Indorama gas deal offers $18bn that could lift Nigeria’s economy

• GDP to gross $3bn annually
• monetization of 1.7 tcf gas, 100m bbl reserves
• 55,000 direct-indirect jobs coming

Ben Eguzozie 

Nigeria’s cash-strapped economy could begin to receive some financial fillip beginning this year, from the early tranches of $18 billion expected in the life cycle of Indorama Nigeria’s gas utilisation partnership between its group of companies and the Nigerian National Petroleum Company (NNPC) Limited. 

Indorama Nigeria, a member of Indorama global conglomerate, is set to begin investment in gas utilisation for large-scale expansion plans in its gas-based heavy manufacturing industries, including fertiliser, methanol and petrochemicals, in Rivers State, Nigeria, according to the gas partnership agreement between the company and NNPCL.

Also, the gas partnership agreement is projected to add $3 billion annually to the nation’s gross domestic product (GDP).

Some 800 million standard cubic feet (mscf) of gas will be made available for use by the Indorama companies in Nigeria, which by extension would promote industrialisation in Nigeria, according to Mele Kyari, group chief executive of NNPCL. 

Nigeria has been inexorably cash-strapped since 2015. The country developed an extraordinary appetite for external borrowing from 2015, when former President Muhammadu Buhari increased the country’s debt from $7.3 billion (in 2015) to more than $114.35 billion (N87.91 trillion) as of 30 December 2023, according to the Debt Management Office (DMO). It followed what many analysts have described as ‘complete cluelessness’ in economic management by the Buhari government,

Kyari had said at the gas utilisation signing ceremony late last year that the partnership will engender a situation that will rescue many companies using natural gas and natural gas liquid as raw materials, which are currently suffering production shortages due to inadequate or lack of gas supply. 

For instance, Indorama Petrochemicals and Indorama Fertilizer have been experiencing production shortfalls as a result of poor supply of feedstock (gas) from Agip, which has affected product supply to customers of the two companies. 

Manish Mundra, managing director and chief executive officer of Indorama Africa, said the Memorandum of Understanding (MoU) with NNPCL is a strategic alliance to release immense benefits of Nigeria’s upstream sector, while partnering the downstream to share the value chain.

“We are seeing an annual contribution of $3bn to the nation’s GDP and a lifetime contribution of $18 billion to government revenue. This is a strategic collaboration to unlock Nigeria’s upstream sector, but more importantly, to partner downstream, to share the value chain, Mundra said. 

He added that the MOU signed with the NNPCL was part of the process of realising Indorama’s vision of making Nigeria the largest petrochemicals and fertilisers hub in Africa. 

He said, “Nigeria’s gas reserves should position the country as one of the largest urea producers in Africa and the Western Hemisphere”. 

Indorama’s gas-based manufacturing portfolio includes different grades of Polymer resins (polypropylene and polyethylene), PET, customised industrial sacks, and the world’s largest single-train Urea plant located in Port Harcourt. The train-1 has been replicated as Train-2, also located in the expansive Indorama complex in Eleme, Rivers State. Indorama Fertilizer plants now produce a total of 3 million metric tonnes of Urea fertiliser per annum. The company is currently working on massive-scale expansion plans in its gas-based heavy manufacturing industries including fertiliser, methanol and petrochemicals, hence the strategic importance of the gas supply pact with government-owned NNPCL. 

Last year, Indorama Nigeria, a subsidiary of Singapore-based global conglomerate, and owners of Indorama Eleme Petrochemicals Ltd (IEPL) and Indorama Eleme Fertilisers & Chemicals Ltd (IEFCL), joined the league of Nigerian operating companies worth over $1 billion, including the likes of Dangote, MTN Nigeria, BUA and Zenith Bank.

The Port Harcourt-based fertiliser producer’s valuation is now around $3.3 billion, making it one of sub-Saharan Africa’s most valuable companies outside of South Africa.

In an equity buyback last year, the company bought the remaining 15 percent share initially held by the United Kingdom-based Actis Capital in Eleme Fertilizers & Chemicals (IEFCL). This leaves Indorama gaining full control of the IEFCL urea plant following Actis Capital’s exit. It has now become the leading producer of urea fertiliser in the entire sub-Saharan Africa. It already owned 85 percent of the fertiliser plant.

Indorama today produces about 3 million tonnes of fertiliser per annum (mtpa) from its two-train Port Harcourt plant, with some being shipped for export to Brazil and India. The company is already afoot with the Train 3 plant, which will take its production level further. Urea is a key ingredient in agricultural fertilisers. In Nigeria, fertiliser consumption was reported at 94.74 percent in 2020, according to the World Bank collection of development indicators, compiled from officially recognised sources.

One of NNPCL’s roles, as enshrined in the Petroleum Industry Act (PIA) is to promote the use of natural gas through the development and operation of large-scale gas utilisation industries. Industry analysts believe that the key benefits of the opportunities include the monetization of over 1.7 trillion cubic feet (tcf) of gas and 100 million barrels of oil reserves, generation of upstream lifecycle revenue of over $18 billion, downstream production of about 4.8 million tonnes per annum (MTPA) of products including methanol, urea and fertiliser to boost national food security. 

Other benefits include the creation of about 55,000 direct and indirect jobs, the development of a condensate refinery to boost petroleum product supply and reduce product importation, annual GDP contribution of over $3.8 billion, and attraction of over $7 billion of foreign direct investment (FDI) into the country.

Last year, President Bola Tinubu went to India on an investment drive and secured a commitment of $8 billion investment commitment from Indorama Corporation to expand its facilities in petrochemicals and fertilisers, as well as build a methanol plant. 

Governor Siminilaye Fubara of Rivers State had also announced that the state government and the communities were giving 209 hectares of land in support of the new investment being brought into the state by Indorama.