Two of Africa’s hydrocarbon industry giants, Nigeria and Angola, are poised to dominate the continent’s offshore oil and gas paints and coatings market in the short- and medium-term on the back of ambitious projects already underway or in the pipeline.

Market analysts Frost & Sullivan predicts in a new report the two countries, which have a combined 46 billion barrels of proved crude oil reserves, “present attractive growth and operational expansion opportunities for manufacturers in the offshore oil and gas (O&G) paints and coatings market.”

“With raw material availability and local manufacturing capabilities catalyzing production and supply lines, the two countries are rapidly emerging as the African hub for the offshore oil and gas paints and coatings market,” the report said.

Currently, Nigeria and Angola have lined up a total of 19 offshore oil and gas projects over the next five years and these are expected to substantially grow the two countries’ offshore oil and gas paints and coatings market.

Angola, which holds 9 billion barrels of proved crude oil reserves, most of it located in offshore areas of Lower Congo and Kwanza basin, has up to 10 major offshore projects set for implementation in a bid to increase its crude production capacity. The projects include Mafumeira Sul, Luanzi field, Kizomba Satellites Phase 2, East Hub Project (Cabaca Norte, South-East), Greater Plutonio Phase 3, Kaombo Project, Negage, Lucapa, Chissonga, Malange and Cameia.

The projects are being developed by major international oil companies (IOCs) of Chevron, ExxonMobil, Total, BP, Maersk Oil, Eni SpA and Cobalt either separately or jointly.

Earlier, US Energy Information Administration (EIA) said: “Because several of Angola’s older deepwater fields are past their peak production, the new capacity additions from upcoming projects are more likely to sustain Angola’s crude oil production around or slightly above current levels over the medium term rather than provide a substantial boost.”

Six of the Angolan projects have reached final investment decision (FID) phase with EIA saying: “Despite the recent drop in global oil prices, projects that are past FID stage will most likely not be cancelled because the procurement phase has already started.”

In Nigeria, a country with 37 billion barrels of proved crude oil reserves, second only to Libya, IOCs have unveiled nine offshore oil and gas projects to be implemented over the next five years and which are likely to boost growth of the West African country’s  offshore oil and gas market.

Although the country’s controversial Petroleum Industry Bill has held back several of the planned projects, with only two having been sanctioned by IOCs, the West African economy presents one of the largest growth opportunities for the offshore oil and gas paints and coatings market.

The projects have a combined capacity of 1.1 million new productions in five years according to EIA.

In the new Frost & Sullivan report both countries generated revenues of $675.1 million in 2014 earnings set to rise to $1,131.4 million in 2019 based on the study of “the offshore oil and gas facilities, dry docks and fabrication yards.”

“The subsidization of manufacturing makes Nigeria and Angola vital to the production of offshore oil and gas paints and coatings in Africa, with the goal of African needs being fulfilled by African countries,” said Frost & Sullivan Chemicals and Materials research analyst Abdul-Baasit Abdullah.

“The drop in crude oil prices has reduced the base costs of paint through a reduction in raw material cost of 8.3 percent, driving competitive pricing and consumption.”
Construction of local production facilities will be vital in order to ensure cost-competitiveness, as transportation costs of raw materials are steep, the report stated.

In Angola several contracts have been awarded for the development of offshore facilities by the international oil companies exploring or producing crude oil and gas in the country’s offshore blocks. In addition, a number of dry docks and fabrication yards are anticipated as more and more crude oil projects come online.

For example, a number of floating, production, storage and offloading (FPSO) vessels have been delivered or are under construction to meet the increasing demand.

Italy’s Eni SpA has awarded a $2.9 billion contract to Malaysia’s offshore oilfield services firm Bumi Armada Berhad for the charter, operation and maintenance of a FPSO to be deployed at Block 15/06. The vessel will be delivered by 2016.

Bumi has in turn awarded Swiss-based power-grid maker ABB a contract for the supply electrification and automation systems for the FPSO which is set to churn out 80,000 barrels/day by the end of 2016.

“The vessel will control the entire extraction process, storing of oil and gas until they can be offloaded to shuttle tankers,” the company said previously.

Separately, Sweden-based Alfa Laval has also been awarded a $30.7 million contract to supply Framo pumping systems for Eni’s two FPSOs in Angola with a deadline to deliver for 2015 and 2016. “The order comprises offshore pumping systems for two FPSOs to be moored outside the Angola coast,” the company added.

Both Nigeria and Angola offshore oil and gas exploration and production activities are likely to continue drawing more drill ships, FPSOs, FPSO topside modifications, flow lines and subsea equipment as the countries bring more offshore oil and gas fields into operation.

Nigeria and Angola offshore oil and gas paints and coatings market compound annual growth is projected to hit 9.6 percent and 12.3 percent respectively until 2019.

Frost & Sullivan said Nigeria local paints and coatings manufacturers are supplying 30 percent to 46 percent of the country’s demand while the rest is supplied through imports.

In Angola, the market analyst said 6 percent of the offshore oil and gas paints and coatings are manufactured locally but a large share of the demand is met by imports.
“The distribution of local brands supported by sales of international brands will ensure long-term growth in the Nigerian and Angolan markets.”

Frost and Sullivan estimates Nigeria’s total offshore oil and gas paints and coatings market at 24 million liters, with potential to grow to 37.9 million liters by 2019.

“Development and construction operations in ports such as Lagos and Luanda present significant growth opportunities,” the report said, adding “significant technological investments have been made in the manufacturing of offshore paints and coatings since 2013.”

However, the analyst said “price fluctuations and customer price sensitivity are major factors impeding growth in the market, both of which have led to underdevelopment in certain areas and significant growth in others.”

“While in-country manufacturing is a must-have, building a brand reputation will be essential for long-term, sustainable growth,” said Abdullah.  “Partnerships between local and international companies will speed up the development of high-quality products and assist offshore oil and gas paints and coatings manufacturers in meeting demand in the Nigerian and Angolan markets.”

Key market players in Nigeria include Berger Paints, Portland Paints and Products, CAP PLC, DN Meyer PLC and International Paints while the Angolan market is dominated by Hempel, AzkoNobel, Dekro, Sigma Coatings and International Paint.

The oil and gas boom in Africa is set to be one of the major drivers of the continent’s coatings market going forward.