol
2.00
2.00
0.00
0.00
100
0
100
200
300
400
150
200
500
End Product Prices
$/MT
7.00
250
300
End Product Prices
$/MT
350
400
450
Egy GP to Urea Plant
IHS Studies GP to Urea Plant
T&T GP to Ammonia Plant
EPP Based GP
T&T GP to Urea Plant
IHS GP to Urea Plant, 10% RoR
500
• End product derived feedstock prices are
common in jurisdiction with significant
petrochemical production.
6.00
5.00
Gas Price
($/mmbtu)
N
10.00
10.00
-2.00
P O R AT I O
12.00
Urea
Gas Prices
($/mmbtu)
Gas Prices @ 15% RoR
$/mmbtu
Relationship Between Crude Oil Prices and Product Prices: Non-Fuels (2)
16.00
LEUM
RO
ET
TIONAL P
NA
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (9)
4.00
• The only distinction between these different
pricing mechanisms is in the rate of increase
of feedstock prices with end product price.
y = 0.0077x + 3E-15
3.00
2.00
1.00
0.00
50
100
150
200
250
300
350
End Product Price
$/MT
400
450
Egyptian Model: y = 0.01 x - 0.4
T & T Ammonia Model: y = 0.015x -1.063
T & T Urea Model: y = 0.013x -1.320
NDGP Model: y = 0.007x
500
550
• Nigeria cannot jumpstart a petrochemical
industry without a clear and transparent
market derived feedstock pricing mechanism.
•
•
•
NIGERIAN
OR
C
Threats in the Horizon: The advent of US Shale Gas
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (10)
P O R AT I O
Above $4/mmbtu, residual fuel oil switching takes place in the US market using
a reference price of WTI $45/bbl
Above $5/mmbtu, ammonia and methanol plants are no longer economic and
gas demand is lost.
In order therefore to position Nigeria competitively vis’ a vis’ the Atlantic basin
market dominated by Trinidad and Tobago, the proposed pricing formula has a
dynamic cap at $3/mmbtu (RT 2008) which is below the gas to fuel oil switching
price and below T & T upstream price for similar end product prices.
N
•
•
NIGERIAN
OR
C
Threats in the Horizon: The advent of US Shale Gas has (2)
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (11)
P O R AT I O
N
The advent of shale gas has made the US chemical industry to be the most
competitive within the OECD countries.
Nigeria needs to match Middle-Eastern competitiveness in order to secure
investment for its chemical industry
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
C
OR
Industrial Parks
P O R AT I O
N
•
•
•
•
•
NIGERIAN
P O R AT I O
Factors that Attract Companies to
Clusters
General Features of Clusters
•
LEUM
RO
ET
Industrial Parks with Pre-Investment in Infrastructure by the State: General Features
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (10)
TIONAL P
NA
Location Allows for ease of importation of
feedstock and evacuation of products
• Near Sea Ports
• Good Transport Network
• Railway Lines
Funding of infrastructure
• By Government
• By Private-Public Partnership
Management & Operations
• By Centralized Agency
Nature of Cluster
• Industry-Specific
• Conglomeration of Industries
Establishment
• National Government
• State Government
• By Local Authorities
• As Custom Zones
Policies
• Favorable Government Policies &
Incentives
•
•
•
•
•
•
•
51
Availability of Infrastructure such as
road networks, electricity supply, ports,
sewerage etc.
Low cost of setting up and doing
business
Reduced cost of materials and services
supply
Availability of market for products and
services; a high concentration of firms
generate an increased market hence
more opportunities for reaching to more
customers;
Liberal Government policies and support
Opportunities for training and
knowledge spill - over
Adequate security for investment and
facilities
N
•
•
Saudi -Australian Business Forum 2012
NIGERIAN
OR
C
Industrial Parks with Pre-Investment in Infrastructure by the State: Relative Attractiveness
of Industrial Clusters to Investors
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (11)
P O R AT I O
Clusters with government funded
infrastructure are much more attractive
to investors:
• Lower unit cost of land as
infrastructure cost is treated as
social investment
• Viability of investors project is
enhanced (Yanbu Industrial
Clusters
Clusters with private sector financed
infrastructure are less attractive to
investors:
• Higher land lease rate as
developers seek for high returns
within a short period
• Viability of investors project could
be less attractive
N
NIGERIAN
OR
C
Industrial Parks with Pre-Investment in Infrastructure by the State: How Clusters Facilitate
Efficient Supply Chain Management
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (13)
P O R AT I O
Reduction in the cost of
supply
• Proximity to sources of supply
• Utilization of joint purchase agreements for
procurement of goods and services
• Information sharing and collaboration among
companies on inventories and supplies
• Utilization of joint suppliers data base
Reduction in holding cost
• Just-in Time delivery of materials and services
due to closeness of suppliers
• Minimal resources expended on materials
handling
• Less likelihood of having obsolete materials
Reduction in cycle time
• Closer sources of supplies
• Inter organizational linkages
53
N
Contribution of Connecticut Maritime Cluster (USA)
2011
•
•
•
•
•
•
•
•
NIGERIAN
OR
C
Industrial Parks with Pre-Investment in Infrastructure by the State: Examples of how
Clusters Facilitate Economic Development
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Strategies to Support Employment & Wealth Creation in Nigeria (12)
P O R AT I O
Contribution of Yanbu Industrial Cluster (Saudi Arabia)
2012
Generated $5 billion in Business output
Generated $1.7 billion in household Income
Contributed $2.7 billion to State GDP
Generated 30,000 Jobs
Paid $56 million in local taxes
Paid $54 million in State taxes
Generated $224 million in Federal tax revenues
Accounted for average wages of $63,000
annually (15% higher than State average)
•
•
•
•
Contributed 3.16% of the Kingdom’s GDP
Attracted over $40 Billion in private investment
in the industrial sector
Generated 54,949 jobs as at 2008 and this is
expected to reach 83,064 in 2013
Sustained an average annual population growth
rate at 6%
Source: Saudi - Australian Business Forum 2012
Source: Hartford Business Journal, Connecticut June 2012
Contribution of Special Economic Zones (China) 2007
Contribution of Onne Free Trade Zone (Nigeria) 2012
•
•
•
•
•
Generated employment of 15 million, 2% of the
national total
Contributed US$113.8 billion to China’s GDP,
5% of Total GDP
Attracted US$5.5 billion of Utilized FDI
representing 9.1% of China’s total
Accounted for merchandize export of US$168.6
billion, 21.1% of China’s total
Source: China National Statistical Bureau, 2006
N
•
•
•
Attracted over 150 companies into the country and
N900bn ($6bn) worth of investments
Created over 30,000 direct and indirect jobs for
Nigerians.
The Zone is now a hub of Oilfield activities, covering the
whole Gulf of Guinea up to Angola and Southern Africa
Enabled technology transfer to Nigerians through
manpower training. For example, Tenaris, which is the
largest pipe producing company in the world, has trained
over 70 Nigerians overseas on pipe technology
Source: Oil and Gas Free Trade Zone Authority
•
•
•
•
•
Shenzhen, Zhuhai, Shantou, Xiamen
Special Economic Zones, China
NIGERIAN
OR
C
Strategies to Support Employment & Wealth Creation in Nigeria (9)
Industrial Parks with Pre-Investment in Infrastructure by the State: Global Examples
The Connecticut Maritime •
cluster, USA
LEUM
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Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
TIONAL P
NA
P O R AT I O
N
The Yanbu Oil and gas Cluster •, Established in 1975 by the Govt. of the
Saudi Arabia
Kingdom of Saudi Arabia
Established in Year 2000 by the State
of Connecticut
Nature of Business: Maritime Services
Purpose: Improve the competitiveness
of Connecticut Maritime Industry
Infrastructure:
• Port Facilities and Waterways
• Intermodal Transport Connection
Facilities
Infrastructure Financing: State of
Connecticut & PPP Funds within the
State
Management/Operation: By the
Connecticut Maritime Coalition(CMC
• Nature of Business: Oil & Gas
• Purpose: Attract FDI & accelerate
Yanbu
Airport
economic development of the Kingdom
Jeddah • Infrastructure:
RESIDENTIAL
• Developed Land 158 sq. km and Road
AREA
network
IND U S T R IAL
EXPANS I ON AR EA
• Power-1006 MW (800 MW to be added by
INDUSTRIAL
AREA
2015)
•
Industrial Sea port-7 terminals with 25
King Fahd
berth
Industrial
•
Financing
of the Infrastructure: By the
Seaport
Government of the Kingdom of Saudi
Arabia
• Management: By the Royal Commission
The Onne FTZ ,Nigeria
•Established in 1980 By the Govt. of the PRC
•Nature of Business : Manufacturing, export
processing, international trade, finance and
information industry
•Purpose:
Facilitate economic development
•
and attract FDI
•Infrastructure :
•Developed Land and Road network
•Sea Port facilities and Railway lines
•Utilities (Electricity
&Telecommunications/Internet Facilities)
•Financing of the Infrastructure: By the
Government of the PRC
• Management: By Administrative
Committees established to manage the
zones
•
•
•
•
•
55
Established in 1996 By the Federal
Government of Nigeria
Nature of Business: Oil & Gas
Purpose: To promote economic
growth and to strengthen Nigeria’s role
in the regional Oil & Gas Industry.
Infrastructure:
• Road and Railway Network
• Port Facilities
• Electricity
• Communication Facilities
Financing of the Infrastructure:
By the Federal Government of Nigeria
• Management/Operation: By D.M.S.
(NIGERIA) Ltd a subsidiary of UK
based D.M.S International Ltd
NIGERIAN
O
N
C
Strategies
to Support
Employment
Creation
in Nigeria (9)
Strategic
Objective:
Link Gas&toWealth
the Wider
Economy
Midstream
Gas: Geotechnical
Surveys at Ogidigben Industrial City
Proposed
Ogidigben
Industrial Park
TIONAL P
NA
LEUM
RO
ET
Enhancing Employment and Development Opportunities through Gas,
Petroleum
Petrochemicals
Fertilizer
Industries
MovingRefining,
the Oil and
Gas Sector and
to the
Next Level
FederalR PMinistry
O R A T I O of
Petroleum Resources
3D Imagery of Proposed Gas Industrial City
- Fertilizer, Petrochemicals, Methanol, Power, Gas Processing, Housing
20
• Nigeria is taking tentative steps in its gas based industrialisation program by
establishing an industrial park dedicated to manufacturing activities using gas as
feedstock. This is an adaptation of successful models such as Jubail in Saudi-Arabia.
• This is distinct from Onne FTZ which is a logistics base for oil and gas activities.
NIGERIAN
OR
C
Enhancing Employment and Development Opportunities through Gas,
Petroleum Refining, Petrochemicals and Fertilizer Industries
Conclusion
LEUM
RO
ET
TIONAL P
NA
P O R AT I O
• Many natural resource rich countries are diversifying and
transforming their economies using the hydrocarbon value chain
for wealth creation.
• In Nigeria, diversification should involve includes diversifying the
energy mix (from oil to gas) and fuels to non-fuels.
• Diversification will result in wealth creation through employment
generation, import substitution and GDP growth.
• The keys to successful transformation lies in four strategies namely:
• Create national focal point for developing industries beyond fuels
• Clear fiscal system for midstream oil with fiscal rules of general application
• Right incentives through price deregulation
• Industrial parks with pre-investment in infrastructure by the State
• An integrated approach to implementing the identified strategies
is vital for the expected wealth creation to be realised.
N
NIGERIAN
LEUM
RO
ET
TIONAL P
NA
C
OR
BACK UP
P O R AT I O
N
NIGERIAN
OR
C
Threats in the Horizon: The advent of US Shale Gas (2)
TIONAL P
NA
LEUM
RO
ET
Creating Wealth Through Diversification, Transformation and
Development of our Refineries and Petrochemical Industries
Strategies to Support Wealth Creation in Nigeria (12)
P O R AT I O
N
NIGERIAN
OR
C
Threats in the Horizon: The advent of US Shale Gas (2)
TIONAL P
NA
LEUM
RO
ET
Creating Wealth Through Diversification, Transformation and
Development of our Refineries and Petrochemical Industries
Strategies to Support Wealth Creation in Nigeria (12)
P O R AT I O
N