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Strategic Analysis of the South African and Nigerian Petrochemicals Markets
Frost & Sullivan, March 2010, Pages: 105
Research into the petrochemicals market was conducted for the South African and Nigerian petrochemicals markets. The report provides an overview of the production of olefins (i.e. ethylene and propylene) and aromatics (i.e. toluene and xylene). An examination of the refineries found in South Africa and Nigeria is provided, along with insight into the historical capacity utilisation of Nigerian refineries. Market engineering measures are provided for each country along with forecasts from 2008-2015. Key market drivers and restraints are listed as well as industry challenges.
This Frost & Sullivan research service titled Strategic Analysis of the South African and Nigerian Petrochemicals Markets provides an analysis of the industry challenges as well as market drivers and restraints. In this research, Frost & Sullivan's analysts examine the following markets: olefins (ethylene, propylene, butadiene) and aromatics (xylene, toluene, benzene). They also analyze the following technologies: coal to liquid (CTL), gas to liquid (GTL) and Fischer-Tropsch.
Market Overview
The South African Petrochemicals Market Trumps the Nigerian Market due to its Vast Refinery Capacities
Compared to other Sub-Saharan markets, South Africa’s petrochemicals market is highly developed, 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. On the other hand, Nigeria depends on imports of petrochemical products despite the presence of large crude reserves. This is because its low refinery-capacity utilization (approximately 40 per cent of the full capacity) lowers petrochemical yields, creating a need for imports. The petrochemicals market is the foundation of the chemicals industry, as it provides the building blocks for most chemical products. For instance, olefins and aromatics are used in end-user markets such as paints, plastics, explosives and fertilizers. “The demand for petrochemicals products is highly driven by activities in the end-user segments,” says the analyst of this research. “South Africa has a well developed manufacturing sector, which provides a ready market for end products of the petrochemicals market.”
The South African market in Sub-Saharan Africa is unique because of the production of feedstock from coal and gas using CTL and GTL technologies. Refineries that are located closer or at the feedstock sources (oil fields of the Middle East) have easier access to the global market because they are more cost competitive - a huge advantage in a price-sensitive 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, disruptions in supply to the refineries due to militant activity, corruption and inefficiency hikes the costs of the production of petrochemical products. However, negotiations between the Nigerian Government and the militants are expected to bring stability to the region and minimize the disruptions. For the South African market, coal is a crucial feedstock for the country’s unique synfuels and petrochemicals industry and it reduces its dependence on crude.
Nevertheless, despite the increasing global refinery capacity, Sub-Saharan Africa has been reliant on imports. South Africa has plans under way to have another refinery on stream by 2015 in the Coega Industrial Development Zone. The refinery is to enable Sub-Saharan Africa to become independent with regard to petrochemical needs. “A restructuring of the operation of Nigerian refineries, with greater private sector participation, is likely to increase the capacity utilization of the refineries,” notes the analyst. “Once this is instituted, the cost structure of the Nigerian petrochemicals market is set to improve.”
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
Olefins (ethylene, propylene, butadiene)
Aromatics (xylene, toluene, benzene)
Technologies
The following technologies are covered in this research:
Coal to liquid (CTL)
Gas to liquid (GTL)
Fischer-Tropsch
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