Delta Aims to Become Industrial Power: An Ambitious Industrial Project, Based on the Presence of Liquefied Natural Gas, Is One the Drawing Board in the States of Ogun and Ondo. It Will Involve Developing a New Shipping Hub and a Large Scale Industrial Zone. Report by Neil Ford

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Countless initiatives have been launched in Nigeria to promote industrial development over many decades. Most have disappeared without trace, as the country has failed to build on the solid base given to it by its oil and gas wealth.

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Yet recent moves towards the construction of industrial development zones and clusters seem to bring something new to the table. The Olokola integrated port and industrial zone appears to provide an example of the way ahead, by using hydrocarbon investment to kick-start a much broader scheme.

By far the most important industrial element in the Nigerian economy at present is its liquefied natural gas (LNG) sector. The Nigeria LNG (LNG) plant on Bonny Island has led the way but total investment in the sector is expected to reach tens of billions of dollars within the next five years. It is therefore fitting that an LNG plant has been chosen as the anchor tenant for the Olokola scheme.

Most combined port and industrial zone ventures require one or two projects that can justify investment in port, rail, road and power infrastructure, which can then be used to attract a large number of smaller enterprises, thereby helping the diversification of the economy as a whole.

Egypt is already pursuing this policy with its Sokhna port and Suez Special Economic Zone (SSEZ), while South Africa is following suit with Coega in the Eastern Cape.

The state governments of Ogun and Ondo have sought to develop a similar scheme at Olokola, on the borders of their two states. Two LNG liquefaction projects had been planned for the site but BG, Chevron and Shell now appear to have pooled their resources to develop a combined LNG plant. Developing this facility will swallow most of the $12bn that the two governments believe is bound for Olokola over the next few years.

It has also been revealed that Chinese Overseas Shipping Company (Cosco), one of the biggest shipping firms in the world, has held talks with Nigerian officials over developing the $1bn port at Olokola.

A full range of shipping facilities will be required, including container, dry bulk, liquid bulk and roll on roll off (ro-ro) terminals, all of which will have a depth alongside of 16 metres. This would allow very large vessels to use the port and could enable Olokola to become a major transhipment port for the entire Gulf of Guinea. The Ogun state governor, Otunba Gbenga Daniel, visited Beijing in December to hold talks with Cosco, which would be expected to lead a consortium on the project. Ogun and Ondo states will probably be included in the consortium, while Western Metal Materials Company, GMT Group, the Lee Group of Companies and Shanghai Waterway Engineering Company, all of China or Hong Kong, have been mentioned as possible investors.

International shipping companies generally run regular container services around the world that utilise only one or two ports in each region and prefer to use larger ports with greater capacity, where containers can be unloaded for transfer to other local ports.

Although there are more than a dozen significant ports on the Gulf of Guinea, none has yet emerged as the dominant player in the region, so Olokola could have regional ambitions. Cosco has yet to sign a development contract but a feasibility study is planned this year.

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Aside from the port and LNG plant, a 10,000 hectare free trade zone, aimed at industrial and export processing investors, will be developed at the site. A spokesperson for the Ondo government said that $15bn would be invested in the Olokola free trade zone over the next two years but even taking into account the LNG plant, this timetable seems optimistic. A $2.5bn fertiliser plant is planned, plus two petrochemical facilities and reports in the Nigerian press indicate that Toyota is interested in constructing an automotive plant.

The chief of staff to the Ondo state governor, Femi Agagu, said: "We are determined to change the oil producing areas now because one day, the oil will dry up and there will be no more derivation money. …