petrochemical

"We have learned how to manage the volatility and the complexities of Nigeria and we are doing fine, and the security environment has got much better," said Amit Lohia, MD of Indorama, in an interview with African Business.

African Business: You have been in Nigeria now since 2006, almost 10 years. What are your principal activities?

We manufacture polyolefins there with a gas cracker, which is a process to convert gas into ethylene and propylene, and then you convert that into polypropylene. The market has been growing domestically every year, year on year, for the last three years and we sell practically everything locally.

We didn’t really plan to be in Nigeria, it wasn’t part of our business plan, but in 2005 a trade delegation from Nigeria came to Indonesia and my father was persuaded by one of the ministers to attend a trade fair. There he heard that Nigeria was privatising a number of petrochemical companies. That sparked his curiosity and he went to investigate, not expecting anything really, but he came back very impressed with the world-class petrochemical complexes that were operating well, and he believed they would be very interesting prospects for us to look at.

There was a tendering process to privatise a fertiliser company and this gas cracker complex which we ended up acquiring. In the fertiliser complex we were very successful, and we ended up being the highest bidder and that’s how we got into this business in Nigeria.

How long was the process between deciding to invest and execution?

It was a 12-month process; travelling to the country, looking at the facilities, conducting due diligence, negotiating with the vendor, then the tendering process before closing the transaction. It was not too long, 12 months is pretty quick.

This was during President Obasanjo’s time and his administration was very committed to the privatisation process and executed it in a very transparent, fair way.

I believe President Obasanjo was quite a big fan of the Singaporean model anyway. He visited quite often. I never met him personally, but I know they really were trying to do the right thing by raising these, from their point of view, “dead investments”, realising their inherent value through a private operator like us.

How have you found it? Nigeria can be quite a taxing place to operate.

Like any new country, there’s a learning curve. In a country like Nigeria, there’s an even more difficult learning curve. The initial two years were very challenging from a security point of view, we even had a case of kidnapping in 2007, where around 10 of our senior executives were abducted. That was one of the most stressful moments, but thankfully they were released within a few weeks and no one was harmed. But, yes, that kind of illustrates that we really had a tough start, but we persevered and we learned from our experiences and over the last six or seven years I think we have learned how to manage the volatility and the complexities of Nigeria and we are doing fine, and the security environment has got much better.

What are your thoughts about the presidential elections and how that might impact your operations?

In general, people are relieved in the way the torch moved to the opposition party. There were some issues here and there in the media about the election, but on the whole I think most people who are there are pleased with how it happened and it’s a good sign and we should be positive about it.

Some of Nigeria’s gas infrastructure has now been privatised and there’s certainly a lot of investment that’s supposed to be going into it. I guess you’ve already got all your supplies and infrastructure issues in place, so it doesn’t really affect you,

We were lucky because we acquired an existing complex which had all the pipelines in place. We didn’t have to build anything new and the raw materials were already coming in, so that wasn’t a problem, but since we acquired this company we have new investments in Nigeria.

We’re building a urea plant, a 1.3m tonne/ year world-scale urea plant with an investment of about $1.2bn. We broke ground for this project last year and the commission is planned for the beginning of next year.

We had to build a lot of the infrastructure for this plant really, including the pipeline for the natural gas and even a port to be able to ship the urea to international markets. But the fact is that we’ve been in Nigeria for many years and we know the environment. It is challenging, community relations and things like that are not easy, but so far so good, we are on track, on budget, on time with this project.

So the new plant is for export markets?

This will be for both domestic and export, the first new urea plant in Nigeria in decades. Nigeria is an agrarian society, and they have a lot of arable land.

Unfortunately, the use of fertilisers has not kept pace with what is required, which we believe is on account of a lack of good quality, local supplies. Nigeria, until now, has had to import and there are a lot of complexities and inefficiencies with the supply chain in Nigeria. So it’s very promising that with our new plant coming on line, and with an abundance of natural gas, more plants in the future will be built; this will give a kick-start to fertiliser consumption and assist Nigeria’s agricultural sector. So it will be both domestic and export, over time more domestic and less export, but in the beginning there will be a mix of both.

There is probably going to be more of an emphasis on agriculture in Nigeria, and that’s obviously positive news for the fertiliser producers.

They have to diversify the economy, to get away from a dependence on oil and gas. Agriculture is one of the ways to achieve this. Nigeria has the resources, they have the land, they have the water, they have the labour, it’s just a matter of getting all the inputs together, the knowhow together and making it happen.

The original plan was to export from the beginning, but not the urea for polyurethane?

No, it was the resins we wanted to export. Resins were being exported to Europe, South Asia mainly, but also the rest of West Africa. But that’s kind of turned around now, so it’s principally domestic demand that we supply, the resins being used mainly by the manufacturers of plastic household goods such as buckets, pipes, bags and even toys.

How would you characterise Nigeria’s manufacturing industries?

Actually it’s quite interesting because there is a large amount of medium-scaled industry in Nigeria, and plastic manufacturing is an example of that. Nigeria is still importing resins, so large is the domestic demand even with our capacity being available. The downstream consumption of these resins has grown significantly in the last 10 years.

Nigeria was your first investment in Africa, is it still your only one?

No, last year we made an acquisition in Senegal, acquiring a large phosphate fertiliser complex, one of the largest industrial complexes in the country. It is a similar story: the company wasn’t operating at full capacity, it was struggling with technical issues and so we come in as an operator now and operations are back to full scale.

So your strategy is really to expand across large-scale chemical-based industries wherever a stressed opportunity presents itself?

Yes, and also there was a nice overlap with our plant coming up in Nigeria for the urea; so we’ll have this urea plant in Nigeria, now we have the phosphate fertiliser in Senegal, and there are three components in fertiliser - nitrogen, phosphate and potassium. We now have two out of the three, so we have almost a complete package of solutions for West Africa in fertilisers and that just makes us more even more entrenched in that sector.

This article was first published in African Business magazine, June 2015 issue. Copyright IC Publications 2015. Published under permission by IC Publications www.africanbusinessmagazine.com.

 

 

 

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