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PCPMP Ethiopia Final Report

Prepared For DFID Ethiopia and PCPMP

August 2017

Jacobs Consultancy Limited Registered Office: 1180, Eskdale Road, Winnersh, Wokingham RG41 5TU Registered in England and Wales No. 2995682

For Jacobs Consultancy Authors:

Sanjay Shah Simon Offiler-Conti

John-Paul Wale Glyn Johnson Reviewers:

Sanjay Shah Glyn Johnson

David Whittaker

August 2017

PCPMP Ethiopia Final Report

Prepared For

DFID Ethiopia and PCPMP

Jacobs Consultancy Limited Tower Bridge Court 226 Tower Bridge Road London SE1 2UP United Kingdom Phone: +44 (0) 20 7403 3330

This report was prepared based in part on information not within the control of the consultant, Jacobs Consultancy Limited. Jacobs Consultancy has not made an analysis, verified, or rendered an independent judgment of the validity of the information provided by others. While it is believed that the information contained herein will be reliable under the conditions and subject to the limitations set forth herein, Jacobs Consultancy does not guarantee the accuracy thereof. Use of this report or any information contained therein shall constitute a release and contract to defend and indemnify Jacobs Consultancy from and against any liability (including but not limited to liability for special, indirect or consequential damages) in connection with such use. Such release from and indemnification against liability shall apply in contract, tort (including negligence of such party, whether active, passive, joint or concurrent), strict liability or other theory of legal liability, provided, however, such release limitation and indemnity provisions shall be effective to, and only to, the maximum extent, scope, or amount allowed by law. This document, and the opinions, analysis, evaluations, or recommendations contained herein are for the sole use and benefit of the contracting parties. There are no intended third party beneficiaries, and Jacobs Consultancy shall have no liability whatsoever to third parties for any defect, deficiency, error, omission in any statement contained in or in any way related to this document or the services provided.

Table of Contents

Section Page

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A Executive Summary Summary ............................................................................................................... 2 Ethiopia’s Place in Global Chemicals, Post-project ......................................... 4 Market Analysis ....................................................................................................... 5

Key Findings – End Use Industry Analysis ...................................................... 5 Achievable External Markets for Ethiopia ........................................................ 7 Ethiopian Market Estimation ............................................................................ 9 Petrochemicals Market Forward Outlook ....................................................... 13 Institutional Matters ....................................................................................... 14

Ranking of Value Chains ....................................................................................... 17 Methodology ................................................................................................. 17 Natural Resources & Feedstock Availability .................................................. 19

Recommended Technical Configurations .............................................................. 21 Methodology ................................................................................................. 21 Ethiopian Cost Competitiveness.................................................................... 25 Summary ...................................................................................................... 28

Integration to Downstream Sectors and Technology Transfer ................................ 29 Transport and Logistics Considerations ................................................................. 32

Overview ....................................................................................................... 32 Existing Transport Infrastructure and its Bearing on Site Selection ............... 34

Financial Performance ........................................................................................... 38 Direct and Indirect Benefits Summary ........................................................... 38 Employment .................................................................................................. 39 Conclusions on Benefit to Ethiopia ................................................................ 39

B Introduction and Background Ethiopia – Economic and Resource Profile .............................................................. 2

Introduction to Ethiopia ................................................................................... 2 Economic Analysis .......................................................................................... 3 Selected Economic Indicators ......................................................................... 4 Ethiopia: Energy Profile ................................................................................... 4 Achievable Markets for Ethiopia .................................................................... 34

Global Chemical and Petrochemical Market .......................................................... 35 Local Stimuli to Market Growth ..................................................................... 36

Ethiopia Market Estimation .................................................................................... 39 Petrochemicals Market Outlook ............................................................................. 46 Ranking of Value Chains ..................................................................................... 103 Value Chain Ranking ........................................................................................... 132 Price Forecast ..................................................................................................... 140 Methodology ........................................................................................................ 140

Trend Pricing............................................................................................... 140 Oil Price Basis ............................................................................................. 143

Forecast Market Prices ........................................................................................ 144

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C Technical Configuration Current Situation and Resource Profile .................................................................... 2

Natural Resources and Feedstock Availability ................................................... 2 Recommended Configurations ........................................................................... 9

Technology Considerations ................................................................................... 17 Introduction ............................................................................................................ 17 Cost Competitiveness Methodology ....................................................................... 45

Introduction ...................................................................................................... 45 Overall Basis & Methodology ........................................................................... 45 Results ............................................................................................................. 47 Summary ......................................................................................................... 70

D Transport/Logistics Infrastructure Introduction .............................................................................................................. 2

Existing Transport Infrastructure ........................................................................ 5 Water and Land Requirements .......................................................................... 8

E Institutional Matters Current Status of Sector and the Support Activities of the GoE............................... 2

Industrial Sector in Ethiopia ............................................................................. 2 Overview of Government Initiatives for Growth in Ethiopia .............................. 7

F Environmental, Social, Health and Safety Considerations of the PCPMP Introduction .............................................................................................................. 2

Overview ......................................................................................................... 2 Scope of ESHS Review .................................................................................. 3 Project Location and Site Selection ................................................................. 4

Legal Framework ..................................................................................................... 5 National ESHS Legal Framework .................................................................... 6 International Standards ................................................................................. 20 International Conventions ............................................................................. 27 National and International Emissions Standards ........................................... 28

ESHS Impacts and Mitigation Framework .............................................................. 55 Introduction ................................................................................................... 55 Potential Environmental and Social Impacts and Mitigation ........................... 55 Potential OHS and Community Health and Safety Impacts and Mitigation .... 80

Summary and Recommendations .......................................................................... 91 G Ethiopia – Financial Model Introduction .............................................................................................................. 2

Basis and Methodology ................................................................................... 2 General Assumptions ...................................................................................... 2 Debt Cost Assumptions ................................................................................... 3 Inflation Assumptions ...................................................................................... 3 Product Price Sets .......................................................................................... 3 Utility Prices .................................................................................................... 4 Operating Hours, Operating Rate & Project Start-Up ...................................... 4 Variable Costs ................................................................................................. 5 Terminal Value ................................................................................................ 5 Fixed Costs ..................................................................................................... 6

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Section Page

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Working Capital ............................................................................................... 8 Project Capital Cost ........................................................................................ 9

Financial Results ................................................................................................... 10 Base Case Results ....................................................................................... 10 Summary and Conclusions ........................................................................... 12

Ethiopian Economic Benefits ................................................................................. 15 Direct and Indirect Benefits Summary ........................................................... 17 Employment .................................................................................................. 17 Conclusions .................................................................................................. 18

Glossary For Common Chemical Name Acronyms

Table of Contents

Figure Page

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Figure A-1: Ethylene Cash Cost Comparison ......................................................................... 26 Figure A-2: Propylene Cash Cost Comparison ....................................................................... 27 Figure A-3: Butadiene Cash Cost Comparison ....................................................................... 27 Figure A-4: Aromatics / PX Cash Cost Comparison ................................................................ 27 Figure A-5: Methanol Cash Cost Comparison ......................................................................... 28 Figure A-6: Ammonia Cash Cost Comparison ......................................................................... 28 Figure A-7: Acetic Acid Cash Cost Comparison ...................................................................... 29 Figure A-8: End-use Sectors Served by Output....................................................................... 31 Figure A-9: LPI Comparison – Ethiopia vs. Germany .............................................................. 33 Figure A-10: LPI Comparison – Ethiopia vs. RSA ................................................................... 33 Figure A-11: Existing Major Road Network in Ethiopia ............................................................ 34 Figure B-1: Overall Geographical Position of Ethiopia ............................................................... 2 Figure B-2: Ethiopia’s GDP Growth Rate .................................................................................. 3 Figure B-3: Ethiopia’s Primary Energy Supply ........................................................................... 5 Figure B-4: Ethiopia’s Electricity Generation ............................................................................. 7 Figure B-5: Ethiopia’s Electricity Installed Capacity ................................................................... 7 Figure B-6: Global Chemical Sales, by Region........................................................................ 35 Figure B-7: Petrochemical Growth Matrix ................................................................................ 92 Figure B-8: Petrochemical Growth Matrix ................................................................................ 93 Figure B-9: Brent Oil Price Scenarios (US$/bbl, current dollars) ........................................... 143 Figure C-1: Map of Natural Gas and Petroleum Reserves in Ethiopia ....................................... 3 Figure C-2: Molecular Architecture of the 3 Basic Types of Polyethylene ................................ 20 Figure C-3: PE100+ HDPE Pressure Pipe Grade Specifications ............................................. 23 Figure C-4: Molecular Architecture of the 3 Basic Types of Polyethylene ................................ 24 Figure C-5: Molecular Weight Distribution in High Density Polyethylenes ............................... 24 Figure C-6: Non-nucleated and Nucleated PP......................................................................... 28 Figure C-7: Global Application Split for PVC ........................................................................... 31 Figure C-8: Vinyl’s Value Chain .............................................................................................. 33 Figure C-9: Comparison of Energy Consumption of Chloralkali Processes ............................. 35 Figure C-10 : Comparison of Chloralkali Process Relative Construction Costs ........................ 37 Figure C-11:Typical Integrated Ammonia/Urea Production Flow Chart ................................... 43 Figure C-12: Ethylene Cash Cost Comparison ........................................................................ 50 Figure C-13: Propylene Cash Cost Comparison ...................................................................... 54 Figure C-14: Butadiene Cash Cost Comparison ...................................................................... 57 Figure C-15: Aromatics / PX Cash Cost Comparison .............................................................. 60 Figure C-16: Methanol Cash Cost Comparison ....................................................................... 63 Figure C-17: Ammonia Cash Cost Comparison ....................................................................... 66 Figure C-18: Acetic Acid Cash Cost Comparison .................................................................... 69 Figure D-1: LPI Comparison – Ethiopia vs. Germany, 2014 ...................................................... 3 Figure D-2: LPI Comparison – Ethiopia vs. RSA, 2014 ............................................................. 4 Figure D-3: LPI Comparison – Djibouti vs. Germany, 2014 ....................................................... 4 Figure D-4: Existing Major Road Network in Ethiopia ............................................................... 5 Figure D-5: Proposed Gas Pipeline Routings and Proximity to Dire Dawa ............................... 7 Figure E-1: Ethiopian GDP Growth by sector, 2004-2010 ......................................................... 7 Figure E-2: Trade Balance Percentage Growth – 2004-2010 .................................................... 8

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Figure F-1: EIA Application Process ........................................................................................ 15 Figure F-2: Organization at Federal Level within MOLSA ........................................................ 19 Figure F-3: City and Regional Inspectorates ........................................................................... 19

Table of Contents

Table Page

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Table A-1: PCPMP’s Principal Commodity Products versus Global/African Demand ............... 4 Table A-2: Ethiopia – Potential Investment Opportunity by Sector............................................. 5 Table A-3: Ethiopia – Priority Chemicals & Petrochemicals ....................................................... 6 Table A-4: Imports of Key Chemicals & Petrochemicals by Select African Countries ................ 8 Table A-5: Latent Ethiopian Demand by Year 2025 ................................................................ 10 Table A-6: Petrochemical Value Chain Growth in Ethiopia and Neighbouring Countries ......... 14 Table A-7: Products Recommended for Investment in Ethiopia ............................................... 19 Table A-8: Ethiopia – Availability of Natural Resources and Feedstock ................................... 20 Table A-9: Configuration Cases – Key Derivative Options ...................................................... 23 Table A-10: Configuration Cases – Derivative Capacity .......................................................... 24 Table A-11: Configuration Cases – Cracker / Steam Reformer Options .................................. 25 Table A-12: Existing Industrial Parks in Ethiopia ..................................................................... 36 Table A-13: Planned Industrial Parks in Ethiopia ..................................................................... 37 Table A-14: Direct Economic Benefits to Ethiopia .................................................................. 38 Table A-15: Direct and Indirect Employment .......................................................................... 39 Table B-1: Ethiopia’s Economic Indicators ................................................................................ 4 Table B-2: Vehicle Population in Ethiopia and Select African Countries .................................. 14 Table B-3: Imports of Key Fuels, Chemicals and Petrochemicals in Ethiopia .......................... 16 Table B-4: Fertilizers Industry ................................................................................................. 18 Table B-5: Paints & Varnish Industry ....................................................................................... 19 Table B-6: Soaps & Detergents Industry ................................................................................. 19 Table B-7: Pharmaceuticals Industry ....................................................................................... 20 Table B-8: Food Processing Industry ...................................................................................... 20 Table B-9: Water Treatment Industry ...................................................................................... 21 Table B-10: Plastic Processing & Packaging Industry ............................................................. 21 Table B-11: Pulp & Paper Industry .......................................................................................... 23 Table B-12: Electronics & White Goods Industry ..................................................................... 23 Table B-13: Furniture Industry ................................................................................................. 24 Table B-14: Construction Industry ........................................................................................... 25 Table B-15: Automobiles Industry ........................................................................................... 25 Table B-16: Tyre Industry ........................................................................................................ 26 Table B-17: Textile Industry .................................................................................................... 26 Table B-18: Leather/Tannery Industry ..................................................................................... 28 Table B-19: Footwear Industry ................................................................................................ 28 Table B-20: Ethiopia – Potential Investment Opportunity by Sector ......................................... 29 Table B-21: Ethiopia – Priority Chemicals & Petrochemicals ................................................... 30 Table B-23: Imports of Key Chemicals & Petrochemicals by Select African Countries ............ 34 Table B-24: Latent Ethiopian Demand by Year 2025 .............................................................. 43 Table B-24: Ethylene Chain Market Outlook ........................................................................... 47 Table B-25: Propylene Chain Market Outlook ......................................................................... 52 Table B-26: C4s Chain Market Outlook ................................................................................... 59 Table B-27: Aromatics Chain Market Outlook ......................................................................... 63 Table B-28: Acetyls Chain Market Outlook .............................................................................. 73 Table B-29: Methanol Chain Market Outlook ........................................................................... 74 Table B-30: Ammonia Chain Market Outlook .......................................................................... 77 Table B-31: Chlor Alkali Chain Market Outlook ....................................................................... 82 Table B-32: Potash Chain Market Outlook .............................................................................. 85 Table B-33: Sulphur Chain Market Outlook ............................................................................. 87

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Table B-34: Bio-based Chain Market Outlook ......................................................................... 88 Table B-35: Soda Ash Chain Market Outlook .......................................................................... 89 Table B-36: Other Chain Market Outlook ................................................................................ 90 Table B-37: Petrochemical Value Chain Growth in Ethiopia and Neighbouring Countries ....... 93 Table B-38: Ethiopia – Investment Priority from Market Perspective ....................................... 95 Table B-39: Ethylene Value Chain ........................................................................................ 104 Table B-40: Propylene Value Chain ...................................................................................... 108 Table B-41: Butadiene Value Chain ...................................................................................... 113 Table B-42: Aromatics Value Chain ...................................................................................... 115 Table B-43: Acetyls Value Chain ........................................................................................... 120 Table B-44: Methanol Value Chain ....................................................................................... 121 Table B-45: Ammonia Value Chain ...................................................................................... 123 Table B-46: Chlor-Alkali Value Chain ................................................................................... 126 Table B-47: Potash Value Chain .......................................................................................... 128 Table B-48: Sulphur Value Chain .......................................................................................... 129 Table B-49: Ethanol Value Chain .......................................................................................... 129 Table B-50: Soda Ash Value Chain ....................................................................................... 130 Table B-51: Other Products................................................................................................... 130 Table B-52: Aggregate Score Card by Product .................................................................... 133 Table B-53: Products Recommended for Investment in Ethiopia ........................................... 139 Table B-54: Ethiopia Netback Price Forecast ........................................................................ 145 Table C-1: Ethiopia – Availability of Natural Resources and Feedstock .................................... 8 Table C-2: Petrochemical Derivative Options .......................................................................... 12 Table C-3: Configuration Cases – Cracker / Steam Reformer Options .................................... 13 Table C-4: Configuration Cases – Key Derivative Options ...................................................... 14 Table C-5: Configuration Cases – Derivative Capacity ............................................................ 15 Table C-6: Licensors and available LLDPE/HDPE process technologies ................................ 25 Table C-7: Advantages and Disadvantages of Chloralkali Processes ..................................... 36 Table C-8: Chloralkali Technology Licensors .......................................................................... 37 Table C-9: EDC Licensors ...................................................................................................... 39 Table C-10: VCM Licensors .................................................................................................... 39 Table C-11: Suspension PVC Licensors ................................................................................. 41 Table C-12:Typical Ammonia/Urea License packages ............................................................ 44 Table C-13: Ethylene Cash Cost Comparison ......................................................................... 49 Table C-14: Propylene Cash Cost Comparison ....................................................................... 53 Table C-15: Butadiene Cash Cost Comparison ....................................................................... 57 Table C-16: Aromatics / PX Cash Cost Comparison ............................................................... 59 Table C-17: Methanol Cash Cost Comparison ........................................................................ 62 Table C-18: Ammonia Cash Cost Comparison ........................................................................ 65 Table C-19: Acetic Acid Cash Cost Comparison ..................................................................... 68

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Table D-1: High Level Water Consumption Estimates for Each Configuration ........................... 8 Table D-2: Initial Land Area Estimates by Configuration ........................................................... 9 Table E-1: Existing Industrial Parks in Ethiopia ......................................................................... 5 Table E-2: Planned Industrial Parks in Ethiopia......................................................................... 6 Table E-3: GPD Growth Achieved versus PASDEP Targets ..................................................... 7 Table F-1: Products Recommended for Investments in Ethiopia ............................................... 3 Table F-2: Information on Proposed Industrial Parks................................................................. 4 Table F-3: Environmental and Social Legislation, Regulations, Policies and Plans ................... 8 Table F-4: Identified National Legal Requirements .................................................................. 16 Table F-5: Emissions to the Atmosphere................................................................................. 30 Table F-6: Emissions to the atmosphere ................................................................................. 39 Table F-7: Emissions to the atmosphere ................................................................................. 45 Table F-8: Ambient Air Quality ................................................................................................ 46 Table F-9: Emissions to water: Industry-Specific Standards .................................................... 48 Table F-10: Noise Limits ......................................................................................................... 54 Table F-11: Examples of Industrial Wastewater Treatment Approaches ................................. 58 Table F-12: Industry-specific Environmental Impacts .............................................................. 60 Table F-13: Industry-specific Environmental Impacts .............................................................. 62 Table F-14: Industry-specific Environmental Impacts .............................................................. 65 Table F-15: Industry-specific Environmental Impacts and Management .................................. 68 Table F-16: Industry-specific Environmental Impacts and Management .................................. 70 Table F-17: Industry-specific Environmental Impacts and Management .................................. 74 Table F-18: Industry-specific Environmental Impacts and Management .................................. 77 Table F-19: Industry-specific Impacts and Management: Nitrogenous Fertilizer Production .... 83 Table F-20: Industry-specific Impacts and Management ......................................................... 84 Table F-21: Industry-specific Impacts and Management: Natural Gas Processing .................. 85 Table F-22: Industry-specific Impacts and Management: ....................................................... 86 Table F-23: Industry-specific Impacts and Management ......................................................... 87 Table F-24: Industry-specific Impacts and Management ......................................................... 89 Table F-25: Industry-specific Impacts and Management ......................................................... 90 Table G-1: Debt Assumptions .................................................................................................. 3 Table G-2: Utility Pricing Structure ........................................................................................... 4 Table G-3: Plant Operating Rates ............................................................................................ 4 Table G-4: Case 1 Manpower Requirements ........................................................................... 6 Table G-5: Ethiopia Project Configuration Manpower Requirements ........................................ 7 Table G-6: Annual Manpower Salary Assumptions .................................................................. 7 Table G-7: Financial Model CAPEX Data (US$million) ............................................................. 9 Table G-8: Project Configuration Returns ............................................................................... 11 Table G-9: Summary Results 1/2 ........................................................................................... 12 Table G-10: Summary Results 2/2 .......................................................................................... 13 Table G-11: Direct Economic Benefits to Ethiopia, US$million per annum .............................. 17 Table G-12: Direct and Indirect Project Employment ............................................................... 17

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This document, and the opinions, analysis, evaluations, or recommendations contained herein are for the sole use of the contracting parties. There are no intended third party beneficiaries, and Jacobs Consultancy shall have no liability whatsoever to third parties for any defect, deficiency, error, omission in any statement contained in or in any way related to this document or the services provided.

Section A.

Executive Summary

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Summary Jacobs Consultancy Limited (Jacobs Consultancy) has been commissioned by the Government of Ethiopia (GoE), in collaboration with the UK Department for International Development (DFID), to carry out a pre-investment inception study of petrochemical and chemical product investment opportunities as part of the government’s Petrochemical and Chemical Product Manufacturing Project (PCPMP), with the ultimate aim of creating a sustainable and internationally competitive petrochemical and chemical product sub-sector in Ethiopia. It is intended by the GoE that the study will assist its plans to stimulate private sector development of the market and attract associated foreign direct investment and technical skills. The following sections of the executive summary present the key issues raised in the analysis carried out by Jacobs Consultancy. These are broadly arranged in terms of Market Analysis, Value Chain Ranking, Technical Configuration, Logistics Issues and Financial Performance. More detailed consideration of all aspects of the PCPMP can be found in subsequent report sections but the aim of this Executive Summary is to provide an accessible overview of the key findings. Key findings include:

• Ethiopia and its surrounding countries have a significant current and latent demand for a broad range of petrochemicals/chemicals.

• Within the midterm, this demand could support the development of an integrated petrochemical sector and lead to downstream processing developments, import substitution, export trade and jobs.

• The major key to the competitiveness of such a sector is always feedstock advantage combined with economy of scale.

• Ethiopia’s feedstock slate includes coal, natural gas, salt, soda ash, potash, agricultural biomass etc.

• However, of these, only natural gas gives the maximum opportunity for hydrocarbon-based chemistry to flourish in Ethiopia.

• Current nationally promoted programmes of chemical development are concentrating on industries which already exist in Ethiopia – mainly leather tanning and textiles. However, other chemical value chains make up a significant part of Ethiopia’s trade imbalance.

• It is therefore important for Ethiopia to establish more chemical value chains in the country based on those fractions of its natural gas that can be utilised as local feedstock advantage. The remaining gas fractions can still be exported, thereby ensuring that not only is the gas fully valorised but that further added value, through

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processing the gas into value chains that Ethiopia might otherwise import, produces the maximum value for the country from its resources.

Whilst it may be considered that Ethiopia is something of a late entrant into global petrochemicals that is only really in comparison with the established producing regions. Within Africa, Ethiopia has an opportunity to take a lead and meet not only its own latent demand (see Section B for this analysis) but also that of its neighbours. Only Nigeria and RSA have any significant integrated capacity at present and the discovery, and likely development of, gas feedstock in Ethiopia is a timely source of advantage. The markets of Eastern Africa will be a good opportunity for Ethiopian product sales beyond its own home market demand. There are other global factors in play that will encourage Ethiopia’s move to greater self-sufficiency and relative competitiveness. The countries of the Arab Gulf have gained advantage since the 1980s in the production of a relatively limited portfolio of materials mostly based on cheap ethane as associated gas (effectively a by-product of oil extraction). They built a large, simple industry using cheap feedstock and massive scale to convert gas to basic products which they sold primarily to East Asia. The availability of cheap ethane in the Gulf is now in decline as the oil fields become more depleted and there is insufficient gas for any new major allocations of gas to be made. This leaves the Gulf producers facing a less competitive future as they look to heavier feedstocks with little competitive advantage. Rates of investment have also declined in the Gulf as the shale gas revolution in the US Gulf Coast (USGC) has drawn investors’ attention away from the Middle East. Whilst this means that the USA is now an exporter of many gas based chemicals, its location is less of a threat to Ethiopia than to the North European and Chinese producers. The decline in oil price also plays to Ethiopia’s advantage – it has gas to produce a commodity style chemical portfolio but it can also access naphtha (from the Middle East) to supplement the gas feed and provide a more diverse, value-added portfolio than seen from the new investments in USGC and the established players in the Middle East. Naphtha is a by-product of oil refining and its value is linked to that of oil. Refiners will tend to add naphtha to the gasoline pool but the global reduction in gasoline consumption is making this less viable so low cost naphtha is becoming more available as cracker feedstock. All of this contributes to a situation where Ethiopia’s entry is not a late entry but a very timely one. (During recent discussions in Addis the subject of naphthalene was raised as a possible feedstock for olefins production. Naphthalene can be obtained from coke which is formed as a by-product of the reduction of iron ore in a blast furnace. However, there is no resemblance between naphtha and naphthalene – naphtha is a mixture of hydrocarbon liquids with carbon contents from C8 to C20. Naphthalene has a chemical formula of C10H8 and is used as a wetting agent/surfactant or as a fumigant for pest control (naphthalene is the principal component in ‘moth-balls’). It is not a suitable cracker feed.)

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Ethiopia’s Place in Global Chemicals, Post-project Sections B, C and G of this report set out to develop a number of optimal configurations for the PCPMP development for the GoE to consider further. These generally consist of a steam cracker (the conventional name for an olefins production unit) downstream of which are a number of derivative plants which produce intermediate or finished chemicals for subsequent synthesis or processing. Table A-1 shows the likely relative position of these plants versus the current global demand for the intermediates/products and the current African demand. It can be seen from this that Ethiopia will be adopting a significant position as a supplier of African demand as well as meeting its own latent demand (see Section C for a detailed explanation of ‘latent demand’ which models the way in which local availability of raw materials opens up the potential for product and derivative consumption within a locality). It should be noted that the comparison with African demand is current demand. It therefore does not show the ‘latent demand’ effect for Africa, which is likely to be substantially greater with time. Table A-1: PCPMP’s Principal Commodity Products versus Global/African Demand

Key Products Global demand, kta African demand, kta Ethiopia projected initial capacity, kta % Global demand % African demand

HDPE 37800 1402 400 1.1% 28.5%LLDPE 26500 642 300 1.1% 46.7%PP 59500 1300 300 0.5% 23.1%Methanol 80000 2100 1250 1.6% 59.5%Ammonia 178300 7000 609 0.3% 8.7%Urea 185400 1900 1000 0.5% 52.6%PVC 40700 1380 250 0.6% 18.1%Chlorine 69500 2000 182 0.3% 9.1%Caustic Soda 74000 2200 200 0.3% 9.1%

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Market Analysis Key Findings – End Use Industry Analysis Table A-2 below summarizes the key findings by industrial sector, and identifies potential opportunities on the basis of Jacobs Consultancy’s end use industry analysis. Table A-2: Ethiopia – Potential Investment Opportunity by Sector

End Use Sector Current Status in Ethiopia

Potential Opportunity

Priority Long Term

Fertilizers Agriculture sector is well developed. But imports of fertilizers, especially urea and MAP/DAP are significant.

Urea, MAP, DAP Ammonium Nitrate, Ammonium Sulphate, Superphosphates

Paints & Varnish Sector is growing, but still under-developed. Lacks availability of key raw material.

VAM / PVA Polyols, Acrylate Esters, Epoxy resins, IPA, others

Soaps & Detergents Growing but lacks basic raw materials such as LAB.

LAB, LABSA, Caustic Soda, Sulphuric Acid, Hydrochloric Acid, Chlorine

EODs, Ethoxylates

Pharmaceuticals Still lacks manufacturing of basic bulk drugs. Producing pharma raw material will have little meaning unless sector is developed.

None Methanol, Benzene, Glycerine, Solvents, Ethylene Glycol Derivatives, etc.

Food Processing Growing, but still lacks modernisation.

Citric Acid, Sodium Citrate Other preservatives and food chemicals

Water Treatment Lacks infrastructure and basic chemicals for treatment

Caustic Soda, Chlorine, Soda Ash, Various Acids

Polyelectrolytes, EDTA, Phosphates, etc.

Plastic Processing & Packaging

Developed, but lacks vertical integration and basic raw materials.

PVC, HDPE, LLDPE, PP, PVAc, PVA

LDPE, EVA, PET/Polyester, SBR, other polymers and chemicals

Pulp & Paper Under-developed Caustic Soda and Chlorine Other chemicals, adhesives and binders

Electronics & White Goods

Under-developed PVC Other chemicals

Furniture Developing PVC, PVA, PVAc Other resins and chemicals Construction Developing PVC, LLDPE, HDPE, PP LDPE, PS/EPS, PVB, ABS Automotive Not developed None PE, PP, PUR, PVC, ABS,

Nylons, PS, PC, POM, PMMA, PET, ASA

Tyres Only one tyre manufacturing plant, which largely consumes natural rubber

None SBR, PBR, NBR, EPDM, EVA, Butyl Rubber

Textiles Under-developed PVA, PVAc, Caustic Soda, Sulphuric Acid, Chlorine, Ammonia

Synthetic fibres, fibre intermediates, and other textile chemicals

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Priority Long Term

Leather / Tanneries Developing PVC, Caustic Soda, Soda Ash, Sodium Carbonate, Detergents, Sulphuric Acid

PU, Polyols, Acrylate Esters, Formic Acid, other chemicals.

Footwear Developing PVC PU/TPU, PET, Plasticizers and PU adhesives

Considering the end use analysis as well as the current import level of major chemicals and petrochemicals, there are selected products which emerge as “priority” products in terms of investment opportunity. Investing in these priority products will allow Ethiopia to pursue a trade and economic policy of import substitution as well as enable Government to nurture and develop various industrial sectors and also export marginal surplus to nearby countries in Africa. The priority chemicals/petrochemicals are shown in Table A-3.

Table A-3: Ethiopia – Priority Chemicals & Petrochemicals

Product End Use Sectors Basic Raw Material / Building Block Reqd.

Ammonia Fertilizers Textiles Water Treatment

Natural Gas

Urea/MAP/DAP Fertilizers Ammonia, phosphate Sulphuric Acid Soaps & Detergents

Fertilizers Water Treatment Pulp & Paper Textiles Leather / Tanneries

Sulphur

Caustic Soda Soaps & Detergents Water Treatment Pulp & Paper Textiles Leather / Tanneries

Salt (NaCl) + Electricity

Chlorine / Hydrochloric Acid Water Treatment Soaps & Detergents Pulp & Paper Textiles


Polyvinyl Chloride (PVC) Construction Plastic Processing Packaging Electronics & White Goods Leather / Footwear

Ethylene, Salt (NaCl)

High Density Polyethylene (HDPE) Linear Low Density Polyethylene (LLDPE)

Construction Plastic Processing Packaging

Ethylene

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Polypropylene (PP) Construction Plastic Processing Packaging

Propylene

Vinyl Acetate Monomer (VAM) Polyvinyl Alcohol (PVA) Polyvinyl Acetate (PVAc)

Paints & Varnish Furniture Plastic Processing Packaging Textiles

Ethylene, Acetic Acid

Linear Alkyl Benzene (LAB) Soaps & Detergents Textiles

n-Paraffin, Benzene

Overall, Ethiopia should focus on producing key “building blocks” — ammonia, ethylene and propylene — in order to develop its downstream value chains. Given the above, natural gas (which is being developed in Ethiopia) is likely to be the most attractive feedstock which would enable Ethiopia to produce all three of these building blocks at a competitive cost. Ammonia can be produced from natural gas through a steam reforming process, to which a downstream urea and/or ammonium nitrate unit can be integrated. Ethylene can be produced from a steam cracker (using ethane or NGLs as feedstock derived from natural gas) or from dehydration of ethanol while propylene can be produced from a mixed feed cracker, which consumes natural gas and some proportion of heavier feedstocks such as naphtha or LPG (which Ethiopia will have to import) or from an on-purpose propylene production technology such as propane dehydrogenation (PDH).

Achievable External Markets for Ethiopia For Ethiopia, apart from the domestic market, significant opportunities exist in the African continent itself as the region is a significant importer of key petrochemicals, chemicals and fertilizers. Neighbouring countries such as Sudan, Uganda, Kenya and Tanzania are moderate to significant importers of major petrochemicals and polymers; while other key importers in the Africa region are Algeria, Egypt, Morocco, Nigeria and South Africa. Furthermore, Western Europe and parts of the Indian subcontinent will also serve as accessible markets for Ethiopia’s chemicals and petrochemical exports. Table A-4 below highlights the imports of key chemicals and petrochemicals by Ethiopia, its neighbours and other countries in the region.

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Table A-4: Imports of Key Chemicals & Petrochemicals by Select African Countries

Products 2014/15 Import (KTA)

Ethiopia Algeria Egypt Kenya Morocco Nigeria S. Africa Sudan Uganda Tanzania HDPE 31 172 123 110 106 99 104 24 28 55 LD/LLD 30 111 165 42 125 155 98 7 14 15 PP 42 73 230 88 75 182 15 17 20 64 PVC 18 107 346 61 60 122 25 - 9 14 PET 13 155 37 51 52 82 67 - 12 - Ammonium Nitrate

6 3 9 6 276 - 1 1 1 33

Ammonium Sulphate

1 21 38 20 51 4 113 1 1 16

MAP 144 36 7 3 9 - 170 1 - DAP 177 - 16 - 9 48 2 - Urea 403 61 - 51 101 280 905 47 6 101 Superphosphates

- 32 - - - - 25 - 12 -

Iso-cyanates 8 18 26 14 14 35 25 - 6 - PS 21 60 - 21 6 43 - - - PU 4 3 24 - 3 5 18 - - - Caustic Soda

13 25 4 26 1 50 14 11 16 35

Ethanol - - 1 15 - 104 - - - 5 Potassium Chloride

- 17 18 - 112 22 381 - - -

Soda Ash 13 72 204 - 44 138 350 - 10 - Sodium Bicarbonate

2 7 25 - 12 8 17 - 1 -

Sulphuric Acid

2 11 - - 915 2 17 - 2 -

Source: UN Comtrade

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Ethiopian Market Estimation To understand the market outlook and identify potential investment opportunities, Jacobs Consultancy has evaluated the following value chains and selected derivatives for their market potential. The list below consists of the products which were identified as “priority” investments (see above) and also includes other important products which have a long term potential in Ethiopia.

1. Ethylene chain: LDPE, LLDPE, HDPE, EVA, EO/MEG, EO/EODs, Ethylene Glycol Ethers, Ethylene Glycol Butyl Ethers, Ethanol Amines, EDTA

2. Propylene chain: PP, PO, Polyols, IPA, Glycerine, Acrylic Acid, Acrylate Esters, Oxo alcohols, Propylene Glycol, EPDM, Acetone, Acrylonitrile, EPR, 2EHA, DOP, NMP

3. Butadiene chain: Butadiene, SBR, PBR, ABS, Nitrile Rubber, Maleic Anhydride, MEK

4. Aromatics chain: Benzene, Toluene, PX, LAB, Cumene, Phenol, BPA, PC, Styrene, PS, EPS, Cyclohexane, Aniline, PET, PTA, PU, Isocyanates, Nitrobenzene, Phthalic Anhydride

5. Acetyl chain: Acetic acid, VAM, Acetic Anhydride, PVOH

6. Methanol chain: Methanol, MTBE, Formaldehyde, PF / UF Resins, MMA, pMMA

7. Ammonia chain: Urea, Ammonia, Ammonium Nitrate, Ammonium Sulphate, MAP, DAP, Superphosphate, Nitric Acid, Calcium Ammonium Nitrate

8. Chlor-alkali chain: Chlorine, Caustic Soda, EDC, VCM, PVC, Epoxy Resin, Epichlorhydrin, Melamine

9. Potash chain: Muriate of Potash, Potassium Sulphate, Potassium Magnesium Sulphate, Potassium Nitrate, Caustic Potash

10. Ethanol chain: Ethanol, Ethyl Acetate, Citric Acid

11. Sulphur chain: Sulphuric acid

12. Soda ash chain: Sodium Carbonate, Sodium Bicarbonate

13. Other products: Formic acid, Hydrochloric acid, Magnesium Chloride, Calcium Carbide

These products were selected on the basis of their prima-facie market potential in Ethiopia and neighbouring countries as well as considering the raw material availability.

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For each of these products, Jacobs Consultancy has provided an estimate of its market potential in Ethiopia, which represents its latent demand by year 2025. Details of the methodology used to arrive at this estimate can be found in Section B of this report. Ethiopia currently imports several key raw materials and intermediates of the chemical and petrochemical industry; while only a small proportion of chemicals are produced indigenously. These imported volumes do not reflect the true potential or “latent” demand for chemicals and petrochemicals in Ethiopia, as the country also imports a significant amount of finished products – ranging from industrial products to consumer products. In order to estimate latent demand for chemicals and petrochemicals in Ethiopia, Jacobs Consultancy has developed a model which considers key demand drivers for the product, trends in the end use industry and macroeconomic factors. Each product in the value chain is evaluated through these factors – generating likely scenarios in terms of potential or latent demand for the product. Our methodology represents a mixed approach, which uses qualitative as well as quantitative analysis. Table A-5 below summarizes our estimation of latent demand by 2025 in Ethiopia for all major products in each of the value chains. Detailed analysis for each product is given in Section B.

Table A-5: Latent Ethiopian Demand by Year 2025 by Chemical/Petrochemical Value Chain

Product Current Demand 2015 (kta)

Latent Potential Demand 2025 (kta)

Ethylene Value Chain

LDPE 15 150 – 200 LLDPE 20 300 – 350 HDPE 45 500 – 600 EVA 3 70 – 80 EO/MEG - 250 – 300 EO/EODs - 50 – 100 Ethylene Glycol Ethers - < 5 Ethylene Glycol Butyl Ethers - < 5 Ethanol Amines - < 5 EDTA - < 5

Propylene Value Chain

PP 45 350 – 400 PO - 300 – 350 Polyols 35 300 – 350 IPA 0.10 10 – 15 Glycerine 2 15 – 20 Acrylic Acid - 20 – 25 Acrylate Ester - 20 – 25 Oxo Alcohols - 20 – 25

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Propylene Glycol - 20 – 25 EPDM - 10 – 15 Acetone - 10 – 15 Acrylonitrile - < 5 EPR - < 5 2EHA - < 5 DOP 7 35 – 40 NMP - < 10

Butadiene Value Chain

Butadiene - No direct demand SBR 0.70 70 – 80 PBR 0.040 40 – 50 Maleic Anhydride - < 2 ABS - < 2 Nitrile Rubber - < 1 MEK - < 1

Aromatic Value Chain

Benzene - No direct demand Toluene - No direct demand PX - 400 – 500 LAB 12 200 – 250 Cumene - No direct demand Phenol - No direct demand BPA - 15 – 20 PC 0.15 15 – 20 Styrene 0.007 No direct demand PS 0.250 20 – 25 EPS 0.030 20 – 25 Cyclohexane 0.090 < 1 Aniline - 100 – 125 PET - 800 – 1000 PTA - 800 – 900 PU 3 200 – 250 Isocyanates 6 125 – 150 Nitrobenzene - 125 – 150 Phthalic Anhydride - 15 – 20

Acetyl Value Chain

Acetic Acid 0.480 80 – 100 VAM 0.230 100 – 125 Acetic Anhydride 0.023 < 1 PVA - 50 – 60

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Methanol Value Chain

MTBE - 30 – 35 Formaldehyde 0.80 80 – 100 PF / UF Resins 6 80 – 100 MMA - 5 – 10 pMMA - 5 – 10

Ammonia Value Chain

Urea 400 1200 – 1500 Ammonium Nitrate 8 40 – 50 Ammonium Sulphate 5 40 – 50 MAP 145 300 – 400 DAP 180 350 - 450 Superphosphate - < 5 Nitric Acid 5 150 – 200 Calcium Ammonium Nitrate - < 5 Melamine - 20 – 25

Chlor-Alkali Value Chain

Sodium Hypochlorite - 8 – 10 Chlorine - 200 – 250 Caustic Soda 145 300 – 350 EDC - 300 – 400 VCM - 200 – 250 PVC 36 250 – 350 Epoxy Resin - 20 – 25 Epichlorhydrin - 18 – 20

Potash Value Chain

Muraite of Potash 0.26 3 – 5 Potassium Sulphate 1.7 20 – 25 Potassium Magnesium Sulphate - - Potassium Nitrate 1.5 18 – 20 Caustic Potash 2.7 20 – 25

Ethanol Value Chain

Ethanol 10 50 – 60 Ethyl Acetate - 5 – 10 Citric Acid - < 5

Sulphur Value Chain

Sulphuric Acid 5 50 – 60

Soda Ash Value Chain

Sodium Carbonate 30 500 – 600 Sodium Bicarbonate 2 20 – 25

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Other Products

Formic Acid 2 15 – 20 Hydrochloric Acid 2 12 – 15 Magnesium Chloride 13 30 – 35 Calcium Carbide 2 90 – 100

Petrochemicals Market Forward Outlook Each of the products in the identified value chains were further evaluated for the following market parameters:

1. Demand — Global, regional and Ethiopian current and latent demand. 2. Supply — Global, regional and Ethiopian supply, and average global plant

utilisation 3. Outlook — Global and regional market outlook 4. Long term growth rates — Global and regional demand growth rates 5. Remarks — includes any additional critical information concerning the product

market. This also includes import data for Ethiopia, neighbouring countries (Eritrea, Kenya, Somalia, South Sudan, Sudan and Uganda) and other major African countries (Algeria, Egypt, Morocco, Nigeria, S. Africa, and Tanzania). Table A-6 below summarizes the growth patterns for each product in Ethiopia and neighbouring countries (Eritrea, Kenya, Somalia, South Sudan, Sudan and Uganda).

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Table A-6: Petrochemical Value Chain Growth in Ethiopia and Neighbouring Countries

Product Market Volume (kta, 2015)

Projected Market Growth %

Slow (< 2.5%) Moderate (2.5% - 4.0%) Strong (> 4.0%)

> 100 kta HDPE, PP, Urea, Ammonia, DAP

50 – 100 kta PET, Caustic Soda, PVC

10 – 50 kta LDPE, AN, AS,

Superphosphates, Soda Ash

LLDPE, LAB, VCM, MOP

5 – 10 kta Toluene, Nitric Acid Sulphuric Acid, Hydrochloric Acid

PX, PF/UF Resins, Ethanol, Sodium

Bicarbonate

< 5 kta

PO, IPA, Benzene, Cumene, Phenol, PC,

Styrene, PS, Cyclohexane, Acetic

Anhydride, MTBE, MAP, Calcium Carbide, EDTA

Butadiene, SBR, MAN, BPA, EPS, Aniline, Acetic Acid, VAM, CAN, Chlorine, EDC, SOP, Caustic Potash,

Formic Acid, Magnesium Chloride, Oxo Alcohols. 2-Ethyl Hexanoic Acid, PVA, MMA, pMMA, Citric Acid

MEG, PBR, Methanol, Formaldehyde,

Glycerine, Acrylic Acid, Acrylate Esters,

DOP, NMP, PTA, Melamine

It is recommended that the final proposed product portfolio should be predominantly weighted towards those markets showing strong future growth, with a fair mix of strategic investments in markets with moderate growth. This strategy will promote the construction of operations with good economy of scale. Availability of local and regional markets is an important investment criterion. Ethiopia is importing significant volumes of chemicals and petrochemicals, so it would be imperative to prioritise the investment for the products which are imported in large volumes as well as having significant market potential in surrounding countries and in the Africa region.

Institutional Matters Jacobs Consultancy has interacted with the local industries and government officials in Addis Ababa. Despite the overall good investment climate in Ethiopia, industry and trade are beleaguered with various issues. During these discussions the following problems and issues were highlighted:

• Inadequate and unreliable local supply of raw materials — low quality and high price in comparison to imports.

• Lack of consistent raw material leads to high production cost due to low “machine park” utilisation.

• High degradation rate of the process sector’s machinery and equipment which is mainly the result of long idle time of the machinery due to underutilisation of the production capacity.

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• Technical and technology problems — lack of latest technology.

• Lack and high turnover of skilled manpower.

• Financial constraints — in terms of lack of investment capital and working capital.

• High banking charges (6% LC charges levied by private bankers).

• Foreign exchange availability is a major problem.

• Power supply is often inconsistent and the lack of a viable back-up supply leads to significant additional downtime.

• Land acquisition for industry is a problem at a regional level.

• Very complex bureaucratic process in Government offices (to get various regulatory clearances).

• Project implementation is delayed due to red tape and procedural issues.

• High customs duty (5% for most items) and VAT (15%).

• FDI dividend — foreign companies cannot take dividends.

• Very high local freight cost for moving industrial raw materials and products (for example, Potash trucking freight from Mekella to Addis Ababa (800km) is about US$60/ton.

Incentives On the positive side, the Ethiopian Government has laid out the following incentives to encourage manufacturing industry and FDI: 1. Fiscal incentives

A) Customs duties exemption • 100% exemption from payments of customs duties and other taxes levied on

imported is given to all granted capital goods, such as plants, machinery, & equipment, and construction materials

• Spare parts worth of 15% of the total value of imported investment capital goods

• An investor granted of customs duty exemption will be allowed to import capital goods duty free any time during the operational phase of the enterprise

• Investment capital goods imported without the payment of custom duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges

B) Income tax exemption

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• Exporters 50 % the product sale or services, or supplies 75% of the products or services as production or services input to an exporter will be exempted from income tax for 5 years

• Exports less than 50% of the products or services of the products or supplies only to the domestic market will be exempted from income tax for 2 years.

• Investors who invest in priority areas such as textile and garments leather products agro processing etc. to produce mainly export products will be provided land for their investment necessary at reduced lease rate.

2. Non-Fiscal Incentives

• Investors who invest to produce export products will be allowed to import machinery and equipment necessary for their investment projects through their supplier’s credit.

• The government of E/a will cover 30% of the cost of infrastructure ( access to road, water supply, electricity, % telephone lines) for investors investing in the industrial zone development.

3. Loss carry forward

Business enterprise the suffer losses during the income tax exemption period can carry forward such losses following the expiry of the exemption period. Export Incentives The incentives given to all exporters will include the following:

• With the exception of few products (e.g. semi-processed hides & skins, no export tax is levied on export products of Ethiopia

• Duty draw back Scheme: it offers investors an exemption from the payment of customs duties and other taxes levied on imported and locally purchased raw materials used in the production of export goods. Duties and other taxes paid are drawn 100 % at the time of the export of the finished goods.

• Voucher scheme: A voucher is a printed document having monetary value which is used in lieu of duties and taxes paid on imported raw material. The beneficiaries of the vouchers scheme are also exporters.

• Exporters are allowed to retain and deposit in a bank account up to 20 % of their foreign exchange export earnings for future use in their operation of their enterprises and no export price control is imposed by the National bank of Ethiopia.

• “Franco-valuta” import of raw materials is allowed for enterprises engaged in export processing. (“Franco-valuta” is a license issued to importers of goods on which no foreign exchange is payable; which means importer uses foreign currency from its own source.)

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Ranking of Value Chains Methodology Jacobs Consultancy has evaluated the key petrochemical value chains for their market potential. Each of the products in these value chains was then further evaluated for the following parameters:

1. Feedstock required — Listing of all key feedstock / raw material required for the production of the product. This will assist in determining the integration opportunities which may exist within (vertical) or across (horizontal) value chains.

2. Strategic benefits — whether investment is justified on strategic grounds and what could be the key strategic benefits.

3. Cost benefits & Returns on Investment — Key factors affecting the costs, and whether any clear cost advantage exists; and average % ROI (return on investment).

4. Commercial issues — whether any commercial issues related to overall operations exist, e.g. process integration, co-products, energy consumption, product support etc.

5. Risks — any perceived risk in terms of market, technology, substitute products, entry barriers, etc.

6. Global market volumes — Categorisation of available market volumes:

• Large >10 million tpa

• Medium 5-10 million tpa

• Small <5 million tpa

7. Major markets / segments — Major applications or end-use segments.

8. Global market growth / trend — Long term outlook for annual demand growth rate is categorized as:

• Strong >4.0%

• Moderate 2.5%-4.0%

• Slow <2.5%

9. Logistics / handling issues — Any concern or cost issues involved in logistics and handling of the product

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For each of these scoring criteria, Jacobs Consultancy has assumed a value chain weighting as follows for all of those factors that are associated with:

1. Feedstock availability = 20%

2. Current industry utilization = 5%

3. Market volumes (Ethiopia and neighbouring countries) = 15%

4. Global market outlook = 15%

5. Import substitution benefit = 10%

6. Return on Investment = 5%

7. Strategic benefit = 10%

8. Commercial / technology issues = 10%

9. Risk = 10% Each product within the value chain was scored on the following criteria:

1.00 – highest/most attractive 0.75 0.50 – average 0.25 0.00 – lowest/least attractive

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The following Table A-7 provides the basis for the assessments and derivatives scoring. Considering the overall scores, this indicates the products that are recommended for further detailed evaluation: Table A-7: Products Recommended for Investment in Ethiopia

Value Chain Products Recommended

Priority Long Term

Ethylene HDPE, LLDPE EO/MEG/EODs, LDPE/EVA Propylene PP PO/ Polyols Butadiene - Butadiene, SBR Aromatics Benzene, LAB PTA/PET Acetyls - Acetic Acid, VAM, PVA Methanol Methanol Formaldehyde, MTBE

Ammonia Ammonia, Urea, Ammonium Sulphate -

Chlor-alkali Chlorine, Caustic Soda, PVC - Potash Muriate of Potash - Ethanol Ethanol - Sulphur Sulphuric Acid -

Soda Ash Sodium Carbonate, Sodium Bicarbonate -

Other / Misc. Hydrochloric Acid Formic Acid It is recommended that while developing the proposed integrated plant configurations to deliver these products at competitive cost, investments in the priority products are considered first, whilst products with long term potential should be considered in next phase of investment.

Natural Resources & Feedstock Availability It is evident that availability of raw material / feedstock at a competitive cost is critical for the chemical and petrochemical sector development. Jacobs Consultancy’s review of the natural resources and feedstock situation in Ethiopia reveals some strengths and weaknesses from the perspective of sector development.

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This is summarized in Table A-8 below. Table A-8: Ethiopia – Availability of Natural Resources and Feedstock

Resource / Feedstock Potential Availability Comment Potential

for use?

Coal 375 million ton reserve Modest reserve, but high ash (lignite) quality may not be suitable for gasification.

Limited

Electricity Although there is a shortage for general use, it is assumed that adequate supply will be available for industries.

Hydroelectric power available at low cost (at 0.38 Birr/Kwh) – major strength for power intensive projects such as chlor-alkali.

Yes

Natural Gas and NGLs

Hilala-Calub = 5.1 bill. cu.m. per year El Kuran = 1.1 bill. cu.m. per year

Hydrocarbons extracted from gas can sustain a world-scale ethylene cracker. Gas availability also critical for producing ammonia/urea based fertilizers.

Yes

Crude oil Not proven (but reserves listed at 430 000 bbl by CIA Factbook 2016)

Oil reserves are untapped. Ethiopia needs to develop a local refinery to meets its fuel (diesel, gasoline) and feedstock (naphtha) needs. Possible potential to use projected fuel pipeline from Djibouti to Awash to import naphtha.

Not currently

Potash Significant reserves available Good opportunity to develop NPK based fertilizers.

Yes

Salt Significant reserves available Adequate availability to develop chlor-alkali value chain, including detergents.

Yes

Soda Ash Significant reserves available Adequate availability. Yes Ethanol Current supply = 12.5 million

litres (equivalent to c.10 ktpa) Supply likely to increase with new sugar mills under construction but a minimum economic size ethylene plant is currently producing 62.5 ktpa of ethylene based on ethanol dehydration. This would require 100 ktpa of ethanol. Process economics are critical in order to compete with ethane/naphtha based alternatives and clearly Ethiopia’s ethanol availability is an order of magnitude too small to be economical.

Not currently

It is imperative for Ethiopia to leverage and monetize its natural gas reserves as only gas offers the full potential and opportunity to develop its chemical and petrochemical sector. Although there has been much reporting of the use of a pipeline to Djibouti port to facilitate the export of gas to China, Ethiopia still has the option to extract hydrocarbons from the gas to develop the petrochemical sector and export the remaining gas as LNG. Ethiopia does not have any other significant alternative feedstock such as crude oil or high quality coal. The country certainly needs a refinery to meets its basic fuel requirements. This could be based on local crude (should adequate reserves be identified and developed)

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and/or imported crude from nearby countries. Coal quality appears to be fit for fuel in the industrial and power sector, but certainly not for gasification plants. Other natural resources such as potash, salt and soda ash are abundant, but can sustain only inorganic chemical based derivatives, which can supplement its raw material requirement, but only to a limited extent. Overall, the chemical and petrochemical sector development in Ethiopia hinges on monetization of natural gas and NGL resources in the best possible manner.

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Recommended Technical Configurations Methodology The process Jacobs Consultancy has adopted to propose a feed slate and derivative option for Ethiopia was designed to optimise the following range of factors:

• Availability of appropriate feedstock, especially based on the country’s natural resources – which can be monetised to generate significant contributions to the economy. We have considered all feedstock options available, considering its suitability and economic cost competitiveness to produce desired derivatives.

• Product market supply and demand outlook and the recommendations regarding particular products that are made in the previous report section.

• Strategic fit of these recommended products with the existing product portfolio of Ethiopia and/or the potential attractiveness for future requirements.

• Availability of suitable technologies for license.

• The current size of world scale units for the recommended derivatives and the potential for economies of scale.

• The potential for process integration between process units including vertical integration.

• Final derivative slate based on Ethiopia’s country strategy, cost competitiveness, marketing attractiveness, and value-to-Ethiopia and national industrial plans.

Feedstock Options Primary feedstocks available in Ethiopia are coal, natural gas/NGLs (natural gas liquids), crude oil, potash, salt, soda ash and ethanol. In the initial phase of the study, we have evaluated availability as well as cost competitiveness of these feedstocks (see Cost Competitiveness Methodology at the end of this report section). Thus, feedstock constraint and cost economics were considered while generating feed slate options for various configurations. Based on this assessment, only natural gas, naphtha and salt are considered as key feedstocks to develop the feed slate options. Configuration Cases Configuration cases have been developed considering likely gas volumes available from El Kuran and Hilala-Calub gas fields supplemented with imported naphtha. A steam cracker unit and reformer will be the key process units producing major intermediates such as olefins

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(ethylene, propylene and butadiene), aromatics (benzene, toluene and xylenes) and methanol – which are the basic raw materials for downstream derivative plants. Cracker size anticipated will range from minimum economic size (550/600 kta of ethylene) to medium size (800 kta) to a world scale size (1000 kta). A maximum gas supply volume is assumed from both the gas fields, subject to its achievable limits. Naphtha volume required will be adequate to achieve full ethylene production in the cracker. An appropriately sized steam reformer is also considered in the cases which have methanol derivatives as a part of the configuration. Table A-9 below defines the 10 configuration cases in terms of major derivative options. Table A-9: Configuration Cases – Key Derivative Options

Key Derivatives Case 1

Case 1A

Case 1B

Case 1C

Case 2

Case 2A

Case 2B

Case 2C

Case 3

Case 3A

Polyethylene Polypropylene EVA

Acetic Acid VAM/ PVAC/PVOH EO/MEG Ethoxylates Methanol Ammonia Ammonia based Fertilizers

Caustic Chlorine PVC MDI/TDI PO (TBA) Polyol Syn. Rubbers MTBE

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Table A-10 below gives the derivative capacity details for all configuration cases. Table A-10: Configuration Cases – Derivative Capacity

All figures in kta Case 1

Case 1A

Case 1B

Case 1C

Case 2

Case 2A

Case 2B

Case 2C

Case 3

Case 3A

HDPE (gas phase) 300 374 - 300 300 400 - 300 300 300

LLDPE (butene-1) 282 300 - 300 282 302 - 300 - 301

LDPE (tube) - - 340 - - - 331 - - -

EVA (18%) - - 100 - - - 102 - - 50-

VAM 100 - 231 100 100 - 235 100 - 100

PVAc 48 - 101 48 48 - 103 48 - 43

PVOH 48 - 101 48 48 - 103 48 - 43

EO - - 400 372 - - 409 370 355 345

MEG - - 360 363 - - 370 401 417 345

Ethoxylates - - 148 116 - - 162 54 - 104

PP - homo (Gas) 279 210 - 300 188 291 - 247 - 261

PP - copol (Gas) - 200 - - - - - - - 0

Methanol 967 637 424 266 1250 1250 1250 1250 1250 1250

Acetic Acid - - - - - - 204 109 - 104

Ammonia - 322 102 425 - 286 609 425 - 367

Urea - 500 - 500 500 1000 - 500 - 400

Amm. Sulphate - 50 - 50 - 50 - 50 - 50

Superphosphate - 50 - 50 - 50 - 50 - 50

Amm. Nitrate - 50 - 50 - 50 - 50 - 50

CO - - 252 153 - - 253 207 - 204

Chlorine - 151 31 182 - 151 31 181 - 152

HCL Elect. - - 358 358 - 161 358 197 - 229 Weak Nitric Acid (64%) - 41 362 403 - 41 362 403 - 403

Conc. Nitric (98.5%) - - 220 220 - - 220 220 - 220

Nitrobenzene - - 249 249 - - 249 249 - 249

Aniline - - 187 187 - - 187 187 - 187

MDI - - 250 250 - - 250 250 - 250

DNT - - 304 304 - - 304 304 - 304

TDA - - 195 195 - - 195 195 - 195

TDI - - 250 250 - - 250 250 - 250

EDC - 209 - 209 - 209 - 209 - 167

VCM - 251 - 251 - 251 - 251 - 201

PVC - 250 - 250 - 250 - 250 - 200

Butane Splitter - - 313 145 - - 239 116 97 73

Butamer Unit - - 728 337 - - 555 270 226 169

PO (TBA) - - 499 231 - - 381 185 155 116

Polyol (flexible) - - 540 250 - - 412 200 168 126

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Case 1A

Case 1B

Case 1C

Case 2

Case 2A

Case 2B

Case 2C

Case 3

Case 3A

SBR (eSBR 1500) - - 85 75 - - 67 58 24 88

SBR (eSBR 1700) - - 85 76 - - 66 57 33 81

PBR - - - 50 - - - 47 - 0

Sulphuric Acid - 49 - 55 - 49 - 54 - 56 Formaldehyde 37% - - 197 197 - - 197 197 - 197

MTBE - 55 916 482 - 43 1100 595 465 390 Table A-11 below defines the 10 configuration cases in terms of feedstock and cracker size. Table A-11: Configuration Cases – Cracker / Steam Reformer Options

Cases Ethylene cracker size

Natural Gas source Naphtha Required

Methane Steam Reformer (for methanol production)

Case 1 Minimum

economic size (600 kta)

El Kuran 448 kta

1.1 mtpa Yes

Case 1A Medium size

(800 kta) El Kuran 448 kta

1.7 mtpa Yes

Case 1B Medium size


1.8 mtpa Yes

Case 1C World scale (1000 kta)

El Kuran 448 kta

2.4 mtpa Yes

Case 2 Minimum


Hilala-Calub 538 kta

0.8 mtpa Yes

Case 2A Medium size (800 kta)


1.3 mtpa Yes

Case 2B Medium size (800 kta)


1.4 mtpa Yes



2.0 mtpa Yes

Case 3 Minimum


El Kuran (448 kta) + Hilala-Calub (538 kta)

Not required Yes

Case 3A World scale (1000 kta)


1.4 mtpa Yes

A detailed financial model was developed to evaluate the viability of these configuration cases.

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Ethiopian Cost Competitiveness In Section C of the report, the competitive position of a range of base chemicals (fundamental chemical ‘building blocks’) produced in a theoretical Ethiopian chemical complex was compared with various competing global producers/regions using a variety of feedstocks. The base chemicals within the review are:

• Ethylene

• Propylene

• Butadiene

• Aromatics & Para-xylene

• Methanol

• Ammonia

• Acetic Acid

The cost of production at an Ethiopian complex for each of the products listed above was compared to competing global producers and was based on the cash cost of production, which included plant variable and fixed costs. Full details of the approach can be found in Section C but the overall results for each basic molecule (and hence value chain) can be seen in the following graphs. Figure A-1: Ethylene Cash Cost Comparison

0

200

400

600

800

1000

1200

1400

KSA Ethane USGC Ethane Ethiopia Naphtha WE Naphtha China Naphtha Ethiopia Propane China MTO Ethanol Technology

US$

/ton

IndirectDirectUtility CostsNet Feed/byproduct

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Figure A-2: Propylene Cash Cost Comparison

Figure A-3: Butadiene Cash Cost Comparison*

* Note that in this 2025 cost of production basis the WE cracker is cheaper than USGC and China. The price forecast for naphtha in WE is lower than that for USGC and China, which is consistent with historic price differentials. Figure A-4: Aromatics / PX Cash Cost Comparison**

0

100

200

300

400

500

600

700

800

900

1000

KSA E-P USGC PDH WE Naphtha KSA PDH China PDH KSA Naphtha China MTP Ethiopia PDH China MTO Ethiopia Naphtha

US$

/ton

Indirect

Direct

Utility Costs

Net Feed/byproduct

0

100

200

300

400

500

600

700

800

Ethiopia WE China USGC

US$

/ton

Indirect Direct Utility Costs Net Feed/byproduct

0

200

400

600

800

1000

1200

1400

Ethiopia Naphtha WE Naphtha KSA Naphtha China Naphtha USGC VX USGC Toluene WE VX Ethiopia Toluene WE Toluene Ethiopia VX

US$

/ton

Indirect

Direct

Utility Costs

Net Feed/byproduct

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** Here the blue bar in the graph is Net Feed/Product (i.e. feed cost minus by-product credit). Based on the credit derived from the high value (and volume) of the naphtha cracker by-products the blue bar for the naphtha based processes is much smaller than for other processing options – credit is dependent on netback value of component. In KSA most by-products are only recycled as fuel hence smaller by-product credit and higher overall feed costs. Figure A-5: Methanol Cash Cost Comparison

Figure A-6: Ammonia Cash Cost Comparison

0

50

100

150

200

250

300

350

400

ME Russia USGC Ethiopia Egypt WE China

US$

/ton


0

50

100

150

200

250

300

Nigeria KSA Russia Ethiopia USGC WE China

US$

/ton

Indirect

Direct

Utility Costs

NetFeed/byproduct

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Figure A-7: Acetic Acid Cash Cost Comparison

Summary The following points highlight the cost competitiveness of base chemical production in Ethiopia:

• Overall Ethiopia could be competitive in producing the following chemical building blocks:

o Ethylene: With a natural gas liquids (NGL) fed cracker Ethiopia is cost competitive, even though it is limited in capacity and economy of scale. This advantage is due to the feed being based on a relatively low natural gas price and the cracker yield resulting in a large volume (in comparison with an ethane only cracker) of valuable by-products. A mixed feed cracker (NGL/Naphtha) is also likely to be competitive, benefiting from the economies of scale afforded by a larger capacity cracker.

o Butadiene: Ethiopia has similar feedstock costs to competitors but benefits from relatively low power costs and labour rates

o Para-xylene: Ethiopian plants benefit from high values of the by-products (versus the cost of importing same), reducing net feedstock costs.

o Acetic Acid: The by-product credit, gained from the high local hydrogen price, reduces the net feedstock costs for CO which is passed on to the downstream Acetic Acid plant reducing the overall cost of production.

• Ethiopia is less competitive in producing the following chemical building blocks:

o Propylene: Production of propylene via a naphtha only cracker is clearly not cost competitive in Ethiopia. However, a mixed feed cracker (NGL/Naphtha) will be

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cost competitive in olefin production overall, due to the NGL feedstock cost impact on ethylene costs.

o Methanol & Ammonia: The availability of low cost gas (though not comparable to global leader plants with access to stranded gas and “mega” scale capacities) makes Ethiopian methanol and ammonia sufficiently competitive within the accessible market.

• There are some positive cost points for Ethiopian projects which include access to a relatively low cost feedstock, labour and power costs. Where market opportunities to build at world scale present themselves, these factors contribute to reducing both variable and fixed costs relative to competitors.

• However Ethiopia must target world scale plants to achieve economies of scale to be cost competitive. This will reduce the large fixed costs penalties incurred where derivatives are operating at sub world scale.

Integration to Downstream Sectors and Technology Transfer Clearly an upstream chemicals sector is only part of the advantage to Ethiopia. By far the greater potential for new employment opportunities and the increase of individual spending power to release the latent product demand in Ethiopia will come from the downstream processing industries. To illustrate this, table A-12 shows the list of end-use sectors that will be served by the products of these initial configuration project configurations. This is where the industry parks will have a key input to the process (in conjunction with suitable fiscal incentives), making it attractive for entrepreneurs to set up small to medium size businesses (SMEs), catalysed by the availability of new chemical building blocks. Unlike the upstream plants, technology for downstream processes tends to be more readily available from equipment suppliers without the upstream complexity of needing to take out licences for proprietary technologies in order to operate them. The industry parks also need to address the requirements of OEMs (e.g. car makers, white goods producers, retailers, electronics etc.) to attract them to set up their own manufacturing bases in Ethiopia, at or close by the industry parks (and potentially the chemicals hub) and so optimise the supply chain. As to the extent to which other existing and developing sectors in Ethiopia can interact with the development of a petrochemicals complex and subsequent complexes, Jacobs Consultancy’s opinion is that there are major strengths in the provision of steel work and concrete for the construction phase of the various components of the project in this initial phase. Engineering inputs and major equipment/instrumentation supply will have to rely on overseas suppliers but, in time, the country’s experience will grow in these aspects.

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Figure A-8: End-use Sectors Served by Output of Initial Petrochemical Complex Development

Retail Gas pipe Water pipe Construction Industrial packaging

Pressure pipe

Automotive Agricultural film

Agrochemicals/fertilisers

Detergents Textiles Glass making Water treatment

Coolant Solvents Coatings

HDPELLDPELDPEEO/MEGEVAPPPOPolyolsButadieneAcetic acidAmmoniaMethanolPVCChlorine/caustic sodaPotashEthanolSulphurSoda ash

Adhesives Electronics Pharmaceuticals Medical Cosmetics Footwear Sports goods Rubber goods

Tyres Mining Metal smelting

Metal treatment

Wood working

Fuels Disinfectants Chemical synthesis

HDPELLDPELDPEEO/MEGEVAPPPOPolyolsButadieneAcetic acidAmmoniaMethanolPVCChlorine/caustic sodaPotashEthanolSulphurSoda ash

A-32


Transport and Logistics Considerations Overview The several configurations set out above require transport of the raw materials and products to locations within Ethiopia where they can be processed into finished/semi-finished goods and then either distributed to the internal market place or exported via the conventional route through the port at Djibouti. The scenario here is similar to that experienced in the former Soviet Union where the hydrocarbon feedstocks were concentrated at the Eastern end of the territory whilst the demand and markets where situated around Moscow in the West. Here we see that Ethiopia has natural resources concentrated in the gas fields in the South East of the country but the centre of demand is around Addis Ababa. The dilemma is whether to build cost effective scale operations close by the feedstock source or to build market size related assets close to the market and transport feedstocks. In our experience, it is almost always more advantageous to build world scale at the feedstock source, than market scale at the demand point. To effectively exploit Ethiopia’s natural feedstock advantage we are looking to transport between 1,500 and 10,000 tons of products to Addis where it is most likely that entrepreneurially driven chemicals processing entities will be established. This represents between 150 and 1,100 truck movements per day out of the complex. A number of factors involved in logistics can be seen to impact Ethiopia’s competitiveness. These are discussed in detail in section D. However, to give a benchmark for comparison of Ethiopia’s current logistic performance in comparison to other countries in Africa and elsewhere, Jacobs Consultancy has adopted the World Bank’s Logistic Performance Index, LPI. This benchmark scores a location on several KPIs:

• Customs performance

• Infrastructure

• Predominance of international shipments

• Logistics competence

• Ability of tracking/tracing

• Timeliness of deliveries/tasks

Figure A-8 shows that Ethiopia, if compared to the world leader Germany, is outperformed by the Leader in all these aspects but the largest shortfall in performance is concerned with the lack of transport infrastructure. Overall, Ethiopia has an LPI of 2.7 versus Germany’s 4.2.

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Figure A-9: LPI Comparison – Ethiopia vs. Germany

Closer to home, the best player in Africa is South Africa. Figure A-9 shows the comparison to Ethiopia. Here again the infrastructure issue indicates where Ethiopia lags the furthest behind RSA but it is clear that even the best African performance – RSA’s LPI of 3.4 – falls well short of best international practice. Figure A-10: LPI Comparison – Ethiopia vs. RSA

A-34


Ethiopia’s materials movements are also hindered by the fact that import of raw materials for chemicals production and export of products are handled through Djibouti. Djibouti’s performance versus international best practice is inferior even to Ethiopia’s, which adds extra burden on the Ethiopian logistics situation. Djibouti has an LPI of just over 2 with performance in all aspects that is inferior to Ethiopia.

Existing Transport Infrastructure and its Bearing on Site Selection Figure A-11: Existing Major Road Network in Ethiopia

Ethiopia’s transport network problems are highlighted in Figure A-11 which clearly shows the lack of roadways into and out of the South East which will be needed to maximise the development of gas derived products and the establishment of large scale industrial chemicals operations in that region. There is only one significant rail route in Ethiopia which is the one from Djibouti to Addis via Dire Dawa. This has been subject to improvement in the recent past but is of little use in terms of imports of large plant units to the gas-rich South Eastern regions or the movement

A-35


of products from there to the likely processing sectors around Addis and their adjacent markets. Discussions with experts in the region have suggested that the Government of Ethiopia needs to consider at least one of the following options:

• Establish major road links between Addis and the South East such that plant items can be transported to the gas-rich regions and thence chemicals products transported to Addis for processing

• Provide a rail link between the Addis-Djibouti railroad and the South East for the exact same purpose with a suitable railhead being established at, say, Dire Dawa.

• Provide a gas pipeline from the South East to the railhead and a gas processing operation at the railhead in order to facilitate the establishment of a major scale chemicals industrial complex at the railhead and to utilise the Djibouti-Addis rail link to permit both internal sales and exports.

Jacobs Consultancy Limited is not routinely qualified to indicate the level of cost that this entails but on the basis that the 57 km first section (to Meki) of the Modjo-Hawassa highway that is being invested in by IFC/China EXIM/S Korea EXIM will cost US$ 165 million, with the whole road to Hawassa costing an initial estimate of USD 700 million. On this basis, the cost of the first bullet point above via an extension from Hawassa to Kelafo to replace the existing road (a distance of some 886 km) would be over US$ 2.5 billion. The existing scheme for a pipeline from Poly-GCL and New-Age’s drillings at Ogaden to join with the wells of Poly-GCL at the Kalub – Hilala fields and thence take gas to the port at Djibouti could offer a compromise solution. This pipeline passes close by Dire Dawa. If a gas processing complex could be established there to split the necessary feedstock fractions out of the natural gas and leave the balance for export then the petrochemicals sector could be established at Dire Dawa with its rather better logistic links to both Djibouti Port (especially for naphtha and equipment imports) and Addis Ababa. Whilst this location appears to be acceptable from the perspective of gas processing and exports and is also on the Addis – Djibouti rail line, the major issue might be availability of skilled labour and willingness of the entrepreneurs and business houses to invest at this location. Dire Dawa is about an 8 hour drive on road from Addis, so a commuting workforce is not possible. Certainly, skilled labour has to be available locally. However, there are some positive factors in favour of Dire Dawa;

• An Industrial park is being planned at Dire Dawa

• OCP is planning a large fertilizer plant at Dire Dawa

A-36


• Actual and projected Industrial clusters around Dire Dawa include heavy industries, textile & apparel, vehicles assembly and food processing.

• Dire Dawa is located at a reasonable distance from other industrial parks – e.g. Kombolcha and Adama

• Dire Dawa already has a University.

On the basis of this analysis, members of the Government of Ethiopia’s project team have recently visited Dire Dawa and another alternative site, Jigjiga, to begin initial considerations of site selection – primarily concerned with water supply and land requirements. On the issue of Industrial Parks, the Ethiopian Industrial Parks Development Corporation (IPDC), established in 2014, is responsible for nurturing manufacturing industries, through development of industrial parks in Ethiopia. IPDC serves as industrial park land bank, develops industrial parks and hands over to private industrial park developers (leases or subleases land, sells or rents sheds). Presently, only two parks are under operation, which are focussed only on apparel manufacturing. These are shown in Table A-12. Table A-12: Existing Industrial Parks in Ethiopia

Industrial Park Location Proximity to the Port

(km)

Delimited land

(Hectare) Eligible

Industries Operation

Started

Addis Industrial Village Addis Ababa 863 8.7 Apparel 1980's Bole Lemi Industrial Park Phase I Addis Ababa 863 175.2 Apparel 2014

The latest addition to the industrial parks is in the city of Hawassa 275 km southeast of Addis Ababa. This 1.3 million m2 park will again be focussed on textiles and apparel. IPDC intends to develop 100,000 ha of land between 2016 and 2025 — i.e. 10,000 ha annually — for a total factory floor area of 10 million m2 (1 million m2 annually). Its plans are detailed in Table A-12.

A-37


Table A-13: Planned Industrial Parks in Ethiopia

Name of Park

Location from Addis

Ababa Kms from

Addis Ababa Proximity

to the port (km)

Delimited land

(hectare) Eligible Industries Completion

period

Bole Lemi II Addis Ababa Addis Ababa 863 186 Textile and apparel 2017 Kilinto Addis Ababa Addis Ababa 863 337 Mixed 2017 Hawassa South 275 998 300 Textile and apparel 2016 Dire Dawa East

473 380 1500

Textile and apparel, Vehicles assembly and food processing

2016

Kombolcha North-East 380 480 700

Textile and apparel, food processing

2016

Mekelle North 760 750 1000


2016

Adama South-East

74 678 2000


2016

Bahir Dar North-West 578 985 1000


2016/17

Jimma South-West 346 1098 500


2016/17

Air Lines Logistics park

Addis Ababa Addis Ababa 863 200

Logistics service 2019

It is evident that much of the focus is on textiles/apparel and the food processing sector. Ethiopia needs to realign its industrial policy for uniform sector development, ensuring upstream and downstream linkages. For the development of the chemicals and petrochemical sector, it is imperative that Ethiopia provides adequate support in terms of industrial infrastructure and feedstock/raw material availability at a competitive price.

A-38


Financial Performance Direct and Indirect Benefits Summary Jacobs Consultancy has developed a financial model that has been used to estimate the financial returns of a number of potential petrochemical complex configurations located in Ethiopia. The objective of the financial analysis is to assess the economic viability of potential project configurations for fundamental chemical “building blocks” and integrated downstream derivative value chains. Section G sets out the approach that has been adopted and the assumptions made in building the model. However, here we focus on the direct cash flows to the Ethiopian economy including gas revenues, land rental, corporate tax and employee tax as predicted by the financial model developed by Jacobs Consultancy. It should be noted that the corporate tax rate in the first 6 years of operation is anticipated to be zero, in-line with current Ethiopian tax guidelines for gas processing and chemical industry projects. The direct economic benefits are as set out in Table A-14 for each of the configurations shown in Table A-9 (above). Table A-14: Direct Economic Benefits to Ethiopia, US$million per year, for each configuration

Clearly the larger the project scope (and number of process units) the greater the employment benefits and subsequent employee tax revenue. However the largest direct source of revenue is from gas sales and equity revenue. (It is anticipated that once the corporate tax is collected that this will form a significant revenue stream, ranging from US$100 million to US$600 million per annum for the largest configuration.) The estimated contribution to GDP is between 1.2% and 4.9% (based on 2015 GDP figures). The size of the contribution depends on the scale of the project and will increase significantly once corporate tax revenues are being collected after year 2031.

Case 1 1A 1B 1C 2 2A 2B 2C 3 3A

Direct BenefitsGovernment Equity Revenue 109 114 626 514 160 193 750 615 453 668 Gas Revenue 136 136 136 136 472 472 472 472 609 609 Corporate Tax - - - - - - - - - - Land Rental 9 17 24 33 11 16 25 33 11 34 Employee Income Tax 5 7 10 13 5 7 10 13 5 13 Total Direct Benefits 259 275 796 695 649 689 1,257 1,134 1,078 1,324 Indirect Benefits 467 702 1,428 1,601 540 740 1,496 1,676 671 1,646 Total Economic Benefits 727 977 2,224 2,296 1,189 1,429 2,753 2,809 1,749 2,970 % GDP 1.2% 1.6% 3.6% 3.8% 1.9% 2.3% 4.5% 4.6% 2.9% 4.9%

A-39


Employment The direct and indirect employment numbers for the various configurations have been summarised below in Table A-16: Table A-15: Direct and Indirect Employment

A large scale integrated project of this nature is expected to generate over 4,000 direct and indirect employment positions with the potential to be increased to over 13,000 if a larger scale and more complex project is considered. In 2015 the manufacturing sector in Ethiopia employed around 275,000 people. This project could potential increase these employment numbers by 1.5-4.7%. Beyond the boundaries of the complex itself the availability of intermediates and finished chemicals and polymers will encourage investment by downstream convertors, thereby adding another level of new employment opportunities for semi-skilled and unskilled workers.

Conclusions on Benefit to Ethiopia The following key conclusions can be drawn from the analysis of the benefits of this Project to Ethiopia:

• The project offers significant economic benefits to Ethiopia. For the plausible crude oil price scenario ($60/bbl), the project is likely to contribute over 1.1% to the country’s GDP, generating over 4000 jobs.

• Indirect benefits resulting from the project will be significant, contributing more than half of total economic benefits. The project is likely to lead the development of downstream and other supportive industries and service sectors in the region.

• The project offers an attractive alternative to exporting gas directly from Ethiopia. The value addition to the country’s resources is potentially much higher through exports of products from the envisioned project.

• The project offers effective outlet to add value to the country’s precious natural resources. Many countries have already started leveraging this opportunity.

• In 2012 the foreign exchange earnings from the manufacturing sector were US$255.4 million. Based on product revenue alone (excluding intermediate products) the smallest project configuration investigated could increase this by US$1.6 billion in its first full year of operation.

Case 1 1A 1B 1C 2 2A 2B 2C 3 3A

Direct Employment 1,187 2,095 2,786 3,727 1,467 1,993 2,869 3,810 1,383 3,900 Indirect Employment 2,968 5,238 6,965 9,318 3,668 4,983 7,173 9,525 3,458 9,750 Total Employment 4,155 7,333 9,751 13,045 5,135 6,976 10,042 13,335 4,841 13,650

B-1


Section B.

Ethiopia — Market Analysis

B-2


Ethiopia – Economic and Resource Profile Introduction to Ethiopia The Federal Democratic Republic of Ethiopia is located in the Horn of Africa. It is bordered by Eritrea to the north and northeast, Djibouti and Somalia to the east, Sudan and South Sudan to the west, and Kenya to the south. The country is the second-most populous country in Sub-Saharan Africa with a population of 90.0 million, and population growth rate of 2.5% in 2014. The country is one of the world's poorest nations. Some 29.6 percent of the population lives on less than USD1.25/day. On the United Nations Development Programme's 2012 Human Development Index (HDI), Ethiopia ranks 173 out of 187 countries.

Ethiopia is one of the world’s oldest civilizations. Throughout most of its history the ancient Ethiopian monarchy maintained its freedom from colonial rule, excepting a short-lived Italian occupation from 1936-41.

In 1974, a military junta, the Derg, deposed Emperor Haile Selassie (who had ruled since 1930) and established a Marxist state. Torn by coups, uprisings, wide-scale drought, and massive refugee problems, the regime was finally toppled in 1991 by a coalition of rebel forces, the Ethiopian People's Revolutionary Democratic Front. A constitution was adopted in 1994, and Ethiopia's first multiparty elections were held in 1995. In August 2012, long-time leader Prime Minister Meles Zenawi died in office and was replaced by his Deputy Prime Minister Hailemariam Desalegn, marking the first peaceful transition of power in decades.

Figure B-1 below illustrates Ethiopia’s geographical position. Figure B-1: Overall Geographical Position of Ethiopia

Source: Magellan Geografix

B-3


Economic Analysis Ethiopia is among the five fastest growing economies in the world. The last decade has seen continuous expansion, during which the real GDP growth is estimated to have averaged 10.8% per annum. However, this growth rate is from a very low base and some of the economic data is unconfirmed by independent third parties. In 2013-14, the economy posted 10.3% GDP growth. During 2013 all of the economy’s main sectors performed well and more recent economic data for 2014-15 indicates 10.2% growth. Agriculture (which represents 40.2% of GDP) grew by 5.4%, industry (14% of GDP) expanded by 21.2% and services (46.2% of GDP) rose by 11.9%.

A side effect of the slowdown in global commodity prices, was that the Government of Ethiopia succeeded in containing annual consumer price inflation to 7.1% in December 2014 (down from 39.2% in 2011). In pursuing a tight monetary strategy, the Country’s fiscal policy focuses on strengthening domestic resource mobilisation and reducing domestic borrowing with the goal of maintaining macroeconomic stability. A strong fiscal stance, particularly through measures to improve tax administration and enforcement, contained the fiscal deficit to 2.6% of GDP in 2013-14, although this was up from 1.9% of GDP during 2012-13.

Exports decreased in value by 11.3% in 2015 to reach USD 5.03 billion, although their GDP share decreased from 10.2% to 8.2% year on year. Imports, mainly from Europe and Asia, rose from USD 21.9 billion in 2014 to USD 25.8 billion in 2015, causing the trade deficit to increase from USD16.2 billion to USD 20.8 billion. The debt as a proportion of GDP rose from 21.6% in 2012-13 to 24.3% at the close of 2013-14, therefore the country still presents a low risk of debt distress. However, it faces a challenge to rebuild its foreign exchange reserves.

Figure B-2 illustrates Ethiopia’s GDP Growth Rate between 2000 and 2020. Figure B-2: Ethiopia’s GDP Growth Rate

Source: International Monetary Fund (IMF) estimates

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B-4


Selected Economic Indicators Ethiopia’s fiscal policy aims to maintain a disciplined stance, while pursuing a policy of attracting strong Foreign Direct Investment (FDI) in infrastructure and basic services. In 2014-15, the fiscal deficit (including grants) reached 2.5% of GDP, and it is projected to remain at said level for the next two years despite heavy public sector spending. Increased spending has largely been offset by significant gains in resource mobilisation via tax reforms, combined with improved administrative efficiencies in tax collection and better enforcement. Public expenditure is dominated by welfare spending (which accounted for 70% of public expenditure in 2013-14). Table B-1 illustrates Ethiopia’s economic Indicators between 2010 and 2020. Table B-1: Ethiopia’s Economic Indicators

Subject Units 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Gross domestic product, current prices

$ Billions 30 32 43 48 56 62 67 74 81 88 96

Inflation, average consumer prices % 8.1 33.2 24.1 8.1 7.4 10.1 10.6 11.6 11.6 11.6 11.6

Volume of imports of goods and services

% Change 33.3 10.3 7.7 1.3 18.6 42.8 25.3 10.3 4.5 4.2 5.0

Volume of exports of goods and services

% Change 15.7 0.6 -14.9 17.3 4.2 4.6 23.7 21.1 15.3 14.4 11.9

Population Persons Million 82.9 84.2 85.6 87.0 88.3 89.8 91.2 92.7 94.1 95.6 97.2

General government revenue

% of GDP 17.2 16.6 15.5 15.8 14.9 16.1 15.9 16.1 16.2 16.3 16.4

General government total expenditure

% of GDP 18.5 18.2 16.6 17.8 17.5 18.6 18.9 19.0 19.0 18.9 18.9

Current account balance $ Billions -0.4 -0.8 -3.0 -2.8 -4.4 -7.9 -7.2 -7.2 -7.2 -6.7 -6.8

Source: International Monetary Fund (IMF) estimates

Ethiopia: Energy Profile Ethiopia had around 2,500 MW of installed power generating capacity in year 2012-13, out of which 80% of the capacity is from hydroelectric power plants followed by conventional thermal sources. According to the five year growth and transformation plan (GTP), the country’s installed electricity generating capacity was expected to reach 10,000 MW by the end of 2014-15 from the above level.

The country has a considerable renewable energy potential, with abundant hydro, solar and geothermal sources as well as fossil fuels. Despite the huge potential to exploit renewables,

B-5


historically only a very small portion has been developed owing to lack of financial resources, amongst other factors. It is estimated that 99% of households, 70% of industries and 94% of service enterprises used biomass as their energy source in 2012. Households account for 88% of total energy consumption, industry 4.0%, transport 3.0% and services and others 5.0%. The total primary energy supply in 2013 was 47939 ktoe (kiloton oil equivalent) out of which 92.7% was from Biofuels/ Waste followed by a total petroleum consumption of 5.3%.

Reported hydrocarbon reserves for Ethiopia vary widely depending on the source. For the purposes of this review we have taken the 2015 reports of the US Government (CIA Factbook) as this presents a more conservative estimate than many sources. In terms of oil and gas resources in 2015, Ethiopia’s oil and gas reserves were:

Oil Reserves: 440 000 bbl Production: 0 barrels/day Natural gas Reserves: 24.92 bn m3 Production: 0 m3

This places Ethiopia #101 in the world in oil reserves, behind Portugal. All of the countries below Ethiopia in this ranking have no proven oil reserves. Ethiopia is #73 in terms of gas reserves - behind Cote d’Ivoire (#71) but ahead of Ghana (74), Sudan (75) and Republic of South Africa (RSA - 77). Figure B-3 illustrates Ethiopia’s Primary Energy Supply In 2013 in terms of energy source. Figure B-3: Ethiopia’s Primary Energy Supply

Source: International Energy Agency (IEA)

*The share of the total primary energy supply excludes electricity trade. In figure 3, peat and oil shale is aggregated to coal when relevant. While many nations in sub-Saharan Africa face similar challenges, Ethiopia ranks particularly low in terms of energy progress, 62nd out of 64 as per the IEA’s 2011 Energy Development Index. Ethiopia has made big strides in recent years, with 48.3% of towns and villages connected to the grid as of 2012, according to the Ethiopia Electric Power Corporation (EEPC). This opens up potential for investment in the chemicals and downstream process industries to support Ethiopia’s power infrastructure needs, such as in the manufacture of wire & cable, switchgear and electrical fittings.

Biofuels / Waste92.7%

Oil5.3%

Hydro1.5%

Coal0.4%

Geothermal/Solar/ wind0.1%

B-6


Concerning electricity generation, renewable energy in Ethiopia has focused on large hydroelectric projects, which are suitable for supporting larger energy intensive projects, such as metal ore conversion and chlor-alkali investments; these would further support local infrastructure, including the use of chlorine for drinking water treatment and in the bleaching of textiles, as well as the use of caustic soda in the tanning and soap supply chains. However, much of the small to medium sized local hydroelectric projects in this large country would need considerable capital. Overseas aid programmes, particularly from Germany, are promoting solar and wind potential in Ethiopia, but these offer power supplies on a relatively modest scale and as yet remain to be developed. Nevertheless, power generation improved by around 230% between 2008 and 2012, with six hydroelectric and wind power projects coming online. However, due to its inadequate power transmission system, Ethiopia’s increased energy supply is not being utilized efficiently. The current energy policy places high emphasis on hydroelectric resource developments while at the same time the Government encourages an energy generation mix with renewables, such as solar, wind and geothermal still to be developed if their cost competitiveness can be justified. The country’s power generation potential is shown below:

• Hydroelectric potential 45,000 MW

• Geothermal potential ~ 7,000 MW

• Solar energy potential 5.5 kWh /sq. m/day – annual average daily irradiation

• Average wind speed > 7 meter/second at 50 m above ground level – 1,350 GW

• Natural gas > 25 billion m3 (CIA Factbook estimate but now known to be more – see section C).

• Coal > 300 million tons.

• Oil shale – 253 million tons.

B-7


Figure B-4 illustrates Ethiopia’s Electricity Generation between 2002 and 2013. Figure B-4: Ethiopia’s Electricity Generation

Source: International Energy Agency (IEA) Figure B-5 illustrates Ethiopia’s Electricity Installed Capacity between 2002 and 2012. Figure B-5: Ethiopia’s Electricity Installed Capacity

Source: International Energy Agency (IEA)

0100020003000400050006000700080009000

10000

GW

hr

Nuclear Electricity

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Total Conventional Thermal

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B-8


Key Industrial Sectors — Current Status

Chemicals, Petrochemical & Allied Sectors The Ethiopian chemical industry is largely under developed, with investments realised only in a few products; while the petrochemical sector is largely non-existent – mainly due to lack of (oil and gas) feedstock availability in the country. However, there are a few basic chemical industries such as caustic soda, aluminium sulphate, sulphuric acid, sodium hypochlorite and alkyd resin that use minerals and other chemicals as raw materials. The objective of these chemical units is to produce raw materials / inputs for key industries such as agriculture, textile, food, detergents, paper, etc. Fertilizer

Ethiopia is an agrarian economy with a total of 16 million hectares of land used for agriculture cultivation and farming practices. The country is fully dependent on imported fertilizer as the country does not have any organic or inorganic fertilizer manufacturing plants. A coal-based fertilizer plant – Yayu Fertilizer Factory – is planned with a capacity of 300kta of Urea and 250kta of DAP (diammonium phosphate). The project, which was expected to be completed in 2014/15, is delayed. Furthermore, a single superphosphate and a triple superphosphate plants are also being planned. Ethiopia is currently importing about 300kta of urea and 400kta of other fertilizers (nitrogen, phosphorous and potash based). Currently, no import duty is levied on fertilizer imports. Fertilizers are supplied to local farmers at a market price. There is no price subsidy available on fertilizers. Caustic Soda

Ziway Caustic Soda plant was established in 1995 by government. It currently produces about 22kta of caustic at 45% concentration level using the chemical process method. Major end users of caustic soda are textiles, soap, soft drinks and mineral water processing plants. Since the local supply is inadequate, Ethiopia is importing about 125kta of caustic soda currently, largely in solid form. Sulphuric Acid and Aluminium Sulphate

In Ethiopia, sulphuric acid is largely used to produce aluminium sulphate and also in tanneries and cotton farms. Major application of aluminium sulphate in Ethiopia is in water and sewage treatment. There is a single plant in Ethiopia with a capacity of 13.6kta of sulphuric acid and 17kta of aluminium sulphate. Both plants are running at a very low utilisation. The sulphuric acid plant’s oleum capacity (50kta) remains unutilised due to lack of detergent manufacturing activity in the country.

B-9


Soda Ash

Major use of soda ash is in the glass and bottle industry, soap and detergent industry, leather industry, textile industry, chemical (such as caustic soda) and other industries. Abijata Soda Ash Company is the only producer of soda ash in the country, established in 1990. The company was established as a pilot plant with the objective of only satisfying the local demand of soda ash by using brine from Lake Abijata as the major source of raw material. The later stage of the project was aimed to be based on both lakes, Abijata and Shalla, for raw material source with larger production capacity. The utilisation is below 50% due to lack of downstream industries in Ethiopia. Sodium Hypochlorite

Sodium Hypochlorite is produced by Ghion Industrial Chemicals and Chora Gas and Chemical Products, with a total capacity of 4.2kta. Average utilisation during the past six years has remained less than 20%. Sodium Hypochlorite is largely used a disinfectant in water and sewerage treatment. Paints, Varnish and Alkyd Resin Industry

There is only one unit producing alkyd resin (1.3kta), which is the key raw material for paints and varnish. Currently, there are about 8 units producing paints and varnish in Ethiopia – mainly construction paint, automotive paint, industrial paint and wood paint. All units are operating at a low operating rate. All major raw materials for paints, including alkyd resin, are imported. Soaps & Detergents

There are about 26 units producing various types of soaps, detergents and surfactants in Ethiopia. Overall, the industry is dependent on imported key raw materials, especially LAB (linear alkyl benzene), fatty acids, caustic soda and other raw materials such as STPP (sodium tripolyphosphate), SCMC (sodium carboxy methylcellulose), sodium sulphate, sodium perborate, sodium chloride, soda ash, zeolite and TEA (triethanol amine). Most of these units are facing very low utilisation (of around 30%) due to lack of raw material availability, and also in many cases, incorrect capacity is reported by the unit. Only some of the raw materials such as caustic soda (partly imported), fillers, palm kernel oil and animal tallow are produced locally. Wilmar is supplying oils required for detergents. Crude soda ash is available from Abijata Soda Ash Company. Palm oil and other oils are also available through the MEWIT (Merchandise Wholesale and Import Trade Enterprise) distribution network. Allied Industry is a major producer of sodium silicate (capacity 40 tpd) required for soaps and detergents. Allied has future plans to enter into manufacturing of LAB, caustic soda and fertilizers.

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Pharmaceuticals

The development of the Ethiopian local pharmaceuticals manufacturing sub-sector has been very much limited in terms of production capacity, technology acquisition, creation of employment opportunity and investment. The annual pharmaceutical market in Ethiopia is estimated to be worth US$ 400 million to US$ 500 million in 2015 and is growing strongly. Steady economic growth, improvements in the delivery of health care, and the introduction of social health insurance coverage across the country in July 2015 all led to growing demand. International pharma companies such as Cadila, Julphar, GlaxoSmithKline, Sandoz and Hikma Pharmaceuticals have invested in Ethiopia. Production of bulk drug and formulation is very limited. There are approximately 200 importers of pharmaceutical products and medical consumables in Ethiopia. The local industry comprises 22 pharmaceutical and medical suppliers and manufacturers, with only 9 involved directly in the manufacture of pharmaceutical products. Most of the manufacturers operate below their capacities and supply only about 20% of the local market. Local manufacturers have limited product portfolios and are thought to be able to supply only 90 of the more than 380 products on the national essential medicines list. There are very limited exports, with the exception of small volumes of empty gelatine capsules being exported. Food Processing

This is a relatively fast growing sector in the Ethiopia. This includes sugar production as well as process food factories. All food processers rely on the supply chain, which include traders, resellers and supermarkets and other local retailers at end of the chain. There are over 2200 large to medium scale food processors which represents roughly about 50% of the industry, as the remaining are largely small scale units. Apart from imports of food products, Ethiopia also imports modest volumes of food processing chemicals such as citric acid, tartaric acid, sodium benzoate, glycerine, etc. Overall, the food processing industry is still developing and lacks basic infrastructure (such as storage) and modern technology. Water Treatment

Apart from Addis Ababa and a few other urban centres, Ethiopia generally lacks proper waste water, sewage treatment and water softening infrastructure. Addis Ababa has two secondary sewage treatment plants. The Addis Ababa Water & Sewerage Authority (AWSSA) is deploying 10 mobile liquid waste treatment plants. There are several water treatment chemical companies operating in Ethiopia providing treatment solutions and chemicals to businesses and industry in general. US based global chemical manufacturer Dow Chemicals is offering its water treatment and purification technologies to the Ethiopian market, especially for the sugar, leather and beverage industries.

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The existing sewage plants, tanneries, pulp and paper industries, textile industries, cotton farms, floricultures, soft drink and beverage, car battery factory and glue factories largely relying on basic treatment chemicals such as aluminium sulphate, caustic soda, lime slurry, sodium hypochlorite, etc. – which are locally available. The Addis Ababa Water and Sewerage Authority also import another substitute chemical (polyelectrolyte) instead of using the locally produced aluminium sulphate. Plastic Processing & Packaging

Currently, there are over 300 small to medium size convertors engaged in producing plastic products. Largely, the supply is far below the local market demand. Ethiopia is importing plastic products and materials worth around Birr 3.35 billion to meet the shortfall. Major plastic products produced by the local convertors are PE/PP/PVC extruded and injection moulded products for industrial, construction and households, electrical wires and cables, shoe uppers and soles, etc. Therefore, it is not only necessary to replace imported plastic materials, but also to produce locally partially finished plastic materials which can be used as inputs for the production of other goods. Although some the plastic processing units in Ethiopia have been set up about 50 years ago, overall, the industry is still underdeveloped and fragmented, mainly because of a lack of upstream linkages and local availability of raw materials. The following are salient features of the Ethiopian plastic processing industry:

• Piping industry = about 30 manufacturing units, with 96 kta capacity, producing PVC (36 kta), LLD/HDPE (60 kta) and PP (random) pipes (minor consumption).

• Pipe fittings industry = 6 manufacturing units producing 2.5 kta of PVC, HDPE and PP (random) fittings.

• Electrical fittings = 2 manufacturing units producing electrical sockets, switches, circuit boards, etc.

• Rubber foam = 22 manufacturing units producing rubber foams, with a total capacity of 5 kta.

• PP bags = 25 manufacturing units producing laminated and non-laminated PP bags, mainly non-laminated raffia bags.

• PU/Polyol = small amount is imported to produce shoe soles and uppers.

• Injection moulding = about 115 units consuming almost 30 kta of polymers to produce various household articles, crates, plastic shoes, PET preforms, etc. HDPE = 90%; PET = 10%

• Film convertors = about 100 co-extrusion units consuming LLDPE/HDPE to produce films.

• Packaging film = 4 printing units producing about 4 kta of printed film.

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Overall, the industry is facing significant shortage of raw material (mainly polymers) and, as the units are dependent on imports, they are facing a foreign exchange and working capital crunch. Other Sectors Pulp & Paper

Currently, there are four paper manufacturing plants in the country, two of which are new. However, there is no pulp manufacturing plant in the country. Due to these factors, a bulk of paper, pulp and paper products are imported from abroad at a cost of 97.8 billion birr annually. In general, the production capacity of local industries is at a low level of development and even those who import pulp and convert it to paper utilize dated technology and the product compares unfavourably with the imported paper. Although there is ample raw material to manufacture the product the industry is not at the required stage of development. Electronics / White Goods

Most of the electronics and white goods in Ethiopia are imported. Use of electronics and white goods is low as compared to other countries, but is growing. Electronic goods manufacturing includes only a small number of mobile phones and TVs being assembled. The only electronic manufacturing unit - Hi-Tech Manufacturing Industry – assembles electronics products such as TVs, mobiles, smart meters and other military equipment including radio communication and radars. Furniture

There are about 300 privately owned large and medium furniture enterprises through the country. The processed wood and furniture industry accounts for 0.6% of the industrial production in Ethiopia. Most of the manufacturing is through manual labour and does not involve mechanised processes. Key raw materials include timber, plywood, particle board and engineered wood. Due to the relatively low quality and expensive price of the product, Ethiopia imports significant volumes of furniture products from abroad. The sector uses various types of adhesives. Most of these are imported. Ethiopia imports about 6-7kta of adhesives that are based on starches, polymers, rubber and other chemicals. Some starch adhesives produced locally are based on Enset (indigenous plant product), potato and cassava. These adhesives are largely used in breweries and soft drinks industries for bottle labelling. The furniture industry largely uses polymer or rubber based adhesives – which are also currently imported.

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Construction

The Ethiopian construction industry has been benefitted significantly by the government’s Growth and Transformation Plan (GTP II) 2010-15. This has resulted in significant growth in residential, industrial and commercial construction activity. Despite the growth, the industry is constrained by capacity and performance of local contractors, quality and productivity, utilisation of appropriate construction technologies, and application of proper building regulations and standards. Currently, PVC and polyethylenes are used in the construction industry for various applications, while other high value products such as ABS (Acrylonitrile Butadiene Styrene) or PVB (Polyvinyl Butyral) are not used in Ethiopia. Automotive

Due to the limited disposable income, Ethiopia’s automotive market is dominated by second-hand imported vehicles – particularly commercial vehicles. The Bishoftu Automotive Industry (BAI), an automotive manufacturing and assembly company run by the Ethiopian military is the only vehicle assembler in Ethiopia. BAI assembles buses, pick-ups, SUVs, trucks and military equipment such as tanks and armoured personnel carriers (APCs) from Chinese sourced vehicle kits. Small quantities of commercial vehicles have been exported to neighbouring Somalia. Ethiopia has total vehicle population of almost 0.6 million, with about 18,000 vehicles added every year – most of which are second hand imports.

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Table B-2: Vehicle Population in Ethiopia and Select African Countries

Indicator Ethiopia Kenya Nigeria

Vehicle Population 587,400 1,300,000 3,590,000 Avg. Sales of New Vehicles (p.a.) 18,000 19,523 26,400 New Vehicles (as % of total) 15% 20% 10% Motorisation rate, % per 1000 people 2% 28% 20%

Source: Africa Automotive Insights Apart from BAI, China’s Lifan Group has also set up an assembly plant in Ethiopia in 2013/14 with an annual capacity of 1500-2000 vehicles per year. Lifan has plans to expand its production capacity. Ethiopia has the lowest motorisation rate globally, with only two cars per 1 000 inhabitants in 2014/15. Ethiopia’s Ministry of Transport reports that there are 587,400 vehicles on the road, with an annual growth rate of approximately 6%. Approximately 84% of the market is passenger vehicles, with commercial vehicles at 16%. There is little potential for automotive plastics and polymers (such as ABS, SAN, PP, etc.) in Ethiopia, unless vehicle manufacturing plant is set up in the country. Vehicle transplant assembly operations will not consume any polymers. Automotive Tyre

Horizon Addis Tyre is the only producer of automotive tyres in Ethiopia. The plant was set up 40 years ago with the support of the government of Ethiopia. It moved on during the closed economy and later on as a part of the new technology revolution, it was acquired by the Slovakian MATADOR company to become MATADOR-Addis Tyre. Then MATADOR was sold globally to Continental. Continental subsequently decided to leave dispose of its Ethiopian acquisition. After that the Horizon Plantations, which is part of Midroc Group, took over the shares of MATADOR (in 2011) and the company become Horizon Addis Tyre. Subsequently in 2013, the company increased its shareholding from 69% to 100% in 2013. Horizon is currently producing 600,000 tyres annually, which includes tyres for passenger vehicles, light trucks and buses. Majority of the production is of radial and diagonal tyres. Currently, Horizon’s market share in Ethiopia is around 23%, with the rest of the tyres demand being largely imported from India and China. Horizon is planning to expand its capacity to produce large radial truck tyres. Horizon is largely dependent on natural rubber locally produced at its own 20 hectare plantations in the Bebeka region of Ethiopia. Horizon also imports about 4kta of natural rubber for tyre manufacturing (a small proportion is also used in rubber foot wear manufacturing), largely from Malaysia. A small quantity (less than 2 kta) of synthetic rubber (mainly SBR) is also imported from South Korea to produce radial tyres. Horizon’s consumption of SBR is likely to increase to some extent in the future as it is planning to

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augment its radial tyre capacity. Nevertheless, it is unlikely to be significant as Horizon’s upstream “push” is towards more dependence on natural rubber sourced from its own plantations. They have engaged Continental to provide technical support in the modernisation of their tyre range – however, modern passenger vehicle tyres tend to use much more synthetic rubber in their construction than natural rubber so there seems to be a mismatch in strategy developing here. Cement

Ethiopia has a total of fifteen operational cement factories with a total capacity of 16.37 million tons per year. These also include five fully integrated cement plants with a combined capacity of 4.39 million tpa. These are Messebo Cement, Muger Cement, Diredawa Cement, Addis Ababa Cement with the latest addition being Dangote Cement. There are various expansions and new cement projects being planned in the country – currently there are two projects about to commence. These are Habesah Cement at Enchini and Mengistab Industrial & Commercial plc at Kuyu/Gerbe Guracha with a combined capacity of 2.6 million tons per year. Textiles

Ethiopia’s textile industry is largely under developed as compared to other major textile hubs in Africa and Asia. The country’s current textiles industry encompasses spinning, weaving and processing. Ethiopia has five public textile factories producing mostly work-wear garments for the domestic market. Numerous privately-owned factories produce shirts, suits, work clothes and uniforms for national and foreign markets. Ethiopia has the potential to become a source of textile raw material, as it has more than 3.2 million hectares of land with a suitable climate for cotton cultivation. Yet, barely 7 percent of that land is being used today. The combination of low land-utilization rates, planning errors, low crop yields and quality problems is forcing Ethiopia to import cotton. Currently, cotton production is carried out under irrigation, mainly in the Awash Valley, which has more than 50,000 hectares under cultivation. Another 45,000 hectares of high-quality cotton is cultivated by small-scale farmers. The Ethiopian Government is actively promoting the further modernization of the textile sector with the aim of attracting foreign investors that can penetrate the global market. Currently, Ethiopia is importing about 92kta of textile yarns and about 137kta of semi-finished and finished textile products, which indicated a high degree of import dependency. Ethiopia still lacks composite textile mills and modern textile processing units. Potential for textile processing chemicals will be realised only textile sector is developed further. Leather

Ethiopia’s leather and footwear industry is well developed and is a significant contributor to the country’s economy; owing to its abundant and available raw materials, disciplined

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workforce and cheap prices. Ethiopia boasts the largest livestock production in Africa and the 10th largest in the world. Ethiopia annually produces 2.7 million hides, 8.1 million sheepskins and 7.5 million goatskins. Currently there are about 33 leather tanneries in Ethiopia with a total capacity of 5 million hides and 50 million pieces of skin. Apart from tanneries, there are about 22 medium and large scale footwear manufacturers with a 12 million pairs/year capacity. There are about 50 leather goods and garment producers in Ethiopia. Ethiopia's leather and leather product sector produces a range of products from semi-processed leather in various forms to processed leathers including shoe uppers, leather garments, stitched upholstery, backpacks, purses, industrial gloves and finished leather. Most of the tannery and leather processing chemicals such as bating enzymes and sulphuric acid are imported. Industry Trade Data Analysis Ethiopia is highly dependent on imports for major chemicals, petrochemicals and its derivatives. Table B-3 below highlights import volume for these products for last three years. Table B-3: Imports of Key Fuels, Chemicals and Petrochemicals in Ethiopia

Product Imported Import Volume (KTA)

2013 2014 2015

A. Fuel

Petroleum oil 980 2252 1665 Refinery fuels (gasoline, diesel, jet fuel, fuel oil, etc.) 713 1200 977 Liquefied Petroleum Gas (LPG) 8 7 9

B. Fertilizers

Urea 230 402 270 Other Nitrogenous (ammonia) based fertilizers 9 9 5 Potash based fertilizers 1 2 2 DAP 97 177 71 MAP 50 143 1 Other nitrogenous, potash and phosphorous fertilizers 207 174 358

C. Chemicals

Hydrochloric Acid 2 2 2 Sulphuric Acid 1 1 1 Nitric Acid 1 2 2 Caustic Soda 12 9 10 Glycerol 1 2 2 Formic Acid 1 1 2 Dioctyl phthalate & other phthalate plasticizers 8 10 8

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Product Imported Import Volume (KTA)

2013 2014 2015

Isocyanates 4 6 6 Other Organic Chemicals and Intermediates 25 22 23

D. Chemical based Products

Paints, Varnishes and Inks 5 8 6 Soaps, detergents and surfactants 35 50 58

E. Polymers and Resins

LDPE / LLDPE 8 6 7 HDPE 27 22 27 EVA 3 3 3 Other ethylene polymers 11 21 31 Polypropylene 30 27 37 Propylene copolymers 1 1 2 Other propylene polymers 7 11 9 PVC 18 21 19 Polyether polyols 15 18 31 PET / Polyester 11 13 18 Other Polymers 12 12 16 Epoxy Resins 1 1 2 Urea Resins 4 4 3 PU Resins 2 2 3

F. Plastics Products

Tubes, Pipes and Hoses of Polymers 13 19 37 Various articles of plastics (including packaging) 52 72 73

G. Rubbers & Rubber Products

Natural rubbers 3 2 4 Synthetic rubbers 1 2 2

Automotive Tyres & Tubes 41 42 43 H. Footwear Products Finished & Semi-finished Plastics & Leather Footwear Items 12 14 21 I. Textiles

Textiles Raw Material (yarn) 56 79 92 Textiles – semi-finished and finished items 48 191 137

J. Furniture Items Wooden furniture and its parts 13 32 20

Source: Central Statistics Agency of Ethiopia. It is evident that Ethiopia is significantly dependent on imports; not only for basic fuels, chemicals and petrochemicals, but also for the final product such as detergents, soaps, plastic articles, textiles, furniture, footwear products, etc. This clearly indicates the fact that

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the domestic industry is struggling to develop backward linkages (e.g. lack of raw material availability) as well as the forward linkages (underdeveloped downstream industry). For example, the plastic processing industry is relatively well developed, but is struggling to source basic raw materials (polymers). Similarly, the packaging industry is not yet fully developed to its potential as there are not enough numbers of printing and film laminating units set up in the country – again this is mainly due to a lack of packaging film availability locally. The textile / garment industry is importing significant volumes of yarn and semi-finished and finished textile items – as there is no availability of polyester resin locally to produce fibres/yarns. Hence, overall it is critical for the Ethiopian Government to focus on producing the select raw materials and intermediates as well as invest in to sector development. End Use Industry Analysis As discussed in the previous section, Ethiopia’s end use industries are in various stages of development. Most of these sectors are still not developed to their fullest potential, mainly due to raw material availability, lack of backward and forward linkages and overall quality of industrial infrastructure. Table B-4 to Table B-19 below highlight major products and intermediates used in each of the end use industries — their applications and the basic building blocks (raw material) required to produce these products. The objective of this analysis is to identify critical and large volume building block chemicals and intermediates required for each of the end use sectors to progress. Table B-4: Fertilizers Industry

Product / Intermediates Industry Specific Key Application Building Block Required

Urea Nitrogen-release fertilizer Methane, Ammonia

Ammonia Nitrogen-release fertilizer Nitrogen, Hydrogen

Ammonium Nitrate (AN) Nitrogen-release fertilizer Ammonia, Nitric Acid

Ammonium Sulphate (AS) Nitrogen-release fertilizer. pH regulator of alkaline soil Ammonia, Sulfuric Acid

Diammonium Phosphate (DAP) Phosphate and nitrogen-release fertilizer Ammonia, Phosphoric Acid

Monoammonium Phosphate (MAP) Phosphate and nitrogen-release fertilizer Ammonia, Phosphoric Acid

Triple Superphosphate (TSP) Phosphate and calcium-release fertilizer Calcium Hydroxide, Phosphoric Acid

Calcium Ammonium Nitrate (CAN) Nitrogen and calcium-release fertilizer Limestone, Ammonia, Nitric

Acid

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Table B-5: Paints & Varnish Industry

Product / Intermediates Industry Specific Key Application Raw Material / Building Block

Synthetic Binders

Acrylic polymers (resins) To impart adhesion to the layer as well as cohesion to the pigment particles Propylene

Vinyl acetate / PVA and acrylate ester.

The most common water-based binders for use in household paint. Ethylene, Propylene, Ammonia

Alkyd polymers (resins) To impart adhesion to the layer as well as cohesion to the pigment particles Fats and Oils

Glycerol based polyol Major binder in solvent-based paints, air-drying and heat-cured paints. Fats and Oils or Propylene

Epichlorhydrin/Epoxy based resins Binder in industrial coatings/paints. Glycerol or Propylene, Chlorine

Solvents

Isopropyl alcohol To clean paints, paint brushes etc. Propylene, Sulfuric Acid/Water

White spirit Most oil-based alkyl paints, primers and varnishes (paint thinner), to clean brushes and spills etc.

Crude Oil

Acetone Paint and varnish remover from glass, metals etc. Propylene

Naphtha Paint thinner Crude Oil

Toluene / Xylene Used in some fast dry enamels, in some lacquers and lacquer thinners; contained in some paint removers.

Naphtha

Methyl Ethyl Ketone (MEK) Cleaning up dried latex paint, lacquer and adhesives. Butylene

Dimethylformamide Industrial paint stripper Methanol, Ammonia

2-Butoxyethanol / glycol ether Solvent in water-based paints Propylene, Ethylene

Denatured ethanol As paint thinner, paint brush cleaner etc. Biomass

Table B-6: Soaps & Detergents Industry


Caustic soda Raw material for soap production Sodium carbonate, calcium hydroxide, Salt

Linear alkyl Benzene (LAB) Basic raw material for detergent Benzene, n-paraffin

Linear Alkyl Benzene Sulphonic Acid (LABSA) Main active ingredient in liquid surfactant Benzene, n-paraffin, Sulphur

trioxide Ethylene Oxide Derivatives (EODs) Foam former, Bleach activator etc. Ethylene

Non-ionic - Ethoxylates Non-ionic detergent and foam former in liquid detergent. Ethylene

Acids Neutralize or adjust alkalinity of other ingredients

Hydrochloric acid, Sulphuric acid

Alkalis Neutralize or adjust acidity of other ingredients, make surfactants and builders more efficient, increase alkalinity.

Caustic Soda

Bleach Help whiten, brighten and remove stains Chlorine

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Table B-7: Pharmaceuticals Industry


Acetone Solvent in pharmaceutical preparations. Propylene

Ammonia Solvent in pharmaceutical preparations. Used in the preparation of sulpha drugs. Nitrogen, Hydrogen

Acetic Anhydride It is used to make aspirin and paracetamol. Methanol

n-butanol (nBA) Used in production of antibiotics, hormones, and vitamins Propylene

Benzene

Used in the production of Iso Butyl Benzene, which is a raw material for the anti-inflammatory/analgesic drug, Ibuprofen

Naphtha

Ethanol Used in Blood fractionation/plasma, Tableting and antibiotics manufacturing Biomass

Isopropyl alcohol (IPA) Active ingredients of disinfect for hospital surfaces. Propylene, Sulfuric Acid/Water

Methanol It is used as a solvent in the production of various drugs. Syngas

Phenol Precursor to a variety of drugs including aspirin. Benzene

Aniline Raw material many drugs, such as paracetamol, analgin, sulpha drugs, oxyphen butazone, Vitamin B2.

Benzene, Nitric Acid, Sulfuric Acid, Hydrogen

Propylene glycol Solvent in pharmaceutical preparations. Propylene

Glycerine Used in suppositories, cough syrups, elixirs and expectorants. Fats and Oils or Propylene

Methyl ethyl ketone (MEK) Used in anaesthetics, antiseptics, drugs and lotions Butylene

2-Ethyl hexanoic acid It is used to produce emollients. Ethylene, Propylene

Ethylene Glycol Butyl Ethers Solvent in some medicine products to enhance percutaneous absorption Ethylene and ethanol

Ethylene Glycol Ethers Solvent in some medicine products to enhance percutaneous absorption Ethylene and ethanol

Dipropylene glycol monomethyl ether Disinfectant cleaners Propylene and Methanol

N-methyl pyrrolidone (NMP) Solvent, extraction medium Ammonia, Methanol Table B-8: Food Processing Industry


Citric Acid Flavouring agent, acidifying agent, antioxidant

Sucrose or glucose-containing medium

Sodium Citrate Chelating agent, Flavouring agent, acidity buffer Sodium bicarbonate, citric acid

Sodium benzoate preservative, antimicrobial agent, flavouring agent, adjuvant

Toluene, oxygen, sodium hydroxide

Sodium Nitrate / Nitrite Colouring and flavouring agent, and preservative.

Caliche ore (natural sources)/Nitric acid and sodium carbonate (synthetic production)

Vinegar / Acetic acid Preservative. Used in the production of Per Methanol/Ethylene

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acetic acid, a sanitizer and disinfectant

Glycerine Humectant, solvent, sweetener, and preservative. Fats and Oils or Propylene

Ethylene diamine tetra acetic acid (EDTA) Chelating agent Ethylene, Methanol

Phosphoric acid / phosphate Acidulant, buffer, chelating agent, colour stabilizer, emulsifier, nutrient

Sulphuric Acid, Tri-calcium Phosphate

Sodium Nitrate / Nitrite Colouring and flavouring agent, and preservative

Caliche ore (natural sources)/Nitric acid and sodium carbonate (synthetic production)

Table B-9: Water Treatment Industry


Caustic soda Used for pH adjustment, alkaline cleansing and heavy metal precipitation

Sodium carbonate, calcium hydroxide Salt

Chlorine

Disinfectant, oxidant and algae controller for water purification. Also used in the production of poly aluminium chloride (flocculent).

Salt, HCl

Soda Ash Used for pH adjustment, alkaline cleansing and heavy metal precipitation Sodium Chloride, Ammonia

Mono Chloramine Used as a residual disinfectant for water distribution and to resist biofouling in cooling water system.

Ammonia, Sodium Hydroxide, Chlorine

Polyelectrolytes (Ammonium Chloride based) coagulants and flocculants Ammonium, Sodium Chloride

Phosphoric acid Used for pH adjustment in water purification.


Sulphuric acid pH neutralizer and emulsion breaker. Used in the production of aluminium hydroxide; which filters out impurities.

Sulphur, Oxygen and Water

Hydrochloric acid pH neutralizer Hydrogen, Chlorine Nitric acid Reagent, pH control Ammonia Acetic acid Reagent, pH control Methanol/Ethylene Ethylene diamine tetra acetic acid (EDTA) chelating agent Ethylene, Methanol

Di-sodium phosphate pH buffer and boiler water treatment Di-calcium phosphate, sodium bisulphate

Tri-sodium phosphate pH buffer and boiler water treatment Sodium hydroxides, sodium carbonate, Phosphoric Acid

Table B-10: Plastic Processing & Packaging Industry


Polymers

Polypropylene (PP) Food takeaway containers, bottles, packaging food, confectioneries, etc. Propylene

Polyethylene (PE) Bags and liners, drums and intermediate bulk containers, food packaging, heavy

Ethylene

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Includes LDPE/LLDPE/HDPE duty sacks, hygiene films, trash bags, caps and closures etc.

Polyvinyl Chloride (PVC) Blood bags, I.V. bags, fresh red meat packaging, shrink wrap etc. Ethylene , Chlorine

Polyethylene terephthalate (PET) / Polyester

Metallized packages, microwave packaging, brick pack, medical packaging, bottles, trays, and as thin flexible film in pouches etc.

Paraxylene, Methanol, Ethylene

Polystyrene (PS) Expanded Polystyrene (EPS)

Yoghurt pots, foam hamburger boxes and egg cartons, plastic cutlery, protective packaging for electronic goods and toys etc.

Benzene, Ethylene

Adhesives

Polyvinyl Acetate (PVAc) Paperboard packaging, small cartons or boxes Ethylene, Methanol

Polyvinyl Alcohol (PVA) Packaging of detergents, water treatment chemicals, agrochemicals, dyes etc. Ethylene

Polyvinyl butyral (PVB) packaging for foodstuffs and heat sensitive products, metals, cardboard etc. Ethylene, Propylene, Methanol

Polyvinyl formal (Formvar) Structural adhesive in aircrafts Ethylene, Methanol Polyvinyl chloride Tapes sealing boxes and cartons etc. Ethylene, Chlorine

Polyvinyl ether Medical tapes, double side tapes, pressure sensitive tapes etc. Ethylene

Acrylics Pressure sensitive tapes and labels, such as envelopes, decal and label applications, as well as medical tapes

Propylene

Cyanoacrylate Fast bonds are requirements Methanol, Sodium Cyanide Acrylate/acetate copolymer Pressure sensitive tapes Propylene

Polyether urethane Flexible packing for foods and others consumer goods

Toluene, Alcohol, Ammonia, Ethylene/propylene

Ethylene Vinyl Acetate (EVA) based Hotmelts Sealants in meat and dairy packaging Ethylene, Methanol

Ethylene Acrylic Acid (EAA) Adhesive / sealant Ethanol, Ethylene/Methanol Ethylene Methyl Acrylate (EMA)

Pressure sensitive adhesives, paper lamination etc. Ethylene, Propylene, Methanol

Polyvinylidine Chloride (PVdC)

Food packaging and wrap, pharmaceuticals packaging, packaging for hygiene and cosmetic products, sterilized medical packaging etc.

Ethylene, Chlorine

Syn. Rubber adhesives

Styrene Butadiene Rubber (SBR)

Coating paperboard products such as food cartons, pressure sensitive tapes, hot melt adhesives etc.

Benzene, Ethylene, Butadiene

Solvents

Ethyl Acetate Flexible packaging and in the manufacture of polyester films and BOPP films etc. Ethanol, Methanol (Acetic acid)

Methyl Ethyl Ketone (MEK) Raw material for printing inks and printing ink additives Butylene

Ethanol Solvent in flexible packaging printing Biomass Toluene Solvent in flexible packaging printing Naphtha

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Table B-11: Pulp & Paper Industry


Caustic soda In pulping and bleaching processes, the de-inking of waste paper.

Sodium carbonate, calcium hydroxide, Salt

Chlorine In pulp bleaching and water treatment Salt, HCl

Sodium Chlorate To generate chlorine dioxide (pulp bleaching) Seawater or Brine

Styrene-butadiene latex For coating paper Ethylene, Benzene, butadiene Sulphuric Acid Post deinking bleaching Sulphur, Oxygen and Water

Soda Ash Makeup chemical in alkaline pulping chemical recovery Sodium Chloride, Ammonia

Sulphur Dioxide (SO2) Increase pressure in digester, bleaching Sulphur Ethylene diamine tetra acetic acid (EDTA)

Used for chelation (removal of transition metals from pulp). Ethylene, Methanol

Polyvinyl Alcohol (PVA) Pigment coating Binder Ethylene

Soaps / Surfactants De-inking Fats and Oils, Sodium hydroxide, Ethylene, Alpha olefins

Styrene acrylic acid Surface sizing agent. Ethylene, Benzene, propylene, Ammonia

Ethylene acrylic acid Surface sizing agent. Ethylene, Propylene, Ammonia

Polyurethane (PU) Surface sizing agent. Toluene, Alcohol, Ammonia, Ethylene/propylene

Table B-12: Electronics & White Goods Industry


Polyvinyl Chloride (PVC) Cable and wire insulation, cable trunking etc. Ethylene , Chlorine

Benzene A cleaning and coating agent for electronic components, liquid crystal displays (LCDs) etc.

Naphtha

Acetic Acid Consumer electronics, semiconductors etc. Methanol/Ethylene Acetone Cleaning of electronic components. Propylene

Hydrochloric acid To keep wafer surfaces free of trace metals in semiconductor processing. Hydrogen, Chlorine

Isopropyl alcohol (IPA) To clean electronic devices. Propylene, Sulfuric Acid/Water

Nitric Acid Cleaning, dissolving basic metals from electronics scrap etc. Ammonia

Phosphoric Acid

Etchants in semiconductor manufacturing, in the production of Flash Memory, and other IC production as well as photovoltaic applications, Fuel Cells, and FPD (Flat Panel Display) screens.


Sulphuric Acid For cleaning and etching applications of semiconductors and PCB's etc. Sulphur, Oxygen and Water

Ethylene Glycols Semiconductor rinse applications and in a high purity cooling system. Ethylene

Aniline To make conducting polymers. Benzene, Nitric Acid, Sulfuric Acid, Hydrogen

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Ammonium Hydroxide To remove organics and particles from the surface of a wafer. Ammonia

Potassium Hydroxide (KOH) Alkaline batteries, etching of silicon wafers etc. Potassium Chloride

Sodium Hydroxide (NaOH) In development of printed circuit boards for chemical copper deposition.


Methyl Ethyl Ketone (MEK) As a negative photoresist remover. Butylene Methanol As a cleaning solvent. Syngas n-Butanol (nBA) As a solvent in semiconductor processes Propylene

N-methyl-pyrolidone (NMP) To remove photoresist, clean and dewax silicon wafers, and remove solder flux on circuit boards.

Methanol, Acetylene, Ammonia

Propylene glycol methyl ethyl acetate In photoresist remover applications. Propylene, Ethylene

Melamine As a flame retardant in electronic products Methane, Ammonia

Epoxy Resins In over moulding of integrated circuits, transistors, hybrid circuits, and making printed circuit boards, etc.

Ethylene, Propylene

Ethanol As a solvent and clean electronic devices. Biomass

Formaldehyde In development of printed circuit boards for chemical copper deposition. Methanol

Acrylonitrile Butadiene Styrene (ABS)

Telephone handsets, keyboards, monitors, computer housings etc.

Propylene, Ammonia, butadiene , Benzene, Ethylene

Alkyd Resins Circuit breakers, switch gear. Phthalic anhydride / Maleic anhydride, polyol

Epoxy Resins Electrical components. Ethylene, Propylene

Ethylene Vinyl Acetate (EVA) Freezer door strips, vacuum lean hoses, handle-grips. Ethylene, Methanol

Phenol Formaldehyde (PF) resins Fuse boxes, knobs, switches, handles. Benzene, Methanol

Table B-13: Furniture Industry


Urea Formaldehyde (UF) / Phenol Formaldehyde (PF) Resins

Major adhesives in binding wood of all sizes and shapes into a wide array of products such as panels, moulded products, lumber and timber products.

Methanol, Methane, Ammonia / Methanol, Benzene

Melamine Laminate office furniture, flooring, store fixtures and cabinets. Methane, Ammonia

Polyvinyl Alcohol (PVA) Polyvinyl Acetate (PVAc)

High performance sealer, primer, bonding agent and dust proofer for plywood, chipboards and MDFs.

Ethylene, Methanol

Hotmelts Edge banding and profile wrapping, flat lamination, assembly and sealing processes

Propylene Ammonia, Ethylene, Benzene.

Aldehyde Condensation Resins

Phenolic Abrasive discs, brake linings, foundry industry, fibre bonding, plywood. Benzene

Resorcinol Laminating and finger jointing soft wood lumber as well as some hard wood species Benzene

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Urea Particleboard, plywood Methane, Ammonia Melamine Particle board. Methane, Ammonia

Epoxy Resins

Epichlorhydrin based resins Clear and glass like finish, water proofer etc. Ethylene, Propylene

Table B-14: Construction Industry


Polyvinyl Chloride (PVC)

Alternative to traditional materials such as wood, metal, rubber and glass; used in drinking and waste water pipes, window frames, flooring and roofing foils, wall coverings, cables etc.

Ethylene, Chlorine

Linear Low Density Polyethylene (LLDPE)

Moisture barriers under the concrete structure, liners, bond breaker for slab bases. etc.

Ethylene

Low Density Polyethylene (LDPE)

Liners or membranes, insulation and jacketing materials etc. Ethylene

High Density Polyethylene (HDPE)

Plumbing pipes, underground pipes, drainage pipes, corrugated pipes etc. Ethylene

Polypropylene (PP)

As secondary reinforcement to reduce shrinkage and controls cracking, manufacturing of pumps and different types of pipes etc.

Propylene

Polystyrene (PS) PS foams used as Insulating material Benzene, Ethylene

Expanded Polystyrene (EPS)

Roof, floor and wall insulation, Interior and exterior decorative mouldings, Insulated concrete forms (ICFs), Sub-structure and void-fill blocks for civil engineering, underground heating system support, etc.

Benzene, Ethylene

Polyvinyl Butyral (PVB) Used as interlayer material embedded in safety glass, membrane for noise reduction etc.

Ethylene, Propylene, Methanol

Acrylonitrile Butadiene Styrene (ABS) Pipes, fittings etc. Propylene, Ammonia,

butadiene , Benzene, Ethylene Table B-15: Automobiles Industry


Polypropylene (PP) Bumper faces, instrumental panels, door trims, energy absorbers, engine covers and battery cases etc.

Propylene

Polyurethane Resins (PUR) Car seats, bumper, energy absorber, coating, windshield, cushioned instrument panels etc.


Polyvinyl Chloride (PVC)

Cable insulation, dashboard skin, sun visors, seat coverings, window encapsulation, underbody coating, battery separation plates etc.

Ethylene, Chlorine

Acrylonitrile Butadiene Styrene (ABS)

Wheel covers, dashboards, exterior and interior trims, lighting etc.

Propylene, Ammonia, butadiene , Benzene, Ethylene

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Polyamide / Nylon Dashboard, fuel system, under the bonnet components, electrical components, exterior trim etc.

Benzene, butadiene, propylene etc.

Polystyrene (PS) Thermal insulation, body panels, buttons, car fittings, display bases etc. Benzene, Ethylene

Polyethylene (PE) Upholstery, electrical components, fuel systems, dashboard etc. Ethylene

Polyoxymethylene (POM) Plastic components in interiors, where high resistance to impact load is required; levers and gears, mirrors etc.

Methanol

Polycarbonate (PC) Lighting, dashboard, bumpers etc. Benzene, Propylene

Poly(methyl methacrylate) (PMMA)

Light covers, interior and exterior trim, glazing, windshields and sun visors etc.

Ethylene/Propylene/Isobutylene, benzene, propylene

Polyethylene Terephthalate (PET)

Wiper arm and gear housings, headlamp retainer, engine cover, interior trim etc. Xylene, Methanol, Ethylene

Acrylonitrile Styrene Acrylate (ASA)

Exterior mirror housings, radiator grills, centre pillar trims, window frames, cowl vent grills, fairings and lamp housings etc.

Propylene, Ammonia, Benzene, Ethylene

Table B-16: Tyre Industry


Styrene Butadiene Rubber (SBR)

Tyre tread blends for pneumatic tyres. Benzene, Ethylene, Butadiene

Polybutadiene Rubber (PBR) Tyre treads, tyre carcass and sidewalls, cycle tyres, flexible rollers etc.

Butadiene

Nitrile Butadiene Rubber (NBR)

Tyre tread blends Butadiene, Propylene, Ammonia

Ethylene Propylene Diene Monomer (EPDM)

Sidewall components, tyre flaps etc. Ethylene, Propylene

Ethylene Vinyl Acetate (EVA) light-weight EVA foam tyre Ethylene, Methanol Butyl Rubber Inner liners of tubeless tyres, tyre inner

tubes, curing bladders in tyre production etc.

Isobutylene, Isoprene

Table B-17: Textile Industry


Syn Fibres

Polyester fibres General blended fabrics and outwear such as jackets, climbing suits, parkas, quilted garments and wrinkle resistant garments.

Xylene, Methanol, Ethylene

Acrylic fibre Sweaters, socks, fleece wear, circular knit apparel, sportswear and children wear. Carpet, blankets, area rugs and upholstery

Propylene

Nylon Industrial yarn/tyre cord Tyre and industrial yarns Benzene or Xylene Polypropylene (PP) filament yarn

Socks, tights swim wear, sportswear, under garments

Propylene

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Fibre Intermediates

Acrylonitrile Used in manufacture of acrylic fibre. Propylene, Ammonia Caprolactam Used in manufacture of nylon fibre. Benzene Monoethylene glycol (MEG) Used along with PTA for the production of

polyester fibre, also used as solvent for dye application.

Ethylene

Dimethyl terephthalate (DMT) Used in the manufacture of polyester fibre p-Xylene, Methanol Purified terephthalic acid (PTA) Used in the manufacture of polyester fibre p-Xylene

Chemicals

PVA Used for textile sizing. Ethylene PVAc Used for textile sizing and non-woven

binding Ethylene, Methanol

Ethylene Glycols (MEG/DEG/TEG)

Used as a precursor to polyester fibre. Fibre humectant and dye solvent.

Ethylene

Acrylic acid Raw material for the production of acrylics Propylene Sodium carbonate Beaching buffer, wool scouring and

reactive dye treatment Sodium Chloride, Ammonia

Caustic soda Fabric mercerization, cotton scouring, bleaching, and dyeing


Acetic acid Scouring and dying of fibre. Also used as antichlor after hypochlorite bleaching.

Methanol/Ethylene

Chlorine Bleaching Salt, HCl Sulphuric acid Cellulose fibres manufacturing such as

rayon Sulphur, Oxygen and Water

Hydrochloric acid Bleaching and acid de-sizing Hydrogen, Chlorine Nitric acid Manufacturing of dyes Ammonia Ammonia Mercerising of cotton fibre. Imparting flame

resistance property to cellulose fibre. Nitrogen, Hydrogen

Urea Used as humectants for fabric, precursor to Dimethylol Dihydroxy Ethylene Urea (DMDHEU), a crease resistant chemical.

Methane, Ammonia

Detergents / surfactants Detergents / surfactants are used for cleaning of fabrics.

Ethylene, Alpha olefins

Urea formaldehyde (UF) / Phenol formaldehyde (PF) / Melamine formaldehyde (MF) Resins

Used to provide crease resistance finish and stiffness to fabric (resin formers).

Methanol, Methane, Ammonia, Methanol, Benzene

Formaldehyde Cellulose cross-linkers, precursor to formaldehyde condensates (UF/MF) which act as resin formers, precursor to Dimethylol Dihydroxy Ethylene Urea (DMDHEU), a crease resistant chemical.

Methanol

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Table B-18: Leather/Tannery Industry


Polyvinyl Chloride (PVC) Alternative to traditional leather in shoes as soles and uppers.

Ethylene , Chlorine

Polyurethane (PU) Used in the top coat of leather to strengthen it and increase water resistance.


Polyols Manufacture of polyurethane used in leather industry

Fats and Oil, Ethylene, Propylene

Acrylate esters Adhesives and coatings Propylene Sodium carbonate Leather washing Sodium Chloride, Ammonia Sodium bi-carbonate Used for tanning and stabilizing the leather Sodium Chloride, Ammonia,

Carbon Dioxide Caustic soda Used in liming process to swell the leather Sodium carbonate, calcium

hydroxide, Salt Soda ash Leather washing Sodium Chloride, Ammonia Detergents / surfactants Detergents are used in leather washing.

Surfactants are used in wetting back process (rehydration) of semi processed leather.

Ethylene, Alpha olefins

Formic acid Leather batting Methanol Sodium Formate Used in creating acidic conditions for

tanning process Sodium Hydroxide, Carbon Monoxide

Sulphuric acid Used in creating acidic conditions for tanning process

Sulphur, Oxygen and Water

Ammonium Sulphate Used in de-liming process to remove lime and make in non-alkali

Ammonia, Sulfuric Acid

Ammonium Chloride Used in de-liming process to remove lime and make in non-alkali

Ammonia, Chlorine

Citric acid Used in de-liming process Sucrose/Molasses Table B-19: Footwear Industry


Polyurethane (PU) / Thermoplastic PU (TPU)

Uppers, shanks, midsole, outsole and toe caps


Polyvinyl Chloride (PVC) Alternative to leather. Used in shoe sole, heels and injected shoes. It can also be used to make complete footwear.

Ethylene , Chlorine

Polyethylene terephthalate (PET / Polyester)

Shoe upper, insole and shoe laces Xylene, Methanol, Ethylene

Plasticizers

Dioctyl phthalate (DOP) / Diethyl hexyl phthalate (DEHP) / Diisononyl phthalate (DINP) (Phthalate Plasticizers)

As a plasticizer in plastic compounding Phthalic anhydride, 2 Ethyl Hexanoic Acid, Propylene

Adhesives

Polyurethane (PU) Wood working glue, book binder Toluene, Alcohol, Ammonia, Ethylene/propylene

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Neoprene Contact adhesive for nonporous materials. Also used for industrial adhesives.

Butadiene, Chlorine

Key Findings – End Use Industry Analysis

Table B-21 below summarizes our key findings, identifying potential opportunities on the basis of end use industry analysis. Table B-20: Ethiopia – Potential Investment Opportunity by Sector



Priority Long Term

Fertilizers Agriculture sector is well developed. But, imports of fertilizers, especially urea and MAP/DAP are significant.

Urea, MAP, DAP Ammonium Nitrate, Ammonium Sulphate, Superphosphates

Paints & Varnish Sector is growing, but still under developed. Lacks availability of key raw material.

VAM / PVA Polyols, Acrylate Esters, Epoxy resins, IPA, others

Soaps & Detergents Growing but lacks basic raw materials such as LAB.

LAB, LABSA, Caustic Soda, Sulphuric Acid, Hydrochloric Acid, Chlorine

EODs, Ethoxylates

Pharmaceuticals Still lacks manufacturing of basic bulk drugs. Producing pharma raw material will have little meaning unless sector is developed.

None Methanol, Benzene, Glycerine, Solvents, Ethylene Glycol Derivatives, etc.

Food Processing Growing, but still lacks modernisation.

Citric Acid, Sodium Citrate Other preservatives and food chemicals

Water Treatment Lacks infrastructure and basic chemicals for treatment

Caustic Soda, Chlorine, Soda Ash, Various Acids

Polyelectrolytes, EDTA, Phosphates, etc.

Plastic Processing & Packaging

Developed, but lacks vertical integration and basic raw materials.

PVC, HDPE, LLDPE, PP, PVAc, PVA

LDPE, EVA, PET/Polyester, SBR, other polymers and chemicals

Pulp & Paper Under developed Caustic Soda and Chlorine Other chemicals, adhesives and binders

Electronics & White Goods

Under developed PVC Other chemicals

Furniture Developing PVC, PVA, PVAc Other resins and chemicals Construction Developing PVC, LLDPE, HDPE, PP LDPE, PS/EPS, PVB, ABS Automotive Not developed None PE, PP, PUR, PVC, ABS,

Nylons, PS, PC, POM, PMMA, PET, ASA

Tyres Only one tyre manufacturing plant, which largely consumes natural rubber

None SBR, PBR, NBR, EPDM, EVA, Butyl Rubber

Textiles Under developed PVA, PVAc, Caustic Soda, Sulphuric Acid, Chlorine,

Synthetic fibres, fibre intermediates, and other

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Priority Long Term Ammonia textile chemicals

Leather / Tanneries Developing PVC, Caustic Soda, Soda Ash, Sodium Carbonate, Detergents, Sulphuric Acid

PU, Polyols, Acrylate Esters, Formic Acid, other chemicals.

Footwear Developing PVC PU/TPU, PET, Plasticizers and PU adhesives

Considering the status of the end use sectors in Ethiopia as well as the current import level of major chemicals and petrochemicals, there are selected products which emerge as “priority” products in terms of investment opportunity. Investing in these priority products will allow Ethiopia to pursue a trade and economic policy of import substitution as well as enable Government to nurture and develop various industrial sectors and also export marginal surplus to nearby countries in Africa.

Table B-21: Ethiopia – Priority Chemicals & Petrochemicals


Ammonia Fertilizers Textiles Water Treatment

Natural Gas

Urea/MAP/DAP Fertilizers Ammonia, phosphate Sulphuric Acid Soaps & Detergents

Fertilizers Water Treatment Pulp & Paper Textiles Leather / Tanneries

Sulphur

Caustic Soda Soaps & Detergents Water Treatment Pulp & Paper Textiles Leather / Tanneries


Chlorine / Hydrochloric Acid Water Treatment Soaps & Detergents Pulp & Paper Textiles


Polyvinyl Chloride (PVC) Construction Plastic Processing Packaging Electronics & White Goods Leather / Footwear

Ethylene, Salt (NaCl)

High Density Polyethylene (HDPE) Linear Low Density Polyethylene (LLDPE)

Construction Plastic Processing Packaging

Ethylene

Polypropylene (PP) Construction Propylene

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Plastic Processing Packaging

Vinyl Acetate Monomer (VAM) Polyvinyl Alcohol (PVA) Polyvinyl Acetate (PVAc)

Paints & Varnish Furniture Plastic Processing Packaging Textiles

Ethylene, Acetic Acid

Linear Alkyl Benzene (LAB) Soaps & Detergents Textiles

n-Paraffin, Benzene

Overall, Ethiopia should focus on producing key building blocks - ammonia, ethylene and propylene to develop its downstream value chain. Natural gas is likely to be most attractive feedstock which would enable Ethiopia to produce all three building blocks at a competitive cost. Ammonia can be produced from natural gas through a steam reforming process, where a downstream urea unit can be integrated. Ethylene can be produced from a steam cracker (using ethane or NGL feedstock derived from natural gas) or from dehydration of ethanol. While, propylene can be produced from a mixed feed cracker, which consumes natural gas and some proportion of heavier feedstocks such as naphtha or LPG (which Ethiopia will have to import) or from an on-purpose propylene production technology such as propane dehydrogenation (PDH). Section C of this report discusses cost competitiveness of various process routes for producing these key building blocks. New Investments Few select medium-to-large projects in the chemicals and allied industries are underway in Ethiopia. Details of these projects and their status are given below. Project 1: Chlor-Alkali Unit Product/Capacity: Integrated Chemical Industry Complex (50,000 ton Caustic Soda,

22,000 ton Chlorine, 46,000 ton Hydrochloric Acid, 22,000 ton Sodium Hypochlorite, 60,000 ton Polyvinyl Chloride, 1,000 ton Ethylene dichloromethane, 95,000 ton Calcium carbide and 110,000 ton Calcium Hydroxide)

Name of company: Dejena Endowment Integrated Chemical Industry Complex Location of the plant: Tigray Region Planned start-up: 2020 Capital cost: 7.2 billion Birr (0.32 billion USD) Current status: Under construction

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Project 2: Urea Production Product/Capacity: 300,000 Ton of Urea from Coal Gasification

Name of company: Chemical Industry Corporation. Fertilizer Complex

Location of the plant: Oromiya Region/Illubabour

Planned start-up: 2018

Capital cost: 11 billion Birr (0.5 billion USD)

Current status: Under construction (50%)

Project 3: Pulp and Paper Product/Capacity: 150,000 Ton of Pulp and Paper

Name of company: Tana Paper and Pulp

Location of the plant: Bahirdar

Planned start-up: 2018

Capital cost: 7 billion Birr (0.32 billion USD)

Current status: Under planning

Project 4: Fertilizers Product/Capacity: 1,200,000 Ton of NPS/NPK/ Urea fertilizers

Name of company: OCP Morocco

Location of the plant: Not yet decided (possibility Dire Dawa)

Planned start-up: 2018-20

Capital cost: Not yet decided

Current status: Under feasibility study

Apart from these projects, The Development Bank of Ethiopia (DBE) has extended US$ 342 million for various manufacturing projects in sectors such as agro processing, leather, textile, metalwork, pharmaceuticals, chemical and construction. Problems of the Industry Jacobs Consultancy has interacted with the local industries and government officials in Addis Ababa. Despite the overall good investment climate in Ethiopia, industry and trade are beleaguered with various issues. During these discussions the following problems and issues were highlighted:

• Inadequate and unreliable local supply of raw materials - low quality and high price in comparison to imports

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• Lack of consistent raw material leads to high production cost due to low “machine park” utilisation.

• High degradation rate of the process sector’s machinery and equipment which is mainly the result of long idle time of the machinery due to underutilisation of the production capacity

• Technical and technology problems – lack of latest technology

• Lack and high turnover of skilled manpower

• Financial constraints – in terms of lack of investment capital and working capital

• High banking charges (6% LC charges levied by private bankers)

• Foreign exchange availability is a major problem

• Power supply is often inconsistent and the lack of a viable back-up supply leads to significant additional downtime.

• Land acquisition for industry is a problem at a regional level

• Very complex bureaucratic process in Government offices (to get various regulatory clearances)

• Project implementation is delayed due to red tape and procedural issues

• High customs duty (5% for most items) and VAT (15%).

• FDI dividend – foreign companies cannot take dividends.

• Very high local freight cost for moving industrial raw materials and products. (for example, Potash trucking freight from Mekella to Addis Ababa (800km) is about $60/ton.

• Lack of professional business management skills.

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Achievable Markets for Ethiopia For Ethiopia, apart from the domestic market, significant opportunities exist in the African continent itself as the region is a significant importer of key petrochemicals, chemicals and fertilizers. Neighbouring countries such as Sudan, Uganda, Kenya and Tanzania are moderate to significant importers of major petrochemicals and polymers; while other key importers in the Africa region are Algeria, Egypt, Morocco, Nigeria and South Africa. Table B-22 below highlights the imports of key chemicals and petrochemicals by Ethiopia, its neighbours and other countries in the region. Table B-22: Imports of Key Chemicals & Petrochemicals by Select African Countries

Products 2014/15 Import (KTA)

Ethiopia Algeria Egypt Kenya Morocco Nigeria S. Africa Sudan Uganda Tanzania

HDPE 31 172 123 110 106 99 104 24 28 55 LD/LLD 30 111 165 42 125 155 98 7 14 15 PP 42 73 230 88 75 182 15 17 20 64 PVC 18 107 346 61 60 122 25 - 9 14 PET 13 155 37 51 52 82 67 - 12 - Ammonium Nitrate 6 3 9 6 276 - 1 1 1 33

Ammonium Sulphate 1 21 38 20 51 4 113 1 1 16

MAP 144 36 7 3 9 - 170 1 - DAP 177 - 16 - 9 48 2 - Urea 403 61 - 51 101 280 905 47 6 101 Superphosphates - 32 - - - - 25 - 12 -

Iso-cyanates 8 18 26 14 14 35 25 - 6 - PS 21 60 - 21 6 43 - - - PU 4 3 24 - 3 5 18 - - - Caustic Soda 13 25 4 26 1 50 14 11 16 35

Ethanol - - 1 15 - 104 - - - 5 Potassium Chloride - 17 18 - 112 22 381 - - -

Soda Ash 13 72 204 - 44 138 350 - 10 - Sodium Bicarbonate 2 7 25 - 12 8 17 - 1 -

Sulphuric Acid 2 11 - - 915 2 17 - 2 -

Source: UN Comtrade Furthermore, Western Europe and parts of Indian subcontinent countries will also serve as accessible markets for Ethiopia’s chemicals and petrochemical exports.

B-35


Global Chemical and Petrochemical Market Globally, the chemical and petrochemical sector contributes to almost 5% of the global GDP. Global chemical and petrochemical sector is estimated at US$3 trillion (excluding pharmaceuticals). Currently, China is the largest producer, followed by European Union and NAFTA (North American Free Trade Agreement) producers. Figure B-6 below depicts the share of major regions in the chemicals and petrochemicals industry during 2013 and 2014.

Figure B-6: Global Chemical Sales, by Region

Source: CEFIC (European Chemical Industry Council)

In the last few years, the European Union has lost its lead position to China and Rest of Asia. Even the NAFTA contribution has declined significantly. From the country perspective, lead producers are China, followed by the USA, Germany, Japan, Korea, Brazil, France, and India.

In the current economic scenario, a recession in many emerging markets, especially in China, has clearly had a major impact on sales. Hence, the industry witnessed a growth of 2.8% in 2015, slightly slower than the growth of 3.0% in 2014. It is expected that the demand growth during 2016 and 2017 will see some improvement. In the long term, the developing economies of Asia-Pacific and Africa & the Middle East will lead the growth. North America will continue to grow due to its competitive advantages from shale gas. Europe and Japan will lag behind due to long-term structural and competitiveness challenges. The slower growth in Latin America and some other emerging markets, however, is more short-term in nature – which will improve in the long run. The chemical industry in Africa still remains underdeveloped and economic growth is coming from a very low base. Nevertheless, the region is likely to witness relatively fast growth in the long term.

B-36


Local Stimuli to Market Growth Beyond the five projects listed in a previous section (New Investments, B-41) it is clear from the GTP2 documentation that there are no committed projects in the chemical sector that the government is actively driving in order to meet or exceed the GDP projections for the chemicals sector. However, Jacobs Consultancy’s market demand projections include algorithms which allow for markets to develop in line with population, prosperity shifts, import levels and the availability of feedstocks. As a result, it is possible to reasonably project that a demand for locally produced goods and materials will be present in future years even if the current demand is zero. The objectives set out in GTP2 seem largely based on the continued development of sectors that are already present in Ethiopia e.g. textiles, cement, leather goods and fertilisers. However, there seems little recognition of the presence of suitable natural resources to expand the sector much more strongly into the area of import substitution of the large volumes of commodity chemicals/plastics and goods made from them. GTP2 seems only to recognise the existence of coal and potash as natural resources (primarily for cement and fertiliser production). Recent pronouncements seem to indicate that the priority has become to export the gas as LNG to the benefit of China. We consider that there is more potential benefit to Ethiopia from the internal exploitation of gas as a chemicals feedstock which will substitute imports, add value in the country and provide major downstream employment opportunities in the processing sectors. However, even in the absence of a current programme of chemicals/petrochemicals investments coordinated with its natural resources, we can see that the government has put in place several stimuli that will create an environment where the sector can develop, even if that development remains highly dependent on foreign direct investment. These stimuli include three interconnecting initiatives:

• The industrial parks development sub-programme discussed above (Industrial Parks, page B-17);

• The petrochemical industry development sub-programme (but this is again focused only on coal/potash and ignores the greater opportunity);

• The ICT industry development sub-programme: not only will this complement the activities necessary to effect world-class operational control for the large asset base needed in chemicals/petrochemicals but will also promote better governance of business entities via modern SAP style business management software and systems.

GTP2 offers the following objectives for the chemicals sector:

1. To establish basic chemical industries and save foreign exchange by using local resources and thereby supply essential inputs for those industries which are engaged in export markets.

B-37


2. To manufacture fertilizer by using local resources and thereby satisfy the local demand.

3. To create capacity which would enable the local industries to produce soap and detergents that substitutes the imported ones.

4. To create capacity which enables local industries to manufacture pulp and paper which is aimed at import substitution?

5. To create capacity which would enable local industries to produce inputs locally which are essential for the production of plastics and therefore substitute the imported ones? (In Jacobs Consultancy’s opinion this is missing the target – if Ethiopia is to produce plastics it needs a cost effective hydrocarbon feedstock source. This can be provided by the gas fields which are currently under exploration in the South East of the country. Importing polymers and processing them into items in Ethiopia will have a job creation benefit but will do little to correct the trade imbalance. Polymers will need to be made in Ethiopia to achieve significant progress. The volume targets in GTP2 for commodity polymers are too small (60ktapa production units are generally considered to be techno-economic laggards. Jacobs Consultancy’s projections for growth and value chain configurations will provide a better economic performance for the product chain.)

6. To create capacity so that local industries manufacture natural rubber that could replace the imported one. Natural rubbers fall outside our remit. However, synthetic rubbers such as SBR could be produced from a gas driven petrochemical sector in Ethiopia and it is these that are the main requirement of the modern auto and truck tyre sector – not natural rubber.

7. To create capacity so that local industries produce non-metal construction inputs which satisfy the local demand and engage in the export market as well.

8. To manufacture coal in terms of quality and quantity so that cement and other factories would have alternative energy source. It is far from clear why Ethiopia wishes to promote the use of coal to produce power considering that it holds a significant cost advantage versus its international competitors with its access to major amounts of hydroelectric power. GTP2 seems to regard the chemicals sector as being a source of environmental impact; however, few sectors have more impact on the global ecostructure than the burning of coal. Major international development banks are currently actively avoiding investment in any scheme that has coal combustion in its scope.

In addition to these, GTP2 sets out targets which include a number of novel complementary initiatives. For example, the establishment of an Institute of Kaizen Philosophy is one move towards growing managerial skills and quality management. Developed in Japan, Kaizen is a leadership philosophy that has its own principles, working procedures and techniques. Its basic principles rest on activities that continually improve all functions and involve all employees from the highest to the middle level management and to the base line workers. Kaizen is a daily process, the purpose of which goes beyond simple productivity

B-38


improvement. It is also a process that, when done correctly, humanizes the workplace, eliminates overly hard work and teaches people how to perform experiments on their work using the scientific method and how to learn to spot and eliminate waste in business processes. Successful implementation requires the participation of workers at all levels of an organization as well as external stakeholders when applicable. Kaizen is most commonly associated with manufacturing operations in Japan, but has also been used in non-manufacturing environments such as construction and health services. Ethiopia has been implementing Kaizen ever since 2012/13 realizing its substantial benefit for industrial transformation. From 2012/13-2013/14, the institute trained 20,467 males and 12,556 females; a total of 32,950 leaders and frontline workers which have been organized into 3,590 Kaizen development teams now active in key sectors.

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Ethiopia Market Estimation To understand the market outlook and identify potential investment opportunities, we have evaluated the following value chains and selected derivatives for their market potential. The list below consists of the products which were identified as “priority” investments in previous section of this report and also includes other important products which have a long term potential in Ethiopia.

1. Ethylene chain: LDPE, LLDPE, HDPE, EVA, EO/MEG, EO/EODs, Ethylene Glycol Ethers, Ethylene Glycol Butyl Ethers, Ethanol Amines, EDTA

2. Propylene chain: PP, PO, Polyols, IPA, Glycerine, Acrylic Acid, Acrylate Esters, Oxo alcohols, Propylene Glycol, EPDM, Acetone, Acrylonitrile, EPR, 2EHA, DOP, NMP

3. Butadiene chain: Butadiene, SBR, PBR, ABS, Nitrile Rubber, Maleic Anhydride, MEK

4. Aromatics chain: Benzene, Toluene, PX, LAB, Cumene, Phenol, BPA, PC, Styrene, PS, EPS, Cyclohexane, Aniline, PET, PTA, PU, Isocyanates, Nitrobenzene, Phthalic Anhydride

5. Acetyl chain: Acetic acid, VAM, Acetic Anhydride, PVOH

6. Methanol chain: Methanol, MTBE, Formaldehyde, PF / UF Resins, MMA, pMMA

7. Ammonia chain: Urea, Ammonia, Ammonium Nitrate, Ammonium Sulphate, MAP, DAP, Superphosphate, Nitric Acid, Calcium Ammonium Nitrate

8. Chlor-alkali chain: Chlorine, Caustic Soda, EDC, VCM, PVC, Epoxy Resin, Epichlorhydrin, Melamine

9. Potash chain: Muriate of Potash, Potassium Sulphate, Potassium Magnesium Sulphate, Potassium Nitrate, Caustic Potash

10. Ethanol chain: Ethanol, Ethyl Acetate, Citric Acid

11. Sulphur chain: Sulphuric acid

12. Soda ash chain: Sodium Carbonate, Sodium Bicarbonate

13. Other products: Formic acid, Hydrochloric acid, Magnesium Chloride, Calcium Carbide

These products were selected on the basis of their prima-facie market potential in Ethiopia and neighbouring countries as well as considering the raw material availability.

B-40


For each of these products, we’ve provided an estimate of its market potential in Ethiopia, which represents its latent demand by year 2025. This is given in following section. Globally chemicals and petrochemical industry is a major contributor to GDP growth. The Government of Ethiopia has recognised the strategic importance of the sector and has taken several measures to facilitate and support its development. Under GTP2, chemical industry has been earmarked as a priority sub sector under the manufacturing industry sector in Ethiopia. Ethiopia currently imports several key raw materials and intermediates of the chemical and petrochemical industry; while only a small proportion of chemicals are produced indigenously. These imported volumes do not reflect the true potential or “latent” demand for chemicals and petrochemicals in Ethiopia, as the country also imports a significant amount of finished products – ranging from industrial products to consumer products. In order to estimate latent demand for chemicals and petrochemicals in Ethiopia, we have developed a model which considers key demand drivers for the product, trends in the end use industry, macroeconomic factors and our observations of other countries’ development. Each product in the value chain is evaluated through these factors – generating likely scenarios in terms of potential or latent demand for the product. Our methodology represents a mixed approach, which uses qualitative as well as quantitative analysis. These factors are discussed as below:

1) Current Market Trend in Ethiopia

Current local demand for the product in Ethiopia, which represents current import levels as well as local production (if any). We have also reviewed and highlighted the underlying trends affecting the local market.

2) Key Demand Drivers

This includes identification of key drivers in terms of end use sectors and a review of the sectoral trends affecting the product’s prospects in Ethiopia.

3) Impact of GTP2 / Industrial Development

We have reviewed the Growth and Transformation Plan 2 (GTP2) published by Government of Ethiopia to understand the likely impact of Government initiatives on the end use sector. Prospects for some products are more directly affected by GTP2 and the industrial development initiative. We’ve considered this while determining the likely impact on the product.

4) Impact on End Use Industries

End use industries in Ethiopia will be affected to a varying degree by the GTP2 growth initiative, which in turn will influence the product demand. Furthermore,

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availability of a product will also trigger the sector development, e.g. availability of PET chips locally will be hastening the development of the textile and yarns sector.

5) Impact of Urbanisation

With a total population of 90 million, Ethiopia is the second most populated country in Africa after Nigeria. In 2015, urbanisation stood at 19%, significantly below the sub-Saharan average of 37% according to the World Bank data. Nevertheless, Ethiopia is now urbanizing fast at about 4.1% per annum and the country’s urban population is expected to exceed 50 million by 2050. This will have a major impact on overall economy of Ethiopia, which will also have a cyclical effect on demand for urban infrastructure and major commodity products. Hence, urbanisation will provide a much needed impetus to major commodity petrochemicals and chemicals in Ethiopia, albeit to a varying degree. We have considered this in our sectoral analysis for each product.

6) Technology Changes

Technology used in production processes as well as in applications will have a major impact on a product’s prospects. For each of the products under review we have considered technology changes whilst ascertaining its future demand.

7) Effect of Competing Sectors

Competing sectors or products will have a major impact on the future prospects of a product, although this may vary by application or by regional economics. Thus, the impact of product substitution or replacement may have a negative or positive impact on its future prospects.

8) Likely Scenario

We have modelled the likely scenario considering the following basis:

o GDP Growth Multiplier

Petrochemical and chemical demand growth is closely related to GDP growth. Historical demand elasticity (demand / GDP ratio) is a reliable measure of estimate product demand in the future. For a developing country such as Ethiopia, it is expected that the demand / GDP ratio for most fast growing commodity products (e.g. PVC, PE) will be 2.0 or even above – which means the product demand is likely to grow at double the rate of economic growth or even more. As the economy matures, product markets also mature gradually, so we can expect the ratio to decline to 1.0 or even lower.

o Latent Demand Factor

Ethiopia is importing significant volume of select petrochemicals and chemicals, while some modest volumes are also produced locally. Nevertheless, this direct import or direct demand does not represent the market’s true potential or “latent

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demand”. This can be determined by considering total imports of the final commodity as well as other macroeconomic factors and sectoral issues discussed above. For example, Ethiopia is importing about 36 kta of PVC, but this does not represent the real or potential demand for PVC in the country. Total imports of PVC goods (PVC pipes, tanks, profiles, etc.) along with the growth prospects of the end use sector can be a good indicator of its latent demand. Hence, in order to quantify this latent demand, we’ve categorised each product as having a weak, moderate or strong latent demand factor. This is explained as follows:

Weak latent demand factor — means the product’s future demand will not grow over its historical growth.

Moderate latent demand factor — means the product’s future demand is likely to grow by a multiple of 1.5 to 2 times the historical growth.

Strong latent demand factor — means the product’s future demand is likely to grow by a multiple of 2 to 3 times the historical growth.

Thus our demand model considers both the qualitative factors (point # 2 to 7 above) as well as quantitative factors (point # 1 and 8 above) in order to determine the latent demand for each petrochemical and chemical product in Ethiopia. Table B-23 below summarizes our estimation of latent demand by 2025 in Ethiopia for all major products in each of the value chains.

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Table B-23: Latent Ethiopian Demand by Year 2025 by Chemical/Petrochemical Value Chain




LDPE 15 150 – 200 LLDPE 20 300 – 350 HDPE 45 500 – 600 EVA 3 70 – 80 EO/MEG - 250 – 300 EO/EODs - 50 – 100 Ethylene Glycol Ethers - < 5 Ethylene Glycol Butyl Ethers - < 5 Ethanol Amines - < 5 EDTA - < 5


PP 45 350 – 400 PO - 300 – 350 Polyols 35 300 – 350 IPA 0.10 10 – 15 Glycerine 2 15 – 20 Acrylic Acid - 20 – 25 Acrylate Ester - 20 – 25 Oxo Alcohols - 20 – 25 Propylene Glycol - 20 – 25 EPDM - 10 – 15 Acetone - 10 – 15 Acrylonitrile - < 5 EPR - < 5 2EHA - < 5 DOP 7 35 – 40 NMP - < 10


Butadiene - No direct demand SBR 0.70 70 – 80 PBR 0.040 40 – 50 Maleic Anhydride - < 2 ABS - < 2 Nitrile Rubber - < 1 MEK - < 1

Aromatic Value Chain

Benzene - No direct demand Toluene - No direct demand PX - 400 – 500 LAB 12 200 – 250

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Cumene - No direct demand Phenol - No direct demand BPA - 15 – 20 PC 0.15 15 – 20 Styrene 0.007 No direct demand PS 0.250 20 – 25 EPS 0.030 20 – 25 Cyclohexane 0.090 < 1 Aniline - 100 – 125 PET - 800 – 1000 PTA - 800 – 900 PU 3 200 – 250 Isocyanates 6 125 – 150 Nitrobenzene - 125 – 150 Phthalic Anhydride - 15 – 20

Acetyl Value Chain

Acetic Acid 0.480 80 – 100 VAM 0.230 100 – 125 Acetic Anhydride 0.023 < 1 PVA - 50 – 60

Methanol Value Chain

MTBE - 30 – 35 Formaldehyde 0.80 80 – 100 PF / UF Resins 6 80 – 100 MMA - 5 – 10 pMMA - 5 – 10

Ammonia Value Chain

Urea 400 1200 – 1500 Ammonium Nitrate 8 40 – 50 Ammonium Sulphate 5 40 – 50 MAP 145 300 – 400 DAP 180 350 - 450 Superphosphate - < 5 Nitric Acid 5 150 – 200 Calcium Ammonium Nitrate - < 5 Melamine - 20 – 25


Sodium Hypochlorite - 8 – 10 Chlorine - 200 – 250 Caustic Soda 145 300 – 350 EDC - 300 – 400 VCM - 200 – 250

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PVC 36 250 – 350 Epoxy Resin - 20 – 25 Epichlorhydrin - 18 – 20

Potash Value Chain

Muraite of Potash 0.26 3 – 5 Potassium Sulphate 1.7 20 – 25 Potassium Magnesium Sulphate - - Potassium Nitrate 1.5 18 – 20 Caustic Potash 2.7 20 – 25

Ethanol Value Chain

Ethanol 10 50 – 60 Ethyl Acetate - 5 – 10 Citric Acid - < 5

Sulphur Value Chain

Sulphuric Acid 5 50 – 60


Sodium Carbonate 30 500 – 600 Sodium Bicarbonate 2 20 – 25

Other Products

Formic Acid 2 15 – 20 Hydrochloric Acid 2 12 – 15 Magnesium Chloride 13 30 – 35 Calcium Carbide 2 90 – 100

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Petrochemicals Market Outlook Each of the products in the identified value chains are now further evaluated for the following market parameters:

1. Demand – Global, regional and Ethiopia current and latent demand. 2. Supply – Global, regional and Ethiopia supply, and average global plant utilisation 3. Outlook – Global and regional market outlook 4. Long term growth rates – Global and regional demand growth rates 5. Remarks – includes any additional critical information concerning the product

market. This also includes import data for Ethiopia, neighbouring countries (Eritrea, Kenya, Somalia, South Sudan, Sudan and Uganda) and other major African countries (Algeria, Egypt, Morocco, Nigeria, S. Africa, and Tanzania). The market outlook for key petrochemical products in each of these value chains is given in the following section.

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Table B-24: Ethylene Chain Market Outlook

Sr. No Product Demand

(Current 2015, Latent 2025)

Supply 2015 Outlook Long Term

Growth Rates Remarks

1. Ethylene Global – 137.8 million tons Africa – 1.1 million tons Ethiopia – Notional demand through PE (around 75 kta)

Global – 175.1 million tons (industry operating rate 79%) Africa – 2 million tons Crackers located in Africa: in Egypt, Algeria, Nigeria and South Africa. No capacity in Ethiopia Asia accounts for 38% of the global capacity

Global - Moderate Developed regions - Poor Growth driven by PE demand. Asia, especially China, will lead the demand. Africa – Strong

Global (3.2%) Asia (4.1%) Middle East (3.2%) Africa (6.6%) C&E. Europe (5.0%) W. Europe (0.9%) Latin America (4.9%) N. America (1.1%)

Demand growth expected to slow down with slowdown in the Chinese economy. Supply expected to increase in China, the US and Saudi Arabia All new ethylene plants in the US to be based on shale gas derived ethane. New ethylene supply will be used for the production of polyethylene, which in turn will be exported to China and the Latin American countries.

2. LDPE (Low Density Polyethylene)

Global – 17.9 million tons (Asia accounts for 35%) Africa – 475 kta Ethiopia (current demand) – 15 kta Ethiopia (latent demand) – 150 to 200 kta Declining consumption in developed markets.

Global – 25.4 million tons (industry operating rate 70%) Africa – 270 kta No capacity in Ethiopia Algeria, Egypt, Tunisia and South Africa are the major importers. About 30% of the capacity located in Asia.

Overall: Slow Africa – Moderate Ethiopia – Moderate LDPE continues to be substituted by LLDPE in many applications (esp. film).

Global (0.6%) Asia (1.9%) N. America (-0.6%) W. Europe (-2.7%) Africa (1.7%) Middle East (0.8%) C&E Europe (-0.1%)

Some capacities in developed countries may shut down in future. New plants planned in ME, Asia, and Eastern Europe. Differentiation through copolymers (e.g. EVA) or compounding (wire and cable) Africa’s Imports Ethiopia = 15 kta Neighbouring Countries = 25 kta Africa major = 310 kta

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3. LLDPE (Linear Low Density Polyethylene)

Global – 26.5 million tons Africa – 642 kta Ethiopia (current demand) – 20 kta Ethiopia (latent demand) – 300 to 350 kta Asia accounts for 46% of the global demand

Global –31.2 million tons (industry operating rate 85%) Africa – 430 kta No capacity in Ethiopia Algeria, Egypt, Tunisia and South Africa are the major importers. Asian capacity (40%)

Overall: Moderate Africa – Strong Ethiopia – Moderate Replacing LDPE in many applications (esp.film)

Global (3.9%) Asia (4%) N. America (1.4%) W. Europe (3%) Africa (4.3%) Middle East (4.8%) Eastern Europe (9.9%)

The fastest growing polyolefin. Good prospects for differentiated PE. Differentiation possible through hexene / octene co-monomer or ultra low density plastomers. Also through metallocene catalysts Africa’s Imports Ethiopia = 20 kta Neighbouring Countries = 30 kta Africa major = 375 kta.

4. HDPE (High Density Polyethylene)

Global – 37.8 million tons Africa – 1402 kta Ethiopia (current demand) – 45 kta Ethiopia (latent demand) – 500 to 600 kta Asian demand (38%).

Global – 49.5 million tons (industry operating rate 76%) Africa – 665 kta No capacity in Ethiopia Egypt, Algeria, Nigeria, South Africa and Morocco are major importers. Asian capacity (32%)

Overall: Moderate Africa – Strong Ethiopia – Strong

Global (3.6%) Asia (4.3%) Africa (5.0%) N. America (1.5%) W. Europe (1.5%)

Largest volume polyethylene. Bimodal HDPE is the key differentiator (especially when compounded for pressure pipe) Africa’s Imports Ethiopia = 45 kta Neighbouring Countries = 145 kta Africa major = 690 kta

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5. EVA (Ethylene Vinyl Acetate)

3.8 million tons Major demand in Asia (~ 40%). Ethiopia (latent demand) – 70 to 80 kta Demand as Photovoltaic encapsulant is likely to drive future growth.

6.7 million tons (industry operating rate 57%)

Overall: Moderate Global (3.0%) Asia is expected to grow at higher rate compared to developed economies

High growth in EVA for shoe soles in Asia and in solar panel encapsulation EVA copolymer with High %VA content is witnessing highest growth rate.

5. EO (Ethylene Oxide)

Global – 28.5 million tons Africa – No direct demand. Asian demand (46%). Major (64%) demand from ethylene glycols.

Global – 32.5 million tons (industry operating rate 88%) Africa – No production Asian capacity (46%)

Overall: Strong Africa – Weak Ethiopia – Weak EO production in W. Europe is likely to remain stagnant, due to overcapacity in MEG.

Global (4.3%) Asia (5%) W. Europe (0.8%) N. America (3%) Middle East (4.5%) Eastern Europe (4.9%)

Most EO producers are vertically integrated to EO derivatives. EO producers often ‘swing’ their capacities to produce more EODs than MEG for better returns. MEG plants many times get only left over EO. International trade in EO is negligible due to its hazardous nature.

6. MEG (Mono ethylene Glycol)

Global – 27 million tons Africa – 200 kta Ethiopia (current demand) – 28 tons Ethiopia (latent demand) – 250 to 300 kta Major demand from polyester segment (88%). About 74% of the total demand is from Asia.

Global – 32.7 million tons (industry operating rate 83%) Africa – No capacity South Africa is the largest importer. Asia accounts for over 51% of the total capacity.

Global – Strong Africa – Strong Ethiopia - Weak Asia to continue to dominate MEG market due to strong demand. Growth driven by PET demand from China.

Global (4.4%) Asia (4.8%) N. America (1.6%) Eastern Europe (5.5%) W. Europe (0.9%) Africa (3.4%) Middle East (3.6%)

MEG supplies are constrained by EO availability as EO producers often 'swing' their capacities to produce more EODs than MEG for better returns. Ethylene cost is critical as it constitutes over 60% of cost in MEG. Africa’s Imports Ethiopia = 28 tons Neighbouring Countries = 1 kta Africa major = 73 kta

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7. EODs (Ethylene Oxide Derivatives)

Global - 9.5 million tons Africa – 100 kta Ethiopia (latent demand) – 50 to 100 kta Ethoxylates and Ethanolamines constitute 71% of total EOD demand.

Global – 14.5 million tons (industry operating rate 66%) No production in Africa

Overall: Strong

Global (4.5-5%) Market for ethoxylates is regional and fragmented due to presence of many non-integrated producers. Africa’s Imports Ethiopia = 80 tons Neighbouring Countries = None Africa major = 3 kta

8. Ethylene Glycol Ethers (EGEs / E-Series)

1.10 million tonnes Ethiopia (latent demand) – < 5 kta Major trade routes are from the USA and Western Europe to Asian countries. EGBE (Butyl derivative) is over 73% of EGE demand.

1.50 million tons (Industry operating rate 73%) US largest producer and exporter of E-series glycol ethers.

Overall: Moderate Growth of water-based surface coatings as replacements for solvent-based coatings drives the markets

Global E-series glycol ether (3.5%)

Large proportion is used in paints and coating Industry E-Series Applications Split: Paints & Coatings: 53% Household Cleaners: 15% Intermediate (for EB Acetate): 7% Electronics: 4% Misc Use: 21%

9. Ethylene Glycol Butyl Ether (EGBE)

0.80 million tonnes Ethiopia (latent demand) – < 5 kta NA and WE markets are matured. Demand driven mainly by China/Asia.

1.1 million tons (Industry operating rate 73%)

Overall: Moderate

Global EGBE (4.3%)

Major applications in industrial and consumer products industries, particularly in paints, coatings and household cleaners.

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10. EOA (Ethanol Amine)

2.1 million tons (Global) Ethiopia (latent demand) – < 5 kta Uses: Herbicide (33%), Surfactants (23%), Ethylenediamines (15%), Gas purification (9%). Grades: MEA (40%), DEA (35%), TEA (25%).

2.5 million tons (Global) (Industry operating rate 84%)

Overall: Strong Oversupply till 2017.

Global (4.0%) EE/FSU (2.8%) WE (1.5%) USA (2%) Asia (5.5%)

All 3 grades are made in varying proportions and the plant production mix varies from 25% to 75% MEA with varying DEA and TEA proportions.

11. Ethylenediaminetetraacetic acid (EDTA)

Global: 120 kta Ethiopia (latent demand) – < 1 kta Mainly used as chelating agent in detergents and water treatment chemicals

Global: 180 kta (Industry operating rate 67%)

Global: Weak Global (1%) Demand from detergent, cleaning formulations and water treatment is likely to remain steady.

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Table B-25: Propylene Chain Market Outlook





1. Propylene Global: 89.1 million tons Africa: 1.4 million tons Ethiopia: No direct demand Major (67%) demand from PP.

Global: 117.4 million tons (industry operating rate 76%) Africa: 1.7 million tons African supply mainly from S. Africa, Egypt, and Nigeria. Naphtha based steam crackers are the major source for propylene.

Global: Moderate Africa: Strong Asia: Moderate W. Europe: Slow N. America: Slow

Global (3.0%) Africa (6.4%) Asia (3.7%) W. Europe (0.3%) N. America (1.0%)

Increasing trend for on-purpose production technologies such as PDH and metathesis. This is as a result of the olefin industry focusing increasingly on ethane/shale gas based cracker developments to produce ethylene. Unlike the older naphtha crackers these produce little or no propylene. Continued growth in derivatives such as PP has encouraged development of ‘on purpose propylene’ technologies.

2. PP (Polypropylene)

Global: 59.5 million tons Africa: 1.3 million tons Ethiopia (current demand) : 70 kta Ethiopia (latent demand) – 350 to 400 kta Demand in W. Europe declined in recent years, however for US it will recover.

75.6 million tons (industry operating rate 79%) Africa: 1.4 kta Africa supply from in S. Africa, Nigeria and Egypt. Asia will lead the supply position. Propylene supply critical.

Global: Moderate Africa: Strong Asia will dominate the future demand. Africa has second highest demand growth rate.

Global (3.1%) Africa (3.7) Asia (3.9%) N. America (0.6%) W. Europe (0.4%)

Vertical integration with propylene is important for cost competitiveness. Auto industry has been a major driver through intermaterial competition

PDH/Propylene route may be competitive, compared to naphtha based propylene route. Africa’s Imports Ethiopia = 70 kta Neighbouring Countries= 117 kta Africa major = 658 kta

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3. PO (Propylene Oxide)

Global: 8.8 million Tons Negligible demand in Africa. Ethiopia (latent demand) – 300 to 350 kta Major (63%) demand from (PU) polyols.

Global: 10.3 million tons (industry operating rate 85%) No production in Africa. New PO capacities coming up in Asia, Europe and US.

Global: Moderate Fastest growth expected in Asia, with China growing at 4.8%.

Global (3.4%) Asia (4.6%) N. America (1.2%) W. Europe (0.4%)

Need to form JV for PO technology.

Key drivers: automotive, housing and construction sectors. No Africa Imports

4. Polyols

6.50 mill. tons (Global) Ethiopia (latent demand) – 300 to 350 kta Major (84%) demand from flexible and rigid foam applications.

9.15 mill. tons (Global) (Industry operating rate 71%)

Overall: High Global oversupply till 2018/19.

Global (4.5%) EE/FSU (3.8%) WE (2.4%) Asia (6.0%)

Specific performance requirement is needed for specific applications; and hence providing technical support is essential.

5. IPA (Iso Propyl Alcohol)

Global: 2.2 million tons Africa = 20 kta Ethiopia (current demand): 0.2 kta Ethiopia (latent demand) – 10 to15 kta Over 63% of IPA is used as solvent.

N. America, W. Europe and China are the key demand regions.

Global: 3.0 million tons (industry operating rate 73%) Over 57% of total production is based in US, W. Europe and Japan. New IPA capacities are planned in Asia

Global: Slow Market is oversupplied and driven by solvent, pharmaceutical, ink and coating industries

Global (1.9%)

Industrial grade IPA shares 77% of total IPA demand Africa’s Imports Ethiopia = 130 tons Neighbouring Countries = 3 kta Africa major = 14 kta

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6. Glycerine (Glycerol)

Global – 2.4 million tons Ethiopia (latent demand) – 15 to 20 kta The market has doubled in the last five years Personal care industry is the largest consumer of glycerine accounting for more than one-third of the consumption.

Global – 4.5 million tons (Industry operating rate 53%)

Global: Moderate Global 4.5% Supply is dependent on availability of palm oil. Few plants, based on propylene route, exist. No Africa Imports

7. AA (Acrylic Acid)

Global – 5.3 million tons Asia – 2.8 million tons Africa – 55 kta Ethiopia (latent demand) – 20 to 25 kta Major demand in glacial and acrylate esters. Asia (53% demand)

Global – 8.2 million tons (Industry operating rate 65%) Asia – 5 million tons Africa – 80 kta Major (60%) supply from Asia. New capacities mostly in Asia.

Overall: Moderate Growth driven by SAP & acrylates.


Integration with AE / SAP, as AA is difficult to store and ship (hence relatively small volumes are traded). Back integration for propylene also important Key issue is to manage consistent margins across the acrylic chain, hence high degree of vertical integration is critical. No Significant Africa Imports

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8. AE (Acrylate Esters)

Global – 4.2 million tons Asia – 2.1 million tons Africa – 70 kta Ethiopia (latent demand) – 20 to 25 kta Major demand: butyl acrylate (60%) Asia (50% demand)

Global - 5 million tons (Industry operating rate 84%) Asia – 2.6 million tons Africa – 123 kta

Overall: moderate Growth driven by coatings and adhesive segment.

Global (4.1%) Asia (5.2%) N. America (1.7%) W. Europe (2%)

Integration with AA important for cost competitiveness. International trade in AE significant compared to AA. No Significant Africa Imports

9. Oxo alcohols (n-Butanol, 2-Ethyl Hexanol)

Global: 7.5 million tons Asia: 4.3 million tons Middle East and Africa: 316 kta Ethiopia (latent demand) – 20 to 25 kta 2-Ethyl hexanol: key usage in plasticizers. n-Butanol: major application in acrylate esters. Region-wise market evenly spread.

Global: 10.5 million tons (Industry operating rate 71%) Asia: 6.2 million tons Middle East and Africa: 600 kta Around 60% capacities in Asia, some capacities closed in Europe and North America.

Overall: Moderate Market likely to remain in balance, growing moderately.

Global (3.5%) Asia (4.7%) N. America (0.3%) Middle East and Africa (3.2%)

Many producers have swing flexibility to produce 2EH or butanols. No Significant Africa Imports

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10.

PG (Propylene Glycol)

2.00 mill. tons (Global) Ethiopia (latent demand) – 20 to 25 kta Over 25% demand as UPR. Also used as coolant & anti-freeze.

2.98 mill. tons (Global) (Industry operating rate 67%)


Global (4.0%) EE/FSU (4.0%) WE (2.2%) Asia (5.5%)

Largely produced by Dow and LyondellBasell, together 50% market share. Competing bio-based processes (glucose-sorbitol and bio-glycerine) have been developed. No Significant Africa Imports

11. EPDM (Ethylene Propylene Diene Monomer)

1.30 million tons Ethiopia (latent demand) – 10 to 15 kta Automotive market is the largest consumer (40%). Other uses include construction, and as a modifier in plastics.


Overall: Moderate Oversupply till 2019.

Global (3.5%) EE/FSU (3.2%) W. Europe (1.3%) Asia (5.1%) N. America (1.1%)

EPDM is the third most used synthetic rubber after SBR and BR. Typically produced by a solution or suspension process using a Ziegler-Natta catalyst. No Significant Africa Imports

12. Acetone 6.5 million tons Ethiopia (latent demand) – 10 to 15 kta Asia: 48% of the global demand. Major demand from MMA and BPA nearly (29%).

8.7 million tons (Industry operating rate 74%) Over 95% of acetone produced as phenol co-product.

Overall: Moderate Global oversupply till 2018/19

Global (1.8%) EE/FSU (2.0%) WE (0.7%) Asia (2.8%) N. America (1.0%)

Demand growth likely to remain slower than Phenol. No Significant Africa Imports

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13. ACN (Acrylonitrile)

5.4 million tons Ethiopia (latent demand) – < 5 kta Asia is largest market (53%). Largest outlet is ABS/SAN (35%), followed by Acrylic Fibres at about 33%.


Overall: Slow Demand from ABS/SAN segment has exceed the Acrylic Fibre market.

Global (1.4%) EE/FSU (1.0%) W. Europe (0.7%) Asia (1.8%) N. America (1.2%)

ACN production has shifted from North America and Western Europe to China and parts of Asia. No Significant Africa Imports

14. EPR (Ethylene Propylene Rubber)

1.50 million tons Ethiopia (latent demand) – < 5 kta

1.80 million tons (Industry operating rate 83%) N. America (36%) W. Europe (30%) Asia (29%) RoW (5%)

Overall: Moderate

Global (3.0%)

Major applications in automobile components, polymer modification and waterproof roll. No Significant Africa Imports

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15. 2 Ethyl Hexanoic Acid

Global – 310 kta Ethiopia (latent demand) – < 5 kta Siccative in paints, and PVB films are the largest end use

Global – 450 kta (Industry operating rate 69%) Western Europe – 200 kta

Overall: Moderate

Global (3.0%) North America (2%) Western Europe (2%) Asia (6%)

Demand from medical intermediates, antibiotics, flavours and fragrances industries to witness strong growth No Significant Africa Imports

16. Di Octyl Phthalate

Global – 3.4 million tons Ethiopia (latent demand) – 35 to 40 kta Asia pacific accounts for more than 75% of the demand

Global –5 million tons Asia pacific accounts for more than 75% of the supply

Overall: Moderate Global 4.5% DOTP is fast replacing traditional phthalate based plasticizers like DOP in the developed regions of Western Europe and North America. No Significant Africa Imports

17. N-Methyl Pyrrolidone

Global – 230 kta Ethiopia (latent demand) – < 10 kta Solvents, Pharma, Lithium Batteries

Global – 400 kta Overall: Strong Global – 5.5%

Demand for lithium batteries in electronic items such as phones, tablets and computers to drive NMP demand. No Significant Africa Imports

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Table B-26: C4s Chain Market Outlook





1. Butadiene Global: 12.6 million tons Asia: 7.2 million tons Africa: 50 kta Ethiopia (current demand): No demand Major (28%) demand is in Butadiene rubber. Asia accounts for 58% of demand.

Global: 15.4 million tons (industry operating rate 82%) Asia: 8.3 million tons No production in Ethiopia Asia has largest share (54%) in existing supply. Most new capacities in China / Asia.

Overall: Moderate Future growth will be driven by China and North East Asian countries. Historically tight Asian market has become more balanced.

Global (3.0%) ME/Africa (2.2 %) Asia (4.0%) N. America (0.1%) W. Europe (0.61%)

Tyre and automobile industries have a major impact on butadiene markets (via synthetic rubbers). Butadiene is extracted from crude C4 produced in crackers; hence its supply is not on-purpose and is largely dependent on ethylene production. If ethylene demand decreases, butadiene supply would be tight. Africa’s Imports Ethiopia = 40 tons Neighbouring Countries = Nil Africa major = 6 kta

2. SBR Synthetic rubbers (Styrene Butadiene Rubber)

Global: 6.0 million tons Asia: 3.2 million tons Africa: 45 kta Ethiopia (current demand): 0.7 kta Ethiopia (latent demand) – 70 – 80 kta About 72% of SBR is being consumed in tyre / tyre products. Asian demand is almost half (52%) of global demand.

Global: 7.5 million tons (industry operating rate 80%) Asia : 3.7 million tons ME : 0.12 million tons Rubber plants have moved from US to China/Asia, due to shift in automotive industry.

Overall: Moderate Future growth driven by China / Asia as significant new investments is planned in rubber / tyre plants.

Global (2.8%) ME/ Africa (3.5%) Asia (4.0%) N America (1.7%) W Europe (1.5%)

Emulsion SBR is a low cost commodity material, while the expensive solution SBR offers performance benefits and gains share as tyre performance requirements increase. As butadiene is costly to transport, most synthetic rubber plants are located close to butadiene extraction plants. Interregional trade of butadiene is small due to this reason. Africa’s Imports Ethiopia = 710 tons Neighbouring Countries = 2 kta Africa major = 32 kta

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3. PBR (Poly butadiene rubber)

Global: 3.7 million tons Africa demand around 100kta. Ethiopia negligible demand. Ethiopia (latent demand) – 40 to 50 kta More than 70% demand from tyres segment.

Global: 4.4 million tons (industry operating rate 84%) Asia has about 70% of world’s total capacity.

Global: Strong Asia: Strong W. Europe: Slow

Global (4.2%) Asia (5.5%) W. Europe (1.1%) China (5.7%)

Growing mobility demand in developing countries, ultimately increasing production of tyres. Africa’s Imports Ethiopia = 43 tons Neighbouring Countries = 0.7 kta Africa major = 6 kta

4. MAN (Maleic Anhydride)

Global: 1.9 million tons UPR account for over 50% of the total demand Asia: 1.0 million tons Africa: 18 kta Ethiopia: Negligible Ethiopia (latent demand) – < 2 kta

Global: 2.7 million tons (industry operating rate 70%) Asia : 2.3 million tons Africa: 14 kta

Overall: Moderate UPR used for fibre reinforced plastics will be the key growth driver

Global (3.0%) Africa ( 8.5% ) Asia (4.0%) N America (1.5%) W Europe (0.8%)

UPR is expected to play a key role in the growth of maleic anhydride market owing to increasing demand from fibre reinforced plastics segment. UPR is projected to be the fastest-growing application for MAN up till 2025. Africa’s Imports Ethiopia = Negligible Neighbouring Countries = Nil Africa major = 4 kta

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5. ABS (Acrylonitrile Butadiene Styrene)

10.3 million tons Growth driven by Asia. Ethiopia (latent demand) – < 2 kta

12.8 million tons (Industry operating rate 80%) Asia represents around 78% of global ABS capacity. China is the largest producer of ABS with about 34% global capacity.

Overall: Moderate Growth in demand due to increased focus on weight reduction in automobiles in order to have better fuel economy

Global (2.8%) Asia (3.5%)

Most markets for ABS are mature, but it continues to find new applications. Capacity build-up in China will create substantial downward pressure on operating rates in the rest of the world. No significant Africa imports

5. NBR (Nitrile Rubber)

0.58 million tons China is the largest consumer of NBR. Ethiopia (latent demand) – < 1 kta

0.94 million tons (Industry operating rate 62%) Asia comprises around 63% of NBR global supply mainly from China about 22%.

Overall: Moderate Major growth will be seen in East Asian countries for nitrile latex.

Global (3.0%)

The demand for NBR has soared in past few years and a large share of this increase is attributed to the production of NBR (nitrile) gloves. Roughly 60% of the material used to make nitrile gloves is butadiene. No significant Africa imports

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16. Methyl Ethyl Ketone

1.26 million tons Ethiopia (latent demand) – < 1 kta

1.52 million tons (Industry operating rate 82%) Coating solvents remains the major consumer of MEK

Overall: Moderate Global (3.0%)

It is widely used as an industrial solvent and chemical intermediate. Rising demand from paints and coatings and printing inks are the key factors for the growth in demand for MEK. No significant Africa imports

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Table B-27: Aromatics Chain Market Outlook





1. Benzene Global - 43.7 million tons Africa – 138 kta Ethiopia (current demand) – 108 tons Asia: 48.6% of the total demand.

Styrene is the major end-use segment with a share of 51%

Global - 62 million tons (industry operating rate 70%) Africa – 185 kta Ethiopia – No production Refinery and Pygas account for about 73% of the total benzene production globally

Overall: Moderate Mature market

Global (2.0%) Asia (2.6%) Africa (5.3%) W. Europe (1.1%) N. America (0.6%) Middle East (1.1%)

Primary production is not on-purpose and is largely dependent on gasoline and ethylene production. However, since benzene demand has increased substantially in the past decade whilst gasoline demand has dwindled, aromatic complexes have been set up, dedicated to benzene production. Africa’s Imports Ethiopia = 37 tons Neighbouring Countries= 220 tons Africa major = 580 tons

2. Toluene Global - 21.9 million tons Africa – 150 kta Ethiopia (current demand) – 2.3 kta > 50% is used for the manufacture of benzene and xylenes.

Global – 33.2 million tons (industry operating rate 66%) Africa – 342 kta Ethiopia – No production

Overall: Moderate Benzene production is likely to be the key growth application.

Global (2.7%) Asia (3.4%) Africa (3.7%) W. Europe (0.4%) N. America (1.9%) Middle East (2.4%)

Africa’s Imports Ethiopia = 2.3 kta Neighbouring Countries= 3 kta Africa major = 32 kta

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3. PX (Paraxylene)

Global – 39.2 million tons Africa – No demand Ethiopia (latent demand) – 400 to 500 kta 98% demand is from the polyester chain. Asia constitutes 80% of PX demand. Major consumer is China.

Global – 49.8 million tons (industry operating rate 79%) Africa – No production Middle East and China are driving capacity expansion

Overall: Strong China will remain a major driver. The Middle East will emerge as major exporter. China to remain a major importer

Global (4.4%) Asia (4.9%) N. America (0.3%) W. Europe (1%) Middle East (4.8%)

Feedstock availability and access to large customers is critical. Major PX sales are made directly between producer and consumer on contract basis. No Africa imports

4. LAB (Linear alkyl benzene)

Global - 3.5 million tons Africa – 185 kta Ethiopia (current demand) – 12 kta Ethiopia (latent demand) – 200 to 250 kta More than 80% is used for household detergents. India, China and Indonesia have about 40% of world demand.

4.1 million tons (industry operating rate 85%) Nearly 50% of capacity is in Asia.

Overall: Moderate Africa: Moderate

Global (2.5%) Africa (3.0%) Asia (3.5%) Moderate growth.

LAB consumption is likely to decline in the future due to growing market for alcohol based surfactants Africa’s Imports Ethiopia = 12 kta Neighbouring Countries= 12 kta Africa major = 62 kta

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5. Cumene Global – 12.1 million tons Africa – 33 kta Ethiopia – No demand Asia accounts for 55% the total demand.

Global – 17.1 million tons (industry operating rate 71%) Africa – No production New capacities will mainly be in Asia.

Overall: Slow

Global (2.2%) Asia (2.9%) N. America (-0.1%) W Europe (0.1%) Middle East and Africa (4.5%)

Dependent on the phenol and acetone market growth rates. No Africa imports.

6. Phenol Global – 9.3 million tons Africa – 33 kta Ethiopia – No demand Asia accounts for 55% of the total demand.

Global – 12.6 million tons (industry operating rate 74%) Africa – 40 kta Ethiopia – No production Nearly 44% of the total capacity is installed in Asia.

Overall: Slow Relative demand growth is much faster in Asia.

Global (2.2%) Asia (3.1%) N. America (-0.6%) W. Europe (0.3%) Middle East and Africa (2.9%)

Acetone is a by-product made during phenol production, Acetone market is not growing in pace with the phenol market which is likely to result in an oversupply of acetone in the future. Phenol/acetone plants are usually integrated with cumene plants. Africa’s Imports Ethiopia = Nil Neighbouring Countries= Nil Africa major = 1.5 kta

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7. BPA (Bisphenol A)

Global – 6 million tons Africa – >1 kta Ethiopia (current demand) – No demand Ethiopia (latent demand) – 15 to 20 kta > 90% of demand is for polycarbonate and epoxy resins.

Global – 7.2 million tons (industry operating rate 73%) Africa - No production 59% of the total BPA capacity is in Asia.

Overall: Moderate

Global (2.6%) Asia (3.3%) North America (0.6%) W. Europe (0.7%) Eastern Europe (3.6%) Middle East and Africa (3.8%) Weak outlook for Africa. Virtually non-existent market for BPA Demand to remain stagnant in North America and Western Europe.

Dependent on the polycarbonate and epoxy resins market. No Africa imports.

8. PC (Polycarbonate)

Global – 4.3 million tons Africa – 18-20 kta Ethiopia (current demand) – 152 tons Ethiopia (latent demand) – 15 to 20 kta > 41% demand is from China. Electrical, electronic, and optical applications dominate.

Global – 5 million tons (industry operating rate 86%) Africa – No production 76% of the total capacity is located in Asia and Western Europe.

Overall: Slow Growth depends on the consumer electrical and electronics and automotive markets.

Global (2.1%) Asia (2.5%) North America (-0.4%) W. Europe (-0.3%) Eastern Europe (3.7%) Middle East and Africa (3.3%) Asia especially China will lead the demand growth.

Cumene-Phenol-BPA-PC vertical integration critical for competitiveness. Access to technology and market expertise via JV is the key. Africa’s Imports Ethiopia = 115 tons Neighbouring Countries= 200 tons Africa major = 19 kta

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9. Styrene Global – 27.8 million tons Africa – 46 kta Ethiopia (current demand) – 7 tons Asia accounts for over 62% of the total demand.

Global – 34.4 million tons (industry operating rate 81%) Africa – No production 52% of the total capacity is located in Asia.

Overall: Slow Demand in developed regions is likely to decline

Global (2.1%) Asia (2.8%) W. Europe (-1%) N. America (-1.1%) Latin America (2.3%) Middle East (2.5%) Africa (7.8%)

Dependent on the growth of the polystyrene market (driven by packaging and construction). Africa’s Imports Ethiopia = 7 tons Neighbouring Countries= 350 tons Africa major = 49 kta

10. PS (Polystyrene)

Global – 10.7 million tons Africa – 185 kta Ethiopia (current demand) – 250 tons Ethiopia (latent demand) – 20 to 25 kta 37% of the total demand is from China.

Global – 15.7 million tons (industry operating rate 68%) Africa – 200 kta Ethiopia – No production China accounts for about 33% of the global capacity.

Overall: Slow China is likely to be the future growth driver.

Global (1.3%) N. America (-1%) Asia (2.2%) W. Europe (-1.3%) Eastern Europe (1.3%) Latin America (1.5%) Middle East (2.3%) Africa (3%)

Polystyrene accounts for 67% of the global polystyrene demand Demand is declining in the developed regions such as North America and Western Europe. Africa’s Imports Ethiopia = 120 tons Neighbouring Countries= 3.3 kta Africa major = 152 tons

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11. EPS (Expandable Polystyrene)

Global – 5.4 million tons Africa – 50 kta Ethiopia (current demand) – 30 tons Ethiopia (latent demand) – 20 to 25 kta

Global – 10.1 million tons (industry operating rate 53%) Africa – No production

Overall: Moderate

Global (3.3%) N. America (0.4%) Asia (4%) W. Europe (1.3%) Eastern Europe (3.2%) Latin America (3.7%) Middle East (4.2%) Africa (5.1%)

Expandable PS (EPS) is growing in Europe due to insulation demand. This is likely to pick up in other regions too which should address part of the global capacity overhang. Africa’s Imports Ethiopia = 7 tons Neighbouring Countries= 90 tons Africa major = 51 tons

12. Cyclohexane Global - 5.3 mill. tons Africa – 5 kta Ethiopia (current demand) – 90 tons Ethiopia (latent demand) – < 1 kta Almost all cyclohexane is used to produce adipic acid and caprolactam for polyamide production

Global - 6.5 million tons (industry operating rate 82%) Africa - No production

Overall: Slow Global (2.2%) China (4%) North America (No growth)

Caprolactam accounts for more than 60% of the total consumption. Africa’s Imports Ethiopia = 90 tons Neighbouring Countries= Nil Africa major = 5 kta

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13. Aniline Global - 5.9 million ton Negligible demand in Africa Ethiopia (latent demand) – 100 to 125 kta MDI production accounts for over 76% of the global demand.

Global – 7.5 million ton (industry operating rate 79%) No production in Africa Asia accounts for around half of the capacity.

Overall : Moderate Dependent on the Polyurethanes demand. China and Asia are likely to push the demand.

Global (3.8%) Asia (5%)

Most Aniline producers are integrated with MDI production. No Africa Imports

14. PET (Polyethylene Terephthalate)

Global – 20 million tons Africa – 700 kta Ethiopia (current demand) – 18 kta Ethiopia (latent demand) – 800 to 1000 kta Synthetic fibres are largest outlet, and bottle resin production – next largest (and fastest growing). China/Asia largest volume growth.

Global – 32 million tons (industry operating rate 62.5%) Ethiopia –No production Major capacities in Asia. China dominates both in terms of consumption as well as supply.

Overall: Moderate Global (3.7%) North America (0.5%) W. Europe (0.5%) Asia (5.0%) Africa (7%)

Strong growth in demand combined with low barriers to entry has attracted capacity, especially in Asia. Hence, the operating rate is currently poor with a major overhang from fibre grade plants Capital costs of PET plants are relatively low while the technology is readily available Africa’s Imports Ethiopia = 18 kta Neighbouring Countries= 54 kta Africa major = 440 kta

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15. PTA (Purified Terephthalic Acid)

Global – 62 million tons Ethiopia (latent demand) – 800 to 900 kta China is the largest consumer accounting for more than half of the consumption PET is the largest consuming market for PTA

Global – 85 million tons (Industry operating rate 73%)

Global: Moderate Global: (3.7%) China suffering from overcapacity but still a net importer. It is likely to become net exporter in the next few years. The global demand growth is likely to slowdown in the future due to slowing Chinese economy. No significant Africa imports

16. PU (Polyurethanes)

9.7 mill. tons Ethiopia (latent demand) – 200 to 250 kta Flexible foams are about 50% of the total demand. > 54% of PU goes into the furniture and construction industry.

Global - 12.3 mill. Tons (Industry operating rate 79%)

Overall: Moderate Global: (4.0%)

Dependent on the construction market Africa’s Imports Ethiopia = 4 kta Neighbouring Countries= Nil Africa major = 53 kta

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17. Isocyanates Methylene Diphenyl Diisocyanate (MDI) Toluene Diisocyanate (TDI)

Total isocyanate market: 8.4 million tons Ethiopia (latent demand) – 125 to 150 kta MDI (72%): 6.0 million tons. PU resins make up for more than 85% of the MDI demand. TDI (28%): 2.4 million tons. PU foams make up for about 83% of the total TDI demand.

MDI: 8.5 million tons TDI: 3.0 million tons (Industry operating rate 73%)

Overall: Strong

Global (4.5%) For both isocyanates. MDI Global: (5.0%) TDI Global: (4.2%) MDI demand growth rate is faster than TDI demand.

PU resins and PU foams will drive the demand. Africa’s Imports Ethiopia = 8 kta Neighbouring Countries= 6 kta Africa major = 131 kta

18. Nitrobenzene 4.25 million ton Ethiopia (latent demand) – 125 to 150 kta China (36%), WE (24%), USA (21%) and Japan (9%) consumed 90% of the global demand.

6.5 million tons (Industry operating rate 65%) Nitrobenzene plants are mostly integrated with aniline production facilities

Overall : Strong Dependent on the Polyurethanes demand. China and Asia are likely to push the demand.

Global (4.6%) USA (4.2%) Europe (2.5%) Asia (6.0%)

Improving economic conditions, better demand from construction and automotive sector strengthening polyurethane business No significant Africa imports

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19. Phthalic Anhydride

4.7 mill. tons Ethiopia (latent demand) – 15 to 20 kta More than 50% is used for the manufacture of phthalate plasticizers

6.1 mill. tons (Industry operating rate 77%)

Overall: Moderate Global (2.5%) Asia (3.1%) N. America (1.0%) W. Europe (2.0%)

- No significant Africa imports

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Table B-28: Acetyls Chain Market Outlook





1. Acetic Acid Global – 13.5 million tons Africa – 40 kta Ethiopia (current demand) – 477 tons Ethiopia (latent demand) – 80 to 100 kta South Africa is the largest market in Africa VAM accounts for over one-third of the acetic acid demand.

Global - 19 million tons (industry operating rate 71%) Africa – 16 kta Capacity only in South Africa China accounts for over 70% of the global capacity.

Overall: Moderate China to drive the demand with over 50% share in the market. Demand in North America and Western Europe is expected to remain stagnant

Global (2.6%) Asia (3.4%) N. America (0.1%) W. Europe (-0.1%) Middle East and Africa (2.8%)

Almost all new investment has been China in the last three years. The country is likely to contribute the bulk of new investment in the future. Africa’s Imports Ethiopia = 480 tons Neighbouring Countries= 840tons Africa major = 17 kta

2. Acetic Anhydride

Global - 2.5 million tons Ethiopia (latent demand) – < 1 kta US is the largest consumer for acetic anhydride.

Global – 3.0 million tons (industry operating rate 83%) Africa – 20 kta African Capacity is only in South Africa

Overall: Slow Pharmaceutical industry in Asia is expected to be a major growth driver.

Global (2.0%) Asia (6.0%) N. America and W. Europe are expected to witness negative growth rates.

Cellulose Acetate for cigarette tow (filters) is the largest consumer. As China switches to filtered cigarettes (and from using PP in filters), this will drive demand Africa’s Imports Ethiopia = 23 tons Neighbouring Countries= Nil Africa major = 730 ton

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3. VAM (Vinyl Acetate Monomer)

Global – 6.5 million tons Africa – 55 kta Ethiopia (current demand) – 250 tons Ethiopia (latent demand) – 100 to 125 kta Bulk of the consumption is for the production of PVA and PVOH.

Global – 10.4 million tons (industry operating rate 62.5%) Africa – 20 kta African capacity is only in South Africa

Overall: Moderate Dependent on the growth of PVA and PVOH market.

Global (3.2%) Asia (4%) Middle East and Africa (3.9%) N. America (0.6%) W. Europe (1.1%)

It is used in the production of various intermediates which are used in sectors such as adhesives, coatings, paints and textile. Africa’s Imports Ethiopia = 250 tons Neighbouring Countries= 840tons Africa major = 38 kta

4. PVA (Polyvinyl Alcohol)

Global – 1.4 million tons Ethiopia (latent demand) – 50 to 60 kta Asia-Pacific accounts for around 70% of the consumption

Global – 2.3 million tons (Industry operating rate 61%) China accounts for half of the capacity

Overall: Moderate

Global (3.5%) Bulk of the Chinese capacity is calcium carbide based. No significant imports in Africa.

Table B-29: Methanol Chain Market Outlook





1. Methanol Global - 80 million tons Africa – 2.1 million tons Ethiopia – 53 tons China accounts for about 55% of the global demand.

Global – 120 million tons (industry operating rate 67%) Africa – 3.4 million tons China will utilise its coal reserves to build

Overall: Strong

Global (4.6%) China (5.4%) Africa (4.1%) Middle East (4%) North America (1.9%) Europe (1.2%)

Accessibility to low cost feedstock is an important parameter for methanol production. Production from alternate feedstock like coal looks attractive in the future. Chinese imports are likely to increase in the future in spite of CTM developments.

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massive coal to methanol capacities.

Africa’s Imports Ethiopia = 23 tons Neighbouring Countries= 4.7 kta Africa major = 31 kta

2. MTBE (Methyl tert-butyl ether)

Global - 14 million tons Africa - 95 kta Ethiopia – Negligible demand Ethiopia (latent demand) – 30 to 35 kta Primarily used as a gasoline additive


Overall: Slow Demand to decline in developed regions such as North America and Western Europe

Global (2.1%) North America (-4.7%) Asia (3.1%) Western Europe (-4.4%) Africa (2.1%) Middle East and Africa (-0.6%) Latin America (0.8%)

Considered a contaminant to the environment and hence it usage is as a fuel additive has seen a steep decline in the developed world. Other regions are expected to follow suit. Africa’s Imports Ethiopia = 18 tons Neighbouring Countries= 30 tons Africa major = 1.3 kta

3. Formaldehyde Global – 47.3 million tons Africa – 213 kta Ethiopia (current demand) – 510 tons Ethiopia (latent demand) – 80 to 100 kta Amino resins account for the bulk of the demand.

Global – 51.2 million tons (industry operating rate 93%) Africa – 225 kta No production in Ethiopia Asia accounts for over 50% of the total supply.

Overall: Moderate Asia will lead the demand

Global (4.4%) Asia (5.9%) N. America (2.5%) W. Europe (2%) Africa (3.5%) Middle East (4.3%)

Growth dependent on the construction and automotive industry. Africa’s Imports Ethiopia = 78 tons Neighbouring Countries= 890ton Africa major = 4.3 kta

4. PF/UF resins PF – phenol formaldehyde)

UF: 11.2 million tons PF: 3.0 million tons Africa – 60 kta Ethiopia (current demand) – 5.5 kta

UF: 20.3 million tons (industry operating rate 55%) PF: 5.3 million tons

Overall: Strong UF Global (4.2%) PF Global (3.9%)

Major use in construction industry. Africa’s Imports Ethiopia = 5.5 kta Neighbouring Countries= 3.7 kta

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UF – urea formaldehyde)

Ethiopia (latent demand) – 80 to 100 kta 64% UF resin is used in wood applications. Wood adhesives account for about 36% of the total demand

Africa major = 26.6 kta

5. MMA (Methyl Methacrylate)

Global - 3.4 million tons Asia – 1.8 million tons Ethiopia (latent demand) – 5 to 10 kta Asia accounts for over 50% of the total MMA demand.

Global - 4.5 million tons (Industry operating rate 75%) Asia – 2.6 million tons Over 1.2 million tons of capacity has been added in Asia in the past one decade.

Overall: Moderate China is likely to push the market demand.

Global: (3.5%) Asia (4.2%) Europe (2.2%) N. America (0.8%)

MMA / pMMA are largely integrated project. Major application of MMA is in producing pMMA sheets, commonly known as acrylic sheets. No significant imports in Africa.

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6. pMMA (Polymethyl Methacrylate)

Global - 1.9 million tons Asia – 1.1 million tons Ethiopia (latent demand) – 5 to 10 kta Asia accounts for around 60% of the total pMMA demand.

Global - 2.4 million tons (Industry operating rate 79%) Asia – 1.6 million tons More than 60% of the total capacity is located in Asia.

Overall: Moderate Asia will be the growth region in the future.

Global (3.5%) Asia (4.2%) Europe (0.7%) N. America (0.8%)

Technological changes favouring substitute products have curtailed demand growth in past few years. No significant imports in Africa.

Table B- 30: Ammonia Chain Market Outlook





1. Urea Global – 185.4 million tons Africa – 1.9 million tons Ethiopia (current demand) – 400 kta Ethiopia (latent demand) – 1200 to 1500 kta 62% of the demand is from Asia.

Global - 263 million tons (industry operating rate 70%) Africa – 13.6 million tons Ethiopia – No production China accounts for one-third of the global supplies. The Middle East is the largest exporter of Urea.

Overall: Moderate Mature market globally and hence usage is likely to grow at a moderate rate.

Global (2.8%) Asia (3.1%) Europe (0.7%) N. America (1.7%) Africa (4.9%) Middle East (1.2%)

Gas price is key – hence competition from US shale and W African associated gas. Yayu Fertilizer (urea) Factory is under construction in Ethiopia. Demand in the country is likely to grow at a moderate rate. Africa’s Imports Ethiopia = 404 kta Neighbouring Countries= 100 kta Africa major = 1455 kta

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2. Ammonia Global – 178.3 million tons Africa – 7 million tons Ethiopia (current demand) – 130 tons 51% of the demand is from Asia.

Global – 237.8 million tons (industry operating rate 75%) Africa – 15.8 million tons Ethiopia – No production China accounts for one-third of the global supplies. The US, China and India are the largest urea importer in the world.

Outlook: Moderate Global (2.6%) Asia (3%) Europe (0.6%) N. America (1.5%) Africa (4.9%) Middle East (1.1%)

Shale gas driving the new capacity development in North America. The region will add capacity on a large scale. It is likely to change from net importer to net exporter in the long term. Africa’s Imports Ethiopia = 10 tons Neighbouring Countries= 212 kta Africa major = 990 kta

3. AN Ammonium Nitrate (AN)

Global – 50 million tons Africa – 3.7 million tons Ethiopia (current demand) – 1.8 kta Ethiopia (latent demand) – 40 to 50 kta

Global – 90 million tons (industry operating rate 55%) Africa – 5.5 million tons Ethiopia – No production

Outlook: Slow Global (2.0%) North America (1.0%) Africa (1.5%) Demand in Western Europe is likely to decline on account of changing agriculture subsidy policies.

It is used both as a fertilizer and as an explosive. North America, Europe, Russia and China accounts for around 75% of the consumption. Africa’s Imports Ethiopia = 5.7 kta Neighbouring Countries= 9.1 kta Africa major = 323 kta

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4. Ammonium Sulphate

Global – 24.5 million tons Africa – 834 kta Ethiopia (current demand) – 1 kta Ethiopia (latent demand) – 40 to 50 kta

Global – 30.5 million tons (industry operating rate 80%) Africa – 868 kta Ethiopia – No production

Outlook: Slow Global (2.0%) Western Europe (1.5%) Asia (2.5%) North America (1.0%) Africa (5.0%)

A large volume is produced as a by-product of other industrial process. Therefore, supply depends on the level of industrialisation. Mainly used as a fertilizer. Other small uses are food additive and flame-proofing agent. Africa’s Imports Ethiopia = 1.1 kta Neighbouring Countries= 21 kta Africa major = 245 kta

5. Monoammonium Phosphate (MAP)

Global – 12 million tons Africa – 310 kta Ethiopia (current demand) –464 tons Ethiopia (latent demand) – 300 to 400 kta


Outlook: Moderate Global (2.0%) Western Europe (-0.5%) North America (2.5%) Africa (7.5%) Asia (34%)

Used as a fertilizer and dry chemical fire extinguisher. Africa’s Imports Ethiopia = 144 kta Neighbouring Countries= 4 kta Africa major = 220 kta

6. Diammonium Phosphate (DAP)

Global – 35 million tons Africa – 1.4 million tons Ethiopia(current demand) – 72 kta Ethiopia (latent demand) – 350 to 450 kta

Global – 63.3 million tons (industry operating rate 55%) Africa – 10.6 million tons Ethiopia – No production

Outlook: Slow Global (2.5%) Western Europe (0.5%) North America (1.5%) Asia (3%) Africa (5.5%)

Primarily used as a fertilizer and also as a fire retardant. One DAP plant is under construction in Ethiopia. Africa’s Imports Ethiopia = 177 kta Neighbouring Countries= 65 kta Africa major = 31 kta

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7. Superphosphates (Mono-Calcium Phosphate)

Global – 6.3 million tons Africa – 420 kta Ethiopia (current demand) – Negligible Ethiopia (latent demand) – < 5 kta

Global – 8.9 million tons (industry operating rate 71%) Africa – 1.2 million tons Ethiopia – 4 kta

Outlook: Moderate Global (2.0%) Western Europe (-1%) Africa (10%) Asia (2%) North America (4%) Latin America (1%

Primarily consumed as a fertilizer. It is also used as an additive in baking powder and animal nutrient. Africa’s Imports Ethiopia = Nil Neighbouring Countries= 15 kta Africa major = 58 kta

8. Calcium Ammonium Nitrate (CAN)

Global – 15.5 million tons Africa – 540 kta Ethiopia (current demand) – 4 kta Ethiopia (latent demand) – < 5 kta

Global – 22 million tons (industry operating rate 70%) Africa – No production

Outlook: Moderate Global (3.0%) Western Europe (0.5%) Africa (2%) Demand in North America to remain stagnant

Primary use as fertilizer. Africa’s Imports Ethiopia = 2 kta Neighbouring Countries= Nil Africa major = 34 kta

9. Nitric Acid Global – 65 million tons Africa – 25 kta Ethiopia (current demand) – 1.7 kta Ethiopia (latent demand) – 150 to 200 kta Ammonium nitrate production accounts for around 85% of the demand.

Global – 85 million tons (industry operating rate 76%)

Outlook - Slow Global – 2.5% Africa’s Imports Ethiopia = 1.7 kta Neighbouring Countries= 5.3 kta Africa major = 12 kta

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8. Melamine Global – 1.7 million tons Asia – 1.1 million ton Africa – 10 kta Ethiopia (latent demand) – 20 to 25 kta

Global – 2.5 million tons (Industry operating rate 68%) Asia – 1.9 million ton Africa – No capacity

Overall: Strong

Global (4.0%) Asia (5.0%) Western Europe (1%) North America (0.6%)

Demand fluctuates with the economic performances of the country/region. Major end-uses are in construction, automotive and OEM industries. No significant imports in Africa.

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Table B-31: Chlor Alkali Chain Market Outlook





1. Chlorine Global - 69-70 million tons Africa – 2 million tons Ethiopia (current demand) - 400 tons Ethiopia (latent demand) – 200 to 250 kta PVC and other organic chemicals production account for 34% and 28% of the demand respectively

Global - 75.0 mill. Tons (industry operating rate 92-93%) Africa – 750 kta Ethiopia – 9 kta

Overall: Moderate

Global (2.8%) Asia (3.2%) W. Europe and N. America are witnessing negative growth rates.

Energy intensive industry, environmentally unfriendly product. Electricity cost accounts for 40-50% of the total production cost. Co-produced with Caustic Soda. Mercury based plants are being phased out in Western Europe due to environmental hazard. Africa’s Imports = Negligible

2. Caustic Soda Global - 74 million tons Africa – 2.2 million tons Ethiopia (current demand) – 13 kta Ethiopia (latent demand) – 200 to 350 kta Paper and pulp industry, and Detergent/textile are largest users with 15% share each

Global - 83 million tons (industry operating rate 92-93%) Africa – 825 kta Ethiopia – 10 kta China accounts for about 46% of the global capacity.

Overall: Moderate Chinese demand will be the growth driver.

Global (2.6%) Asia (3.3%) W. Europe and N. America are witnessing negative growth rates.

Co-produced with Chlorine. Power cost critical. Africa’s Imports Ethiopia = 13 kta Neighbouring Countries= 44 kta Africa major = 144 kta

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3. EDC (Ethylene Di-chloride)

Global - 39 million tons Africa – 778 kta Ethiopia (current) – No demand Ethiopia (latent demand) – 300 to 400 kta

Global – 55.2 million tons (industry operating rate 72%) Africa – 1 million tons No production in Ethiopia

Overall: Moderate Driven by PVC demand

Global (3.0%) Asia (4.5%) W. Europe (0.6%) N. America (0.4%) Middle East and Africa (4.5%)

Often integrated with PVC but we see an increase in merchant EDC sales based on low cost gas in USGC and elsewhere. Africa’s Imports Ethiopia = Nil Neighbouring Countries= Nil Africa major = 81 kta

4. VCM (Vinyl Chloride Monomer)

Global – 41.7 million tons Africa – 430 kta Ethiopia (current demand) – 36 kta Ethiopia (latent demand) – 200 to 250 kta

Global – 59 million tons (industry operating rate 71%) Africa – 778 kta Ethiopia – No production

Overall: Moderate Driven by PVC demand.

Global (3.1%) Asia (3.6%) W. Europe (-0.1%) N. America (2.1%) Middle East (5.6%) Africa (4.3%)

Integrated with PVC. Two thirds of China’s PVC is based on VCM from the carbide process to produce VCM. This uses coal instead of ethylene as its key feedstock. Africa’s Imports Ethiopia = Nil Neighbouring Countries= Nil Africa major = 2 kta

5. PVC (Polyvinyl chloride)

Global – 40.7 million tons Africa – 1380 kta Ethiopia (current demand) – 18.4 kta Ethiopia (latent demand) – 250 to 350 kta Asia accounts for 57% of the total demand.

Global – 60.6 million tons (industry operating rate 67%) Africa – 550 kta No production in Ethiopia 62% of total capacity is located in Asia.

Overall: Moderate Demand in developed markets is stagnating PVC is increasingly being substituted.

Global (3.1%) Asia (3.8%) N. America (0.7%) W. Europe (-0.5%) Middle East (3%) Africa (3.7%)

PVC market is slowing due to slowdown in China. Demand highly dependent on construction sector. China is self-sufficient in PVC and it is now a significant exporter as the downturn takes hold. Africa’s Imports Ethiopia = 18 kta Neighbouring Countries= 67 kta Africa major = 685 kta

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6. Epoxy Resins 2.22 mill. tons Ethiopia (latent demand) – 20 to 25 kta The major end-use segments: paints, coatings, electrical laminates, bonding, flooring & paving.

2.81 mill. tons China has 40% of the global capacity

Overall: Strong China will be a high growth region

Global (4.0%) Asia is the fastest growing region.

Electronics, appliances and automotive will be the key drivers for future epoxy demand. No significant imports in Africa.

7. Epichlorohydrin 1.30 mill. tons Ethiopia (latent demand) – 18 to 25 kta 75% of is used to manufacture epoxy resins. China is the largest consumer.

1.75 mill. Tons (Industry operating rate 74%)

Overall: Strong Major growth from Asia.


No significant imports in Africa.

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Table B-32: Potash Chain Market Outlook





1. Muriate of Potash (MOP)

Global – 59.7 million tons Africa – 1 million ton Ethiopia (current demand) – 263 tons Ethiopia (latent demand) – 3 to 5 kta


Global - Moderate Asia – Strong

Global (3.9%) Asia (4.3%)

Around 90% of the consumption is in fertilizer sector. Around 50% consumption in Asia Africa’s Imports Ethiopia = 130 ton Neighbouring Countries= 15 kta Africa major = 551 kta

2. Potassium Sulphate (SOP)

Global – 4.9 million tons Africa – 225 kta Ethiopia (current demand) – 1.7 kta Ethiopia (latent demand) – 20 to 25 kta China accounts for around 45% of the demand


Global – Moderate Global (2.7%) China (4.8%) North America (1%) Europe (-0.5%) Africa (1%) Rest of the world (2%)

Can be used in every application where MOP is used but it is prices significantly higher than MOP. Africa’s Imports Ethiopia = 300 tons Neighbouring Countries= 620ton Africa major = 188 kta

3. Potassium Magnesium Sulphate (Langbeinite)

Global – 1.3 Million tons Ethiopia (latent demand) – Insignificant


Global – Moderate Global (3.0%)

Almost all of Langbeinite is used in Agriculture and animal feed sector Langbeinite prices generally follow potash price and are sold at premium to potash price. Africa’s Imports = Negligible

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4. Potassium Nitrate (NOP)

Global – 1.4 Million tons Africa – 75 kta Ethiopia (current demand) – 1.5 kta Ethiopia (latent demand) – 18 to 20 kta


Global – Moderate Global (3.0%)

It is used as a raw material for nitric acid production, as a fertilizer, as an oxidiser in gun powder and as a food preservative. Africa’s Imports Ethiopia = 1.4 kta Neighbouring Countries= 5 kta Africa major = 77 kta

5. Caustic Potash Global – 1.8 Million tons Africa – 15 kta Ethiopia (current demand) – 2.7 kta Ethiopia (latent demand) – 20 to 25 kta

Global – 2.9 million tons (Industry operating rate 62%) Africa – No production

Global – Moderate Global (3.0%) Asia (4.8%)

The US accounts for around 70% of the global capacity. Africa’s Imports Ethiopia = 2.7 kta Neighbouring Countries= 690ton Africa major = 12 kta

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Table B-33: Sulphur Chain Market Outlook





1. Sulphuric Acid Global: 200 million tons Ethiopia (latent demand) – 50 to 60 kta Asia accounts for 38% of the total demand Phosphate fertilizers account for 60% of the total demand for sulphuric acid.

Global: 260 million tons (industry operating rate 77%) Middle East, North Africa and China will see new capacities being set up in the next 3 – 5 years.

Overall: Strong Global (3.5%) Asia will grow faster compared to N. America and W. Europe.

It is one of the key raw materials in the production of Phosphoric Acid, Ammonium Phosphate fertilizers (DAP, MAP), Superphosphates (SSP, TSP) and Ammonium Sulphate. Africa’s Imports Ethiopia = 2 kta Neighbouring Countries= 4 kta Africa major = 950 kta

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Table B-34: Bio-based Chain Market Outlook





1. Ethanol Global: 92 million tons Africa – 3.5 million tons Ethiopia (current demand) – 10 kta Ethiopia (latent demand) – 50 to 60 kta

Global: 115-120 million tons (industry operating rate 77-80%) Africa – 200-220 kta Ethiopia – 8.75 kta Brazil and USA account for 85% of the global demand

Overall: Strong Global (4.5%) North America (4%) Brazil (6%)

Demand in Brazil is likely to grow in the future as the country is focusing on increasing automotive production to exploit flexible fuels. No significant imports in Africa.

2. Ethyl Acetate Global – 3.5 million tons Ethiopia (latent demand) – 5 to 10 kta Ink and coatings account for more than 60% of the demand

Global – 4.6 million tons (Industry operating rate 76%) China – 3.4 million tons

Overall: Moderate Global (3.5-4%) China accounts for more than half of the global ethyl acetate production. No significant imports in Africa.

3. Citric Acid Global – 2 million tons Europe – 500 kta Ethiopia (latent demand) – < 5 kta

Global - 3.5 million tons (Industry operating rate 57%) Europe – 350kta

Overall: Moderate Global (3.0%) China account for more than 60% of the global capacity and exports. No significant imports in Africa.

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Table B-35: Soda Ash Chain Market Outlook





1. Soda Ash Sodium Carbonate

Global – 54 million tons China – 24 million tons Africa – 1.2 million tons Ethiopia (current demand) – 30 kta Ethiopia (latent demand) – 500 to 600 kta Major uses in glass, chemicals, soaps and detergents.

Global – 66 million tons (industry operating rate 82%) Africa – 1.16 million tons Ethiopia – 20 kta

Overall: Slow Global (2.3%) Europe (1.2%) North America (including Mexico) (1.4%)

Entire soda ash production in North America is based on mining of natural deposit; while in Europe and China just 9% and 6% of respective capacity is based on natural deposits. Naturally mined soda ash is about 26% of the global supply. Africa’s Imports Ethiopia = 12 kta Neighbouring Countries= 8 kta Africa major = 826 kta

2. Sodium Bicarbonate

Global – 3 million tons Africa – 120 kta Ethiopia (current demand) – 1.7 kta Ethiopia (latent demand) – 20 to 25 kta

Global – 4 million tons (industry operating rate 75%) Ethiopia – No production

Overall: Moderate Global (4.0%) Europe (2.0%)

Food and Animal nutrition sectors account for more than half of the demand globally. Africa’s Imports Ethiopia = 2 kta Neighbouring Countries= 6 kta Africa major = 71 kta

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Table B-36: Other Chain Market Outlook





1. Formic acid Global – 600 kta Asia – 294 kta Africa – 8 kta Ethiopia (current demand) – 2 kta Ethiopia (latent demand) – 15 to 20 kta Animal feed and leather tanning segments each account for one-third of the global demand

Global – 700 kta (industry operating rate 86%) Africa – No production

Overall: Moderate Global (3.6%) Asia (4.6%) Middle East (3.5%) Western Europe (2.6%)

China accounts for around 40% of the global demand BASF is the largest player with around 40% of the capacity share. Africa’s Imports Ethiopia = 1.9 kta Neighbouring Countries= 520 ton Africa major = 7 kta

2. Hydrochloric Acid

Global – 75 million tons Africa – 700 kta Ethiopia (current demand) – 3.4 kta Ethiopia (latent demand) – 12 to 15 kta Food and petroleum industries account for one-third of the global demand each

Global – 110 million tons. (Industry operating rate 70%) No production in Ethiopia

Overall: Moderate Global (3.0%) China (3.8%)

HCl is mostly produced as a by-product of other chemical process. Therefore, it supply is dependent on production of other chemicals. Africa’s Imports Ethiopia = 1.8 kta Neighbouring Countries= 7 kta Africa major = 5 kta

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3. Magnesium Chloride

Global – 300-350kta (approx. estimate) Africa – 15 kta Ethiopia (current demand) – 13 kta Ethiopia (latent demand) – 30 to 35 kta China dominates the global market with over 60% share in demand and production.

Global – 500 kta (Industry operating rate 60%)


Used as deicing agent, also for handling of dust-forming and freezable cargoes in mining and metal industry; in oil and gas industry as a component of magnesia cement mortars; as fire retardant. Africa’s Imports Ethiopia = 12.8 kta Neighbouring Countries= 480 ton Africa major = 2 kta

4. Calcium Carbide Global – 22 million tons Africa – 60 kta Ethiopia (current demand) – 1.6 kta Ethiopia (latent demand) – 90 to 100 kta China accounts for more than 95% of the demand

Global – 35 million tons (industry operating rate 60%) No production in Ethiopia More than 95% of the global capacity is in China

Overall: Slow Global (2.2%) North America (1.0%) W. Europe (-0.6%) China (3.0%)

Almost 90% of the calcium carbide is used in the production of acetylene with, in China, the primary aim of producing PVC. Africa’s Imports Ethiopia = 1.6 kta Neighbouring Countries= 3 kta Africa major = 20 kta

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The market potential for all value chains is summarized in Figure B-7 below.

Figure B-7: Petrochemical Growth Matrix

LDPE

LLDPE

MEGEODs

SurfactantsPP

PO

IPA

ButadieneSBR

PBR

MAN

Benzene

Toluene

PX

LABCumene / Phenol / BPA

PC

Styrene

PS

EPS

Cyclohexane

Aniline PET

Acetic Acid

VAM

Acetic Anhydride

Methanol

MTBE

Formaldehyde

PF/UF Resin

UreaAmmonia

Amm. NitrateAmm. Sulphate

DAP

MAPSuperphosphate

CANNitric Acid

HDPE

PVC

Caustic Soda

VCM

MOP

SOP

NOP

Ethanol

Sulphuric Acid

Sodium Bicarb.

Formic Acid

Ethylene Derivatives Propylene Derivatives Butadiene Derivatives Aromatics Derivatives

Acetyl Derivatives Methanol Derivatives Ammonia Derivatives Chlor-Alkali Derivatives

Potash Derivatives Other Derivatives

% G

row

th R

ate

Ethiopia + Surrounding Countries Demand, 2015 (KTA)

% GDP

B-93


Figure B-9 gives a clearer picture by eliminating the outlying LDPE and urea points. Figure B-8: Petrochemical Growth Matrix — as above but without the outlying LDPE and Urea

points

Table B-37 below summarizes the growth patterns for each product in Ethiopia and neighbouring countries (Eritrea, Kenya, Somalia, South Sudan, Sudan and Uganda).

Table B-37: Petrochemical Value Chain Growth in Ethiopia and Neighbouring Countries

Product Market Volume (kta, 2015)

Projected Market Growth %

Slow (< 2.5%) Moderate (2.5% - 4.0%) Strong (> 4.0%)

> 100 kta HDPE, PP, Urea, Ammonia, DAP

50 – 100 kta PET, Caustic Soda, PVC

10 – 50 kta LDPE, AN, AS,

Superphosphates, Soda Ash

LLDPE, LAB, VCM, MOP

5 – 10 kta Toluene, Nitric Acid Sulphuric Acid, Hydrochloric Acid

PX, PF/UF Resins, Ethanol, Sodium

Bicarbonate

< 5 kta

PO, IPA, Benzene, Cumene, Phenol, PC,

Styrene, PS, Cyclohexane, Acetic

Anhydride, MTBE, MAP, Calcium Carbide, EDTA

Butadiene, SBR, MAN, BPA, EPS, Aniline, Acetic Acid, VAM, CAN, Chlorine,

EDC, SOP, Caustic Potash, Formic Acid,

Magnesium Chloride, Oxo Alcohols. 2-Ethyl Hexanoic Acid, PVA, MMA, pMMA,

Citric Acid

MEG, PBR, Methanol, Formaldehyde,

Glycerine, Acrylic Acid, Acrylate Esters,

DOP, NMP, PTA, Melamine

B-94


It is recommended that the final proposed product portfolio should be predominantly weighted towards those markets showing strong future growth, with a fair mix of strategic investments in markets with moderate growth. This strategy will promote the construction of operations with good economy of scale. Availability of local and regional markets is an important investment criterion. Ethiopia is importing significant volumes of chemicals and petrochemicals, so it would be imperative to prioritise the investment for the products which are imported in large volumes as well as having significant market potential in surrounding countries and in the Africa region. All the products considered in the long list are further evaluated for their investment attractiveness from the market perspective. Prospects for each product have been categorised and rated as “High”, “Medium” or “Low” as explained below. High Priority investment – can be considered in the short term Medium Potential investment – can be considered in the long term Low Least attractive investment – not be considered unless situation changes in

the long term Table B-39 below summarizes the investment priority for Ethiopia from the market perspective, also justifying the reason for the ratings.

B-95


Table B-38: Ethiopia – Investment Priority from Market Perspective

Value Chain / Product

2015 Imports (kta) Ethiopia Latent Market

Demand (kta)

Investment Priority for

Ethiopia Reasons / Comments By

Ethiopia By

Neighbouring Countries

By Africa Major

Countries

Regional Total

(Approx.)


HDPE 45 145 690 1000 500 to 600 High Significant consumption in Ethiopia as well as in the region.

LLDPE 17 30 375 450 300 to 350 High Relatively modest consumption, but availability will develop

downstream sector.

LDPE 15 25 310 350 150 to 200 Medium Long term potential, as overall demand growth will be slower.

EVA No significant direct imports 70 to 80 Medium Not attractive in short term, but its availability can help in developing shoe (for soles) and tyre sector.

MEG 28 1 73 150 250 to 300 Medium MEG plant is sustainable in the long term only if downstream

textile and packaging industry is developed.

EODs 80 - 3 100 50 to 100 Medium EOD plant will be sustainable if surfactants, detergents, paints and

coatings industry develops in the long term.


PP 70 117 658 1000 350 to 400 High A minimum sized PP plant is sustainable.

PO/ Polyols No significant direct imports 300 to 350 Medium

Not attractive in short term, but its availability can boost the prospects for foam furniture, coatings, adhesives, sealant, and construction industries.

IPA 0.13 3 14 25 10 to 15 Low Consumption by solvent, pharma, inks and coating industry in the region is negligible.

Glycerine No significant direct imports 15 to 20 Low Investment not sustainable. Future depends upon downstream personal care industry.

Acrylic Acid No significant direct imports 20 to 25 Low Investment not sustainable. Future depends upon downstream

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Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

Acrylate Esters No significant direct imports 20 to 25 Low paints, coatings industry.

Oxo Alcohols No significant direct imports 20 to 25 Low Propylene

Glycols No significant direct imports 20 to 25 Low Investment not sustainable. No downstream industry (polyester resins, coolant, etc.).

EPDM No significant direct imports 10 to 15 Low Investment not sustainable. Downstream automotive industry not developed.

Acetone No significant direct imports 10 to 15 Low Investment not sustainable. Requires downstream MMA, BPA and solvent applications.

ACN No significant direct imports < 5 Low Investment not sustainable. No downstream industry. EPR No significant direct imports < 5 Low Investment not sustainable. No downstream industry.

2 Ethyl Hexanoic Acid No significant direct imports < 5 Low Investment not sustainable. No downstream industry.

Di-Octyl Phthalate No significant direct imports 35 – 40 Low

Investment sustainable only if polymers are produced locally and plastic processing industry develops. Also requires a Phthalic Anhydride plant.

N-Methyl Pyrrolidone No significant direct imports < 10 Low Investment not sustainable. Depends upon development of bulk

drug manufacturing.


Butadiene 0.04 - 6 10 No

direct demand

Medium

Investment not sustainable for a merchant butadiene plant. Export to distant markets (China/Asia) is risky as butadiene is a temperature and time sensitive product (it can dimerise over a long period). Product favours shipping to closest market possible. Producing butadiene is feasible only if downstream SBR plant is envisaged.

SBR 0.71 2.0 32 40 70 to 80 Medium Investment feasible only is local tyre manufacturing based on

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Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

PBR 0.43 0.7 6 8 40 to 50 synthetic rubber is planned.

MAN - - 4 5 < 2 Low Investment not sustainable. Insufficient market.

ABS No significant direct imports < 2 Low Investment not sustainable. No downstream white goods and automotive industry.

NBR No significant direct imports <1 Low Investment not sustainable. Insufficient market. MEK No significant direct imports < 1 Low Investment not sustainable. Insufficient market.

Aromatics Value Chain

Benzene 0.04 0.22 0.6 1.0 No

direct demand

Medium Dedicated merchant benzene plant is not sustainable. Benzene is a key intermediate. Investment is feasible only if downstream large volume derivative (e.g. LAB, Aniline, etc.) is envisaged.

Toluene 2.3 3.0 32.0 40 No

direct demand

Medium Investment in merchant plant not feasible. To be considered only if downstream (e.g. Isocyanate) plant is envisaged.

PX / PTA No significant direct imports 400 to 500

Medium

Investment in PX/PTA/PET is feasible only if downstream polyester textile and packaging industry develops. Can be considered in long term as Ethiopia imports significant amount of textiles and packaging material. PET 18 54 440 550 800 to

1000

LAB 12 12 62 100 200 to 250 High

Ethiopia imports significant volumes of detergents and surfactants. Producing LAB locally will obviate the need to import LAB as well as finished detergent products – and also boost the sector.

Cumene No significant direct imports No

direct demand

Low Investment not sustainable.

Phenol - - 1.5 2.0 No

direct demand


B-98




Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

BPA No significant direct imports 15 to 20 Low Investment not sustainable. PC 0.12 0.20 19 25 15 to 20 Low Investment not sustainable.

Styrene 0.07 0.35 49 50 No

direct demand


PS 0.12 0.03 200 200 20 to 25 Low Investment in PS/EPS plant is not attractive. Industry is significantly over invested, EPS 0.007 0.090 50 50 20 to 25 Low

Cyclohexane 0.090 - 5 5 < 1 Low Investment not sustainable.

Aniline No significant direct imports 100 to 125 Medium Investment feasible only if a downstream Isocyanate plant is

planned. Merchant Aniline plant is not sustainable.

PU 4 - 53 60 200 to 250

Medium

Although, direct imports are not significant; Ethiopia imports large volume of coatings, adhesives, finished and semi-finished footwear and furniture, etc. Local availability of PU will boost the downstream sectors. Isocyanates 8 6 131 150 125 to

150

Nitrobenzene No significant direct imports 125 to 150 Medium Investment feasible only if a downstream Aniline/Isocyanate plant

is planned. Merchant Nitrobenzene plant is not sustainable. Phthalic

Anhydride No significant direct imports 15 to 20 Low Investment not sustainable.

Acetic Acid 0.48 0.84 17 20 80 to 100 Medium Investment can be considered, if downstream unit (e.g. VAM) is

envisaged. Acetic Anhydride 0.02 - 0.73 2 < 1 Low Investment not sustainable.

VAM 0.25 0.84 38 45 100 to 125 Medium Investment can be considered in the long term. Depends on

development of adhesives, coatings, paints and textile sectors. PVA / PVAc No significant direct imports 50 to 60

B-99




Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

Methanol 0.02 4.7 31 50 No

direct demand

Medium Investment can be considered in the long term, if downstream units (acetic acid, formaldehyde, MTBE, etc.) are considered.

MTBE 0.02 0.03 1.3 5 30 to 35 Medium MTBE is largely imported blended with gasoline. Ethiopia can consider MTBE plant, if local refinery project is envisaged.

Formaldehyde 5.5 3.7 27 40 80 to 100 Long term Investment may be attractive, if downstream Isocyanate unit is

planned.

MMA/pMMA No significant direct imports 5 to 10 Low Investment not sustainable, as electronic / TV manufacturing is not present in Ethiopia.

Ammonia Value Chain

Ammonia 0.01 212 990 1400 No

direct demand

High Investment is critical for development of fertilizer sector. Integration with Urea is required. Some merchant supply to neighbouring countries is also possible.

Urea 404 100 1455 2200 1200 to 1500 High Significant imports. Priority investment for development of fertilizer

/ agriculture sector. Ammonium

Nitrate 6 9 323 350 40 to 50 High Modest imports, but good export opportunity in the region. Can be considered as priority.

Ammonium Sulphate 1.1 21 245 300 40 to 50 High Modest imports, but good export opportunity in the region. Can be

considered as priority. Mono-ammonium

Phosphate 144 4 220 400 300 to 400 High

High volume of imports. Priority investment. Di-ammonium

Phosphate 177 65 31 300 350 to 450 High

Superphosphate - 15 58 100 < 5 Medium Modest imports in the region. Can be considered for long term.

B-100




Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

Calcium Ammonium

Nitrate 2 - 34 50 < 5 Medium Modest imports in the region. Can be considered for long term.

Nitric Acid 2 5 12 20 150 to 200 Medium Can be considered if investment in downstream Isocyanate is

envisaged. Melamine No significant direct imports 20 to 25 Low Insufficient market.


Chlorine No significant direct imports 200 to 250

High Caustic soda production is critical for producing detergents and also in textile and paper industry. Chlorine is a key for PVC production and water treatment. Caustic Soda 13 44 144 250 300 to

350

EDC - - 81 100 300 to 400

High

EDC and VCM are traded to a limited extent, though its trade has increased in recent years. Merchant production of EDC/VCM may not be sustainable. Downstream PVC holds good prospects for Ethiopia as it is a key to development of plastic processing, water supply, construction and furniture industry.

VCM - - 2 50 200 to 250

PVC 18 67 685 800 250 to 350

Epoxy Resin No significant direct imports 20 to 25 Low Insufficient market in the region. Epichlorohydrin No significant direct imports 18 to 20 Low Insufficient market in the region.

Potash Value Chain

Muraite of Potash 0.13 15 551 600 3 to 5 High Significant export potential. Ethiopia can monetize its Potash

reserves. Potassium Sulphate 0.3 0.62 188 250 20 to 25 Medium Good export potential in the long term. Ethiopia can monetize its

Potash reserves.

B-101




Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

Potassium Magnesium

Sulphate No significant direct imports - Low Market volumes in the region are low.

Potassium Nitrate 1.4 5 77 100 18 to 20 Medium Can be considered in the long term.

Caustic Potash 2.7 0.69 12 20 20 to 25 Low Investment not sustainable. Insufficient market in the region.

Sulphur Value Chain

Sulphuric Acid 2 4 0.95 10 50 to 60 High Sulphuric acid is a key intermediate in many chemical processes, including fertilizers. Ethiopia will need a reasonable size plant.

Bio-based Value Chain

Ethanol No significant direct imports 50 to 60 High

Ethiopia already has plans to increase the ethanol production based on sugar molasses. Major application is in gasoline blending as oxygenate. Ethanol can be a potential source of ethylene, subject to its cost competitiveness.

Ethyl Acetate No significant direct imports 5 to 10 Low Investment not sustainable. Insufficient market in the region. Citric Acid No significant direct imports < 5 Low Investment not sustainable. Insufficient market in the region.


Sodium Carbonate 12 8 826 1000 High Good export potential. Ethiopia can monetize its Soda Ash natural

reserves. Sodium

Bicarbonate 2 6 71 150 High Good export potential. Ethiopia can monetize its Soda Ash natural reserves.

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Demand (kta)



Ethiopia By


By Africa Major

Countries

Regional Total

(Approx.)

Other Products

Formic Acid 1.9 0.52 7 10 Medium A small to medium size plant may be sustainable in the long term, depending upon development of leather tanning and animal feed sector in Ethiopia.

Hydrochloric Acid 1.8 7 5 15 High Hydrochloric acid is a key intermediate in many chemical

processes. Ethiopia will need a reasonable size plant. Magnesium

Chloride 12.8 0.5 2 20 Low Investment not sustainable.

Calcium Carbide 1.6 3 20 25 Low Investment not sustainable.

B-103


Ranking of Value Chains In the above section, we evaluated the key petrochemical value chains for their market potential. Each of the products in these value chains are now further evaluated for the following parameters:

1. Feedstock required — Listing of all key feedstock / raw material required for the production of the product. This will assist in determining the integration opportunities which may exist within (vertical) or across (horizontal) value chains.

2. Strategic benefits — Whether investment is justified on strategic grounds and what could be the key strategic benefits.

3. Cost benefits & Returns on Investments — Key factors affecting the costs, and whether any clear cost advantage exists; and average % ROI (return on investment).

4. Commercial issues — Whether any commercial issues related to overall operations exist, e.g. process integration, co-products, energy consumption, product support etc.

5. Risks — Any perceived risk in terms of market, technology, substitute products, entry barriers, etc.

6. Global market volumes — Categorisation of available market volumes:

• Large; >10 million tpa

• Medium; 5-10 million tpa

• Small; <5 million tpa

7. Major markets / segments — Major applications or end-use segments.

8. Global market growth / trend — Long term outlook for annual demand growth rate is categorized as:

• Strong; >4.0%

• Moderate; 2.5%-4.0%

• Slow; <2.5%

9. Logistics / handling issues — Any concern or cost issues involved in logistics and handling of the product

Table B-40 to Table B-52 give our product analyses within each value chain.

B-104


Table B-39: Ethylene Value Chain

Sr. No Product Feedstock Strategic

Benefits

Cost Benefit / % ROI

Commercial / Technology Issues

Risks Market Volumes

Major Markets / Segments

Market Growth/Trend

Logistic / Handling Issues

1. Ethylene (Product form: Gas)

Cracker (Ethane, Naphtha, LPG) MTO (Methanol)

Monomer for C2 Chain derivatives. Offers wide range of derivative opportunities.

Cost competitiveness depends upon feedstock cost. (Ethylene is an intermediate, hence %ROI not calculated).

Provides good commercial returns. Competitive feedstock cost is critical for commercial feasibility of ethylene derivatives. World scale cracker size has increased over 1300 kta.

Ethylene being explosive and flammable, storage and handling risk to be adequately addressed. No market or technical risk perceived.

Large Global – 137.8 million tons

60% of the demand from polyethylene. Other segments: EO/MEG, EDC, Styrene, VAM, etc. Growth driven PE demand in Asia, especially China.

Outlook: Moderate Global (3.2%) Africa (6.6%) Major new capacities in Asia and ME.

High logistic cost. Only, small volumes shipped internationally. ME crackers are known to ship ethylene to Asia. KSA and is the largest exporter.

2. LDPE (Low density polyethylene) (Product form: Solid)

Ethylene Yes Offers base load consumption of ethylene.

Depends on ethylene cost. ROI = 15%

Scale of economies very important.

Market risk in developing regions LDPE is being substituted by LLDPE in certain applications.


Film & sheet, injection moulding, blow moulding, fibres, etc. Asia demand (35%).

Outlook: Slow Global (0.6%) Africa (1.7%) Declining consumption in developed markets.

None

B-105



Benefits





Market Growth/Trend


3. LLDPE (Linear Low density polyethylene) (Product form: Solid)




Competition from low cost US / ME producers


Films, injection moulding, wire & cable, rotomoulding, pipes / conduits, etc. Major region of demand is Asia (46%). Replacing LDPE in certain applications.

Outlook: Moderate Global (3.9%) Africa (4.3%) Asian Capacities (40%). Good prospects for differentiated PE.

None

4. HDPE (High density polyethylene) (Product form: Solid)






Film & sheet, injection moulding, blow moulding, fibres, etc. Asian demand (40%).

Outlook: Moderate Global (3.6%) Africa (5.0%) Asian Capacities (32%).

None

5. EO (Ethylene oxide) (Product form: Liquefied gas)


Highly competitive if, low cost ethylene feed is used. ROI = 11%

Most EO producers are vertically integrated to EO derivatives.



Major (64%) demand from ethylene glycols. Major market: Asia

Outlook: Strong Global (4.3%) Africa – weak Major new capacities in ME.

International trade in EO is negligible due to its explosive nature.

B-106



Benefits





Market Growth/Trend


6. MEG (Mono ethylene glycol) (Product form: Liquid)

EO Yes Offers base load consumption of ethylene.

Highly competitive if, low cost ethylene feed is used. C2 cost critical as it constitutes over 60% of cost in MEG. ROI = 11%

ME likely to dominate MEG market due to low cost feed. Scale of economies very important.

Regional competition from low cost US / ME producers

Large Global – 27 million tons

Major demand (85%) from polyester segment. About 60% of the total demand is from Asia.

Outlook: Strong Global (4.4%) Africa (3.4%)

None

7. EODs (Ethylene oxide condensates) (Product form: Liquid)

EO Yes Offers alternate derivative option to MEG.

Highly competitive if, low cost ethylene feed is used. Good outlet for adding value to EO. ROI = 13%

Margins earned on EODs are higher than the one realized on MEG.

EOD market fragmented due to presence of many non-integrated players.

Medium Global - 9.5 million tons

Ethoxylates and Ethanolamines constitute 75% of total EOD demand.

Outlook: Strong Global (4.5-5.0%)

None

8. Ethylene Glycol Ethers (EGEs / E-Series) (Product form: Liquid)

EO No Highly competitive if, low cost ethylene feed is used. ROI = 18%


Relatively small market

Small Global - 1.1 million tons


Outlook: Moderate Global (3.5%)

None

B-107



Benefits





Market Growth/Trend


9. Ethylene Glycol Butyl Ether (EGBE) (Product form: Liquid)

EO No Highly competitive if, low cost ethylene feed is used. ROI = 35%





Outlook: Strong Global (4.3%)

None

10. EOA (Ethanol Amine) (Product form: Liquid)

EO, Ammonia No Highly competitive if, low cost ethylene feed is used. ROI = 15%






None

11. Ethylenediaminetetraacetic acid (EDTA) (Product form: Solid)

EO, Ammonia, Formaldehyde

No Highly competitive if, low cost ethylene feed is used. ROI = 15%



Small Global - 120 Ktons


Outlook: Slow Global (1%)

None

B-108


Table B-40: Propylene Value Chain


Benefits

Cost Benefit /

% ROI

Commercial / Technology

Issues Risks Market

Volumes Major Markets

/ Segments Market

Growth/Trend Logistic / Handling

Issues

1. Propylene (Product form: Gas)

Ethane, Naphtha, LPG Propane (for PDH process)

Monomer / feed for C3 Chain derivatives. Offers wide range of derivative opportunities.

Cost competitiveness for PDH process to be ascertained (Propylene is an intermediate, hence %ROI is not calculated).

Increasing trend for on-purpose production technologies such as PDH and metathesis.

PDH technology may not always easy to implement

Large Global: 89.1 million tons

Major (67%) demand from PP. Fastest growth in Asia.

Outlook: Moderate Global (3.0%) Africa (6.4%)

High logistic cost. Only, small volumes shipped internationally.

2. PP (Polypropylene) (Product form: Solid)

Propylene Offers base load consumption of propylene.

PDH/PP route may be competitive, compared to naphtha based route. ROI = 9%

Vertical integration with propylene is important for cost competitiveness. Scale of economies critical.

Captive propylene supply critical.


Fibres, injection moulding, film, blow moulding, sheet, others. Asia will dominate the future demand.

Outlook: Moderate Global (3.1%) Africa (3.7%)

None

B-109



Benefits

Cost Benefit /

% ROI


Issues Risks Market


/ Segments Market


Issues

3. PO (Propylene Oxide) (Product form: Gas)

Propylene Offers base load consumption of propylene.

Technology selected is a major factor in cost competitiveness. ROI = 18%

Integration and scale of economies are important. Selection of technology critical.

Technology is critical. Need to form JV for PO technology.

Medium Global: 8.8 million Tons

Major (63%) demand from (PU) polyols. Key drivers: automotive, housing and construction sectors. Fastest growth expected in Asia, with China growing at 5%.


Adequate safety measure required while handling PO.

4. Polyols (Product form: Liquid)

Propylene Oxide Ethylene Oxide

Offers base load consumption of propylene oxide.

Competitive propylene cost critical ROI = 17%

Technical support to customers is important.

None Medium Global: 6.5 million tons

Major (84%) demand from flexible and rigid foam applications.

Overall: Strong Global (4.4%)

Flammable liquid

5. IPA (Iso Propyl alcohol) (Product form: Liquid)

Propylene No significant benefit


None None Small Global: 2.2 million tons

Over 62% of IPA is used as solvent. N. America and W. Europe are the key demand regions.

Overall: Slow Global (1.9%)

Flammable liquid

B-110



Benefits

Cost Benefit /

% ROI


Issues Risks Market


/ Segments Market


Issues

6. AA (Acrylic Acid) (Product form: Liquid)

Propylene Yes Key pre-cursor for the AA chain.

Important to manage consistent margins across the acrylic chain, hence high degree of vertical integration is critical. ROI = 25%

Crude AA is not saleable item due to its instability. Can be sold / shipped in glacial form.

None Small

Major demand in glacial and acrylate esters.

Outlook: Strong Global: (4.2%) Growth driven by SAP & coatings.

AA is difficult to store and ship (hence relatively small volumes are traded).

7. AE (Acrylate Esters) (Product form: Liquid)

AA, Oxo alcohols

Yes Integration with AA important for cost competitiveness. ROI = 23%

None None Small Growth driven by coatings and adhesive segment. Asia (48% demand) Butyl acrylate (60%)


International trade in AE significant compared to AA.

8. Oxo alcohols (n-Butanol, 2-Ethyl Hexanol) (Product form: Liquid)

Propylene, Syngas

Yes Allows integration in to the AA chain


Many producers have swing flexibility to produce 2EH or butanols.

None Moderate

2-EH: plasticizers. NBA: Acrylate esters. Major demand from Asia.

Outlook: Moderate Global: (3.5%) Market likely to remain in balance, growing moderately.

None

B-111



Benefits

Cost Benefit /

% ROI


Issues Risks Market


/ Segments Market


Issues

9. PG (Propylene Glycol) (Product form: Liquid)

Propylene oxide

Not significant Competitive propylene cost critical ROI = 20%

None Market risk Small Over 25% demand as UPR. Also used as coolant & anti-freeze


None

10 EPDM (Ethylene Propylene Diene Monomer) (Product form: Solid)

Ethylene, Propylene

Only if downstream Tyre industry is present

Competitive ethylene & propylene cost critical ROI = 7%

None Market risk Small Automotive market is the largest consumer (40%). Other uses include construction, and as a modifier in plastics.

Overall: Moderate Oversupply till 2019.

None

11. Acetone (Product form: Liquid)

Propylene Co-produced in Cumene process.

Not significant Competitive propylene cost critical ROI = 9%

None Market risk Small Major demand from MMA and BPA nearly (29%).

Overall: Moderate Global oversupply till 2018/19

None

12 ACN (Acrylonitrile) (Product form: Liquid)

Ammonia, Propylene

Not significant Dependent on cost competitive feed and vertical integration. ROI = 15%

None Market risk Small Largest outlet is ABS/SAN (35%), followed by Acrylic Fibres at about 33%.

Overall: Slow Demand from ABS/SAN segment has exceeded the Acrylic Fibre market.

None

B-112



Benefits

Cost Benefit /

% ROI


Issues Risks Market


/ Segments Market


Issues

13. EPR (Ethylene Propylene Rubber) (Product form: Solid)

Ethylene, Propylene

Only if downstream Tyre industry is present

Competitive ethylene & propylene cost critical ROI = 18%

None Market risk Small Major applications in automobile components, polymer modification and waterproof roll.

Overall: Moderate

None

14. 2EH (2 Ethyl Hexanoic Acid) (Product form: Liquid)

Condensation of butyraldehyde from Oxo process

Only if Oxo plant is set up


None Market risk Small Siccative and paints, and PVB films are the largest end use

Overall: Moderate

None

15. DOP (Di Octyl Phthalate) (Product form: Liquid)

Phthalic anhydride, 2-ethyl hexanol



None None Small Plasticizers for polymers processing.

Overall: Moderate

None

16. NMP (N-Methyl Pyrrolidone) (Product form: Liquid)

Butyrolactone, Methylamine



None Market risk Small Solvents, Pharma, Lithium Batteries

Overall: Strong None

B-113


Table B-41: Butadiene Value Chain


Benefits





Market Growth/Trend


1. Butadiene (Product form: Gas)

Naphtha Allows presence in value added C4 derivatives

Depends on naphtha feed cost ROI = 24%

Largely co-produced in crackers. On-purpose technology not economical. Downstream integration critical as merchant market for butadiene would be limited in the region.

Supply risk, as production is not on-purpose.


Major (66%) demand in synthetic rubbers. Asia accounts for 58% of demand.

Outlook: Moderate Global (3.0%) Future growth will be driven by China and North East Asian countries.

Butadiene is costly to transport.

2. SBR/ PBR Synthetic rubbers (styrene butadiene rubber and polybutadiene rubbers) (Product form: solid)

Butadiene / n-C4s, Styrene

Yes, but only when downstream tyre industry exist in the region.

Depends on butadiene feed cost. Integration with butadiene source is important. ROI = 14%/ 20%

SBR in emulsion / solution form is difficult to ship. Still it can be exported in bales form.

None Medium (SBR) Small (PBR) Global: 6.0 million tons (SBR) Global: 3.7 million tons (PBR)

Over 70% demand in tyre / tyre products. Asian demand is almost half (48%) of global demand.

Overall: Moderate Global (2.8%) Future growth driven by China / Asia.

International trade in SBR liquid is limited due to high logistic cost. Hence, most SBR/PBR plants are located close to butadiene extraction plants.

3. MAN (Maleic anhydride) (Product form: Solid)

n-Butane Only when investment in BDO (Butanediol) chain is planned.

Depends on feed cost. ROI = 14%

None None Small Global: 1.9 million tons

UPR account for over 50% of the total demand. UPR used for fibre reinforced plastics will be the key growth driver.


None

B-114



Benefits





Market Growth/Trend


4. ABS (Acrylonitrile Butadiene Styrene) (Product form: Solid)

ACN, Butadiene, Styrene

Only when downstream industry exists in the region.


None Market risk. Large Electricals, White Goods, Appliances.

Moderate None

5. NBR (Nitrile Rubber) (Product form: Solid)

ACN, Butadiene Only when downstream industry exists in the region.


None Market risk. Small Tyre and other rubber goods such as gloves.

Moderate None

6. Methyl Ethyl Ketone (Product form: Liquid)

2-butene None Depends on feed cost. ROI = 10%

None Market risk. Small Industrial solvent and chemical intermediate.

Moderate None

B-115


Table B-42: Aromatics Value Chain


Benefits





Market Growth/Trend


1. Benzene (Product form: Liquid)

Naphtha Key intermediate for aromatics derivatives.

Dependent on cost competitive feed and vertical integration ROI = 12%

None None Large Global - 43.7 million tons

EB/Styrene, Cumene, Aniline, Nitrobenzene, Cyclohexane, etc. Asia - fastest growing market.

Outlook: Moderate Global (2.0%) Mature market

Flammable liquid

2. Toluene (Product form: Liquid)

Naphtha Key intermediate for aromatics derivatives.

Dependent on cost competitive feed and vertical integration ROI = 12%

None None Large Global - 21.9 million tons

Benzene and xylenes.

Outlook: Moderate Global (2.7%) Mature market

Flammable liquid

3. PX (Product form: Liquid)

Naphtha Key intermediate in the polyester chain

Dependent on cost competitive feed ROI = 5%

Feedstock base and large customer base is critical.

None Large Global – 39.2 million tons

Polyesters Outlook: Strong Global (4.4%)

Flammable liquid

B-116



Benefits





Market Growth/Trend


4. LAB (Linear alkyl benzene) (Product form: Liquid)

Ethylene Kerosene / n-Paraffin Benzene

Yes Allows presence in surfactant / soaps and detergent value chain.

Competitive if, low cost ethylene and kerosene feed is used. ROI = 7%

None LAB consumption is likely to decline in the future due to growing market for alcohol based surfactants.


More than 95% is used for household detergents.

Outlook: Moderate Global (2.5%) Africa (3.0%) Growth is stagnated or negative in developed regions.

None

5. Cumene (Product form: Liquid)

Benzene, Propylene

Investment justified, only if presence in PC chain is planned

Dependent on cost competitive feed. ROI = 10%

None Dependent on phenol and acetone market


Phenol / Acetone

Outlook: Slow Global (2.2%) Growth dependent on phenol/acetone markets

Flammable liquid

6. Phenol (Product form: Liquid/semi-solid)

Cumene Investment justified, only if presence in PC chain is planned


Acetone co-produced along with phenol.

Disposal of acetone by-product can be an issue.

Medium Global – 9.3 million tons

BPA, epoxy resins.


Flammable liquid

7. Bisphenol-A (BPA) (Product form: Solid)

Phenol Investment justified, only if presence in PC chain is planned


None Dependent on PC and epoxy resin market.

Medium Global – 6.0 million tons

Polycarbonate Outlook: Moderate Global (2.6%)

None

B-117



Benefits





Market Growth/Trend


8. Polycarbonate (PC) (Product form: Solid)

BPA Moderate advantage


Vertical integration critical.

Access to technology and market expertise via JV is the key.

Small Global – 4.3 million tons

Electrical/electronic, automotive industry.


None

9. Styrene (Product form: Liquid)

Benzene Only if invested in PS chain.


None PS / EPS market stagnating


Polystyrene Outlook: Moderate Global (2.1%)

Flammable liquid

10. Polystyrene / Expanded Polystyrene (Product form: Solid)

Styrene Moderate Dependent on cost competitive feed. ROI = 15% /17%

None Market risk Large (PS) Medium (EPS) Global – 10.7 million tons (PS) Global – 5.4 million tons (EPS)

Food packaging, domestic appliances, electronic goods, toys, household goods and furniture.

Outlook: Slow (PS) Moderate (EPS) Global (1.3% / 3.3%)

None

11. Cyclohexane (Product form: Liquid)

Benzene, Hydrogen

Only if invested in Nylon chain.


None None Medium Global - 5.3 million tons

Caprolactam Outlook: Slow Global (2.2%)

Flammable liquid

12. Aniline (Product form: Liquid)

Benzene Nitric / sulphuric acid Hydrogen

Yes, if invested in the PU chain.


Integrated with MDI production for PU.

None Medium Global - 5.9 million ton

MDI / PU Outlook: Moderate Global (3.8%)

Flammable liquid

B-118



Benefits





Market Growth/Trend


13. PET (Product form: Solid)

PTA (purified terephthalic acid) MEG

Yes, also offers base load consumption of MEG

Dependent on cost competitive feed and vertical integration. ROI = 10%

None Low entry barrier as capital costs of PET plants are relatively low while the technology is readily available


Synthetic Fibres Outlook: Moderate Global (3.7%)

None

14. PTA (Purified Terephthalic Acid) (Product form: Solid)

Paraxylene, Acetic Acid

Yes Dependent on cost competitive Paraxylene feed and vertical integration. ROI = 12%

None Low entry barrier


Synthetic Fibres Outlook: Moderate Global (3.7%)

None

15. PU (Polyurethane) (Product form: Solid)

Isocyanates, Polyols

Yes Dependent on cost competitive feed and vertical integration. ROI = 20%

None Application support required


Flexible foams Outlook: Strong Global (4.0%)

None

B-119



Benefits





Market Growth/Trend


16. Isocyanates Methylene Diphenyl Diisocyanate (MDI) Toluene Diisocyanate (TDI) (Product form: Liquid)

Nitrobenzene, Toluene, Chlorine, Formaldehyde


None None Medium MDI: 8.5 million tons TDI: 3.0 million tons

PU resins Outlook: Strong Global (4.0%)

Involves chlorine use.

17. Nitrobenzene (Product form: Liquid)

Nitric Acid, Benzene


None None Small Global – 4.25 million tons

Mostly used for producing Aniline


None

18. Phthalic Anhydride (Product form: Solid)

O-Xylene No Dependent on cost competitive feed and vertical integration. ROI = 15%


Plasticizers Outlook: Slow Global (2.5%)

None

B-120


Table B-43: Acetyls Value Chain


Benefits





Market Growth/Trend


1. Acetic Acid (Product form: Liquid)

Methanol Only if invested in acetyl chain


None None Large Global – 13.5 million tons

VAM Outlook: Moderate Global (2.6%)

None

2. Acetic Anhydride (Product form: Liquid)

Acetic acid Only if invested in acetyl chain


None None Small Global - 2.5 million tons

Pharmaceuticals

Outlook: Slow Global (2.0%)

None

3. VAM (Product form: Liquid)

Acetic Acid Only if invested in acetyl chain


None None Medium Global – 6.5 million tons

Adhesives Outlook: Moderate Global (3.2%)

Flammable liquid

4. PVA (Product form: Liquid)

VAM Only if invested in acetyl chain



Adhesives Outlook: Moderate Global (3.5%)

None

B-121


Table B-44: Methanol Value Chain


Benefits





Market Growth/Trend


1. Methanol (Product form: Liquid)

Natural gas Yes. Potential feedstock for olefins (MTO route). Also offers opportunity in chain methanol derivatives.


None

Coal to methanol route in China is gaining popularity.

Large Global - 80 million tons

Formaldehyde, MTBE, acetic acid, fuel blending.

Outlook: Strong Global (4.6%) Africa (4.1%)

Flammable liquid

2. MTBE (Product form: Liquid)

Methanol Only if there is a local production of gasoline.


None Usage likely to decline in developed countries.


Gasoline additive


Flammable liquid

3. Formaldehyde (Product form: Liquid)

Methanol Only if invested in PF/UF resin.



Amino resins Outlook: Strong Global (4.4%)

None

4. PF/UF Resin (Product form: Liquid/Solid)

Phenol / Urea / Formaldehyde

Only if there is a significant presence of wood / furniture industry.


None None Large (UF) Small (PF) Global - UF: 11.2 million tons PF: 3.0 million tons

Wood adhesive Outlook: Strong UF Global (4.2%) PF Global (3.9%)

None

B-122



Benefits





Market Growth/Trend


5. MMA (Product form: Liquid)

Iso butanes (i-C4s)

Yes, if vertical integration in the chain is planned.


Integrated with pMMA.

None Small pMMA Outlook: Moderate Global (3.0%)

None

6. pMMA (Product form: Solid)

MMA Yes, if vertical integration in the chain is planned.


Integrated with MMA.

None Small Electronics Outlook: Strong Global (6.0%)

None

B-123


Table B-45: Ammonia Value Chain


Benefits





Market Growth/Trend


1. Urea (Product form: Solid)

Ammonia Yes, major commodity fertilizer.


Integrated with ammonia plant


Fertilizers Resins Melamine

Outlook: Moderate Global (2.8%) Mature market.

Hygroscopic solid

2. Ammonia (Product form: Gas)

Natural Gas Syn Gas

Yes, key intermediate for fertilizer production.



Fertilizers Chemicals


Anhydrous ammonia is stored under pressure.

3. Ammonium Nitrate (Product form: Solid)

Ammonia Nitric acid

Yes, major commodity fertilizer.


Integrated with ammonia and nitric acid plant

None Large Global – 50 million tons

Fertilizers Explosives


None

4. Ammonium Sulphate (Product form: Solid)

Ammonia Sulphuric acid


Integrated with ammonia and sulphuric acid plant By-product from Coke ovens


Fertilizers Agriculture spray adjuvant for insecticides


None

B-124



Benefits





Market Growth/Trend


5. Mono-Ammonium and Di-Ammonium Phosphate (Product form: Solid)

Ammonia Phosphoric acid

Yes Dependent on cost competitive feed and vertical integration. Hindered by relatively high logistic costs. ROI = 10%

Integrated with ammonia and phosphoric acid plant (generally adjacent to phosphate rock mines)

None Large Global – 12 million tons (MAP) Global – 35 million tons (DAP)

Fertilizers Fire retardant / extinguisher

Outlook: Slow Global (2.0% / 2.5%)

Relatively highs logistic costs for low value product.

6. Superphosphates (Mono-Calcium Phosphate) (Product form: Solid)

Limestone (Calcium Hydroxide) Phosphoric acid


Integrated with phosphoric acid plant (generally adjacent to phosphate rock mines)


Fertilizers Leavening agent


None

7. Calcium Ammonium Nitrate (CAN) (Product form: Solid)

Limestone (Calcium Hydroxide) Ammonium Nitrate


Integrated with Ammonia / Ammonium nitrate plant


Fertilizers Outlook: Moderate Global (3.0%)

None

8. Nitric Acid (Product form: Liquid)

Ammonia Not significant, unless integrated with fertilizer plant.


None None Large Global – 65 million tons

Fertilizers Chemical process


Corrosive and toxic liquid

B-125



Benefits





Market Growth/Trend


9. Melamine (Product form: Solid)

Urea Only if forward integration in resins is planned.


Integrated with urea plant.

Market risk. Small Global – 1.7 million tons

Construction / furniture, automotive and OEM industries


None

B-126


Table B-46: Chlor-Alkali Value Chain


Benefits





Market Growth/Trend


1. Chlorine (Product form: Gas)

Salt Yes, if investing in vinyl chain.

Dependent on power cost. ROI = 15%

Energy intensive industry, environment unfriendly product. Part of integrated vinyl chain.

Market risk. Regional markets are often significantly surplus in chlorine.


EDC for PVC; other organic and inorganic chemicals.


Corrosive and toxic gas. High logistic cost.

2. Caustic Soda (Product form: Solid)

Salt Yes, if investing in vinyl chain.


Co-produced with Chlorine. Part of integrated vinyl chain.

None Large Global - 74 million tons

EDC / VCM / PVC


Corrosive and toxic solid

3. EDC (Product form: Liquid)

Chlorine, Ethylene

Yes, offers base load consumption of ethylene and chlorine.

Dependent on power and ethylene cost. ROI = 11%

Part of integrated vinyl chain.

Limited merchant market


PVC Outlook: Moderate Global (3.0%)

Toxic, flammable, carcinogenic

4. VCM (Product form: Gas)

EDC Yes, offers base load consumption of ethylene and chlorine.




PVC Outlook: Moderate Global (3.1%)

Highly flammable gas – to be kept pressurized

5. PVC (Product form: Solid)

VCM Yes, offers base load consumption of ethylene and chlorine.




Construction, Packaging


None

B-127



Benefits





Market Growth/Trend


6. Epoxy Resin (Product form: Solid)

Epichlorohydrin crosslinked with other wide range of amines acids, phenols.

None Dependent on raw material cost. ROI = 20%

None. Involves large number of formulations.

Market risk. Small Global – 2.2 million tons

Paints, coatings, electrical laminates, bonding, flooring & paving


None

7. Epichlorohydrin (Product form: liquid)

Chlorine, Propylene Or Glycerol

None Dependent on raw material cost. ROI = 11%

Technology and process route selection critical.

Process risk Small Global – 1.3 million tons

Epoxy resins Outlook: Strong Global (4.0%)

None

B-128


Table B-47: Potash Value Chain


Benefits





Market Growth/Trend


1. Muriate of Potash (MOP) (Product form: Solid)

Minerals sylvite/ potassium nitrate and hydrochloric acid

Yes, key commodity fertilizer


Integrated with potash mines


Fertilizers Outlook: Moderate Global (3.9%) Mature market.

None

2. Potassium Sulphate (SOP) (Product form: Solid)

Potassium chloride with sulfuric acid

Yes, , key commodity fertilizer



None Small Global – 4.9 million tons

Fertilizers Outlook: Moderate Global (2.7%) Mature market.

None

3. Potassium Magnesium Sulphate (Langbeinite) (Product form: Solid)

Mined and processed



None Small Global – 1.3 Million tons

Fertilizers Outlook: Moderate Global (3.0%)

None

4. Potassium Nitrate (NOP) (Product form: Solid)

Ammonium nitrate and caustic potash


Integrated with ammonia and caustic potash plant


Fertilizers


None

B-129



Benefits





Market Growth/Trend


5. Caustic Potash (Product form: Solid)

Potassium chloride

Only, if investing in NOP.


Co-produced with Chlorine. Part of integrated potash chain.




Corrosive

Table B-48: Sulphur Value Chain


Benefits





Market Growth/Trend


1. Sulphuric Acid (Product form: Liquid)

Sulphur Yes, if planning to invest in fertilizers

Dependent on sulphur cost. ROI = 18%

Integrated with phosphatic fertilizer plants

None Large Global: 200 million tons



Hazardous

Table B-49: Ethanol Value Chain


Benefits





Market Growth/Trend


1. Ethanol (Product form: Liquid)

Biomass / Sugar Yes, if planning to invest in ethanol derivatives

Dependent on biomass feedstock. ROI = 20%

Integrated with derivative plants

Uncertainty in biomass feedstock availability due to seasonality

Large Global: 92 million tons

Fuel blending Chemicals


None

B-130


Table B-50: Soda Ash Value Chain


Benefits Cost Benefit / % ROI




Market Growth/Trend


1. Soda Ash (Product form: Solid)

Ores (trona and nahcolite) Salt

Yes Dependent on ore beneficiation economics ROI = 15%


Glass Chemicals Soaps and detergents.

Outlook: Slow Global (2.3%) Mature market.

None

2. Soda Bicarbonate (Product form: Solid)

Soda ash Carbon dioxide

Yes Dependent on soda ash cost ROI = 15%

None None Small Global – 3 million tons

Food Animal nutrient.


None

Table B-51: Other Products


Benefits





Market Growth/Trend


1. Formic Acid (Product form: Liquid)

Methanol and carbon monoxide

No Dependent on methanol cost ROI = 12%

Ammonium sulphate is produced as by-product

None Small Global – 600 kta

Animal feed and leather tanning segments.


None

2. Hydrochloric Acid (Product form: Liquid)

Chlorine Produced as by-product

No Dependent on Chlorine cost ROI = 12%

Supply driven business. Difficult to sustain as a merchant plant. Downstream integration is important

None Large Global – 75 million tons

Food Petroleum industry


Corrosive and hazardous

B-131



Benefits





Market Growth/Trend


3. Magnesium Chloride (Product form: Solid)

Magnesium hydroxide and hydrochloric acid. Magnesium hydroxide can be produced from sea water (brine) or from its natural form (brucite).

No Dependent on cost of naturally sourced magnesium hydroxide. ROI = 10%

None None Small

As deicing agent, also for handling of dust-forming and freezable cargoes in mining and metal industry; in oil and gas industry as a component of magnesia cement mortars; as fire retardant.

Outlook: Moderate Global (2.5%) Underdeveloped market.

None

4. Calcium Carbide (Product form: Solid)

Calcium oxide (lime) and carbon (coke)

Only, if economics are attractive enough for investment in downstream vinyl chain.

Dependent on availability of low cost coke / coal. ROI = 10%


VCM / PVC Acetylene

Outlook: Slow Global (2.2%) Mature market.

Hazardous and corrosive. Emits flammable gases when in contact with water. To be stored in closed container.

B-132


Value Chain Ranking We have scored the derivatives above from the perspectives of feedstock availability, industry utilisation, market attractiveness, import substitution, strategic benefits, commercial / technology issues and risk factors. For each of these scoring criteria, Jacobs Consultancy has assumed a value chain weighting as follows for all of those factors that are associated with:

1. Feedstock availability = 20%

2. Current industry utilization = 5%

3. Market volumes (Ethiopia and neighbouring countries) = 15%

4. Global market outlook = 15%

5. Import substitution benefit = 10%

6. Return on Investment = 5%

7. Strategic benefit = 10%

8. Commercial / technology issues = 10%

9. Risk = 10% The aim being to provide an overall high weighting to projects which meets these key criteria. Each product within the value chain was scored on the following criteria:

1.00 – highest/most attractive 0.75 0.50 – average 0.25 0.00 – lowest/least attractive

Considering the overall scores, the following table B-52 indicates that the value chain/product combinations that are recommended for further detailed evaluation are:

B-133


Table B-52: Aggregate Score Card by Product (Sorted in descending order within value chain)

Products Feedstock Availability

Current Industry

Utilisation Market

Volumes Market Outlook

Import Substitution

Benefit Return on

Investment Strategic Benefits

Commercial/ Technology

Issues Risk Total

Score

Weighting Factor => 20% 5% 15% 15% 10% 5% 10% 10% 10% 100%

Ethylene Chain

HDPE 0.75 0.50 1.00 0.75 0.50 0.50 1.00 0.75 0.75 76.25 LLDPE 0.75 0.75 0.50 0.75 0.50 0.75 1.00 0.75 0.75 71.25 EO/MEG 0.75 0.75 0.00 1.00 0.00 0.50 1.00 0.75 0.75 61.25 EO/EODs 0.75 0.25 0.00 1.00 0.00 0.50 0.75 0.75 0.75 56.25 LDPE 0.75 0.50 0.50 0.00 0.50 0.50 0.75 0.75 0.50 52.50 EVA 0.50 0.00 0.00 0.50 0.00 0.75 1.00 0.75 0.50 43.75 Ethanolamines 0.50 0.00 0.00 0.50 0.00 1.00 0.75 0.75 0.50 42.50 Ethylene Glycol Ethers 0.50 0.00 0.00 0.50 0.00 0.75 0.75 0.75 0.50 41.25 Ethylene Glycol Butyl Ethers 0.50 0.00 0.00 0.50 0.00 0.75 0.75 0.75 0.50 41.25 Ethylenediaminetetraacetic acid 0.50 0.00 0.00 0.25 0.00 0.75 0.50 0.75 0.50 35.00

Propylene Chain

Polypropylene 0.75 0.50 1.00 0.50 0.75 0.25 1.00 0.75 1.00 76.25 Polyols 0.50 0.50 0.00 0.75 0.00 0.75 1.00 0.75 0.75 52.50 Propylene Oxide 0.75 0.75 0.00 0.50 0.00 0.75 1.00 0.50 0.50 50.00 Acrylic Acid 0.75 0.75 0.00 0.75 0.00 1.00 0.75 0.25 0.25 47.50 Acrylate Ester 0.75 0.75 0.00 0.75 0.00 1.00 0.75 0.25 0.25 47.50 Oxo Alcohols 0.50 0.75 0.00 0.75 0.00 0.75 0.75 0.50 0.50 46.25 Glycerine 0.50 0.50 0.00 0.50 0.00 0.50 0.50 0.75 1.00 45.00 Propylene Glycol 0.50 0.50 0.00 0.50 0.00 1.00 0.50 0.75 0.75 45.00 EPDM 0.50 0.50 0.00 0.75 0.00 0.25 0.25 0.75 0.75 42.50

B-134



Current Industry

Utilisation Market


Import Substitution

Benefit Return on



Issues Risk Total

Score


2 Ethyl Hexanoic Acid 0.50 0.50 0.00 0.50 0.00 0.75 0.25 0.75 0.75 41.25 Di Octyl Phthalate 0.50 0.50 0.00 0.50 0.00 0.75 0.25 0.75 0.75 41.25 Acetone 0.75 0.50 0.00 0.25 0.00 0.25 0.25 0.75 0.75 40.00 Iso Propyl Alcohol 0.75 0.50 0.00 0.25 0.00 0.25 0.25 0.75 0.75 40.00 EPR 0.50 0.50 0.00 0.50 0.00 0.50 0.25 0.75 0.75 40.00 N-Methyl Pyrrolidone 0.50 0.50 0.00 0.50 0.00 0.75 0.50 0.50 0.50 38.75 Acrylonitrile 0.50 0.50 0.00 0.25 0.00 0.25 0.50 0.75 0.75 37.50

Butadiene Chain

Butadiene 0.75 0.75 0.00 0.50 0.00 1.00 1.00 0.75 0.75 56.25 Polybutadiene Rubber 0.50 0.75 0.00 1.00 0.00 1.00 0.50 1.00 0.75 56.25 Styrene Butadiene Rubber 0.50 0.75 0.00 0.50 0.00 0.50 0.75 1.00 0.75 48.75 Acrylonitrile Butadiene Styrene 0.50 0.50 0.00 0.50 0.00 0.75 0.75 1.00 0.50 46.25 Nitrile Rubber 0.50 0.50 0.00 0.50 0.00 0.75 0.50 1.00 0.50 43.75 Maleic Anhydride 0.50 0.50 0.00 0.50 0.00 0.50 0.25 1.00 0.75 42.50 Polymethyl Methacrylate 0.50 0.50 0.00 0.50 0.00 0.75 0.50 0.75 0.50 41.25 Methyl Methacrylate 0.50 0.50 0.00 0.50 0.00 0.75 0.50 0.50 0.50 38.75 Methyl Ethyl Ketone 0.25 0.25 0.00 0.50 0.00 0.50 0.50 0.75 0.75 36.25

Aromatic Chain

Polyethylene Terephthalate 0.25 0.25 0.50 0.50 0.50 0.1 1.00 0.50 0.50 46.75 Purified Terephthalic Acid 0.25 0.25 0.50 0.50 0.50 0.1 1.00 0.50 0.50 46.75 Linear Alkyl Benzene 0.25 0.75 0.50 0.50 0.25 0.25 1.00 0.75 0.75 52.50 Toluene 0.25 0.25 0.25 0.50 0.00 0.25 1.00 1.00 1.00 48.75

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Current Industry

Utilisation Market


Import Substitution

Benefit Return on



Issues Risk Total

Score


Paraxylene 0.25 0.50 0.00 1.00 0.00 0.10 1.00 0.50 1.00 48.00 Polyurethane 0.25 0.50 0.00 0.75 0.00 1.00 1.00 0.75 1.00 51.25 Benzene 0.50 0.50 0.00 0.25 0.00 0.50 1.00 1.00 1.00 48.75 Isocyanates 0.25 0.50 0.00 0.75 0.00 0.25 1.00 0.50 1.00 45.00 Nitrobenzene 0.25 0.50 0.00 0.50 0.00 0.75 0.75 0.75 1.00 43.75 Aniline 0.25 0.50 0.00 0.50 0.00 0.50 0.75 0.75 1.00 42.50 Bisphenol A 0.50 0.50 0.00 0.50 0.00 0.25 0.50 1.00 0.50 41.25 Cyclohexane 0.50 0.75 0.00 0.25 0.00 0.25 0.25 1.00 1.00 41.25 Phenol 0.50 0.50 0.00 0.25 0.00 0.50 0.50 0.75 1.00 41.25 Styrene 0.25 0.75 0.00 0.25 0.00 0.50 0.75 1.00 0.75 40.00 Cumene 0.50 0.50 0.00 0.25 0.00 0.50 0.50 1.00 0.50 38.75 Expandable Polystyrene 0.25 0.00 0.00 0.50 0.00 0.75 0.50 1.00 0.75 38.75 Phthalic Anhydride 0.25 0.25 0.00 0.50 0.00 0.75 0.25 0.75 1.00 37.50 Polystyrene 0.25 0.25 0.00 0.25 0.00 0.75 0.50 1.00 0.50 33.75 Polycarbonate 0.25 0.75 0.00 0.25 0.00 0.25 0.50 0.25 0.50 26.25

Acetyl Chain

Acetic Acid 0.75 0.50 0.00 0.50 0.00 0.75 0.75 0.75 1.00 53.75 Vinyl Acetate Monomer 0.50 0.25 0.00 0.50 0.00 1.00 0.75 0.75 1.00 48.75 Polyvinyl Alcohol 0.50 0.25 0.00 0.25 0.00 0.75 0.75 0.75 1.00 43.75 Acetic Anhydride 0.50 0.75 0.00 0.25 0.00 0.50 0.50 0.75 1.00 42.50

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Current Industry

Utilisation Market


Import Substitution

Benefit Return on



Issues Risk Total

Score


Methanol Chain

Methanol 1.00 0.25 0.00 1.00 0.00 1.00 1.00 0.50 0.75 63.75 Formaldehyde 0.75 1.00 0.00 1.00 0.00 0.50 0.50 1.00 1.00 62.50 MTBE 0.50 0.25 0.00 1.00 0.50 0.50 0.50 1.00 1.00 1.25 PF/UF Resins 0.75 0.25 0.00 0.25 0.00 0.50 0.50 1.00 1.00 46.25 pMMA 0.25 0.50 0.00 1.00 0.00 0.50 0.25 1.00 0.50 42.50 MMA 0.25 0.50 0.00 1.00 0.00 0.50 0.25 0.75 0.50 40.00

Ammonia Chain

Urea 1.00 0.50 1.00 0.50 1.00 0.75 1.00 0.75 1.00 86.25 Ammonia 1.00 0.50 1.00 0.50 0.00 0.50 1.00 0.75 1.00 75.00 Diammonium Phosphate 0.50 0.00 0.50 0.25 0.25 0.50 0.75 0.75 1.00 51.25 Ammonium Sulphate 0.75 0.75 0.50 0.25 0.00 1.00 0.75 0.75 1.00 60.00 Monoammonium Phosphate 0.50 0.00 0.25 0.250 0.25 0.50 0.75 0.75 1.00 47.50 Superphosphate 0.75 0.50 0.50 0.25 0.00 0.75 0.75 0.75 1.00 57.50 Calcium Ammonium Nitrate 0.75 0.50 0.00 0.50 0.00 0.75 0.75 0.75 1.00 53.75 Nitric Acid 0.75 0.50 0.25 0.50 0.00 0.75 0.25 0.75 1.00 52.50 Ammonium Nitrate 0.75 0.00 0.50 0.25 0.00 0.25 0.75 0.75 1.00 52.50 Melamine 0.50 0.25 0.00 0.50 0.00 0.50 0.50 0.50 0.50 36.25

Chlor Alkali Chain

Polyvinyl Chloride 0.75 0.25 0.75 0.50 0.50 0.75 1.00 1.00 1.00 73.75 Vinyl Chloride Monomer 0.75 0.50 0.50 0.50 0.50 0.50 1.00 1.00 1.00 70.00 Caustic Soda 1.00 1.00 0.75 0.50 0.25 0.75 1.00 0.25 0.50 67.50

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Current Industry

Utilisation Market


Import Substitution

Benefit Return on



Issues Risk Total

Score


Ethylene Di-chloride 0.75 0.50 0.00 0.50 0.00 0.50 1.00 1.00 0.75 55.00 Chlorine 1.00 1.00 0.00 0.50 0.00 0.75 1.00 0.25 0.50 53.75 Epoxy Resins 0.50 0.25 0.00 0.50 0.00 1.00 0.75 1.00 0.75 48.75 Epichlorhydrin 0.50 0.25 0.00 0.50 0.00 0.50 0.75 0.25 0.50 36.25

Potash Chain

Muriate of Potash 1.00 0.50 0.50 0.75 0.00 0.75 1.00 0.75 1.00 72.50 Potassium Sulphate 1.00 0.50 0.00 0.50 0.00 0.50 1.00 0.75 1.00 60.00 Potassium Magnesium Sulphate 1.00 0.25 0.00 0.50 0.00 0.50 0.50 0.75 1.00 53.75 Potassium Nitrate 0.75 0.50 0.25 0.50 0.00 0.50 0.50 0.75 1.00 53.75 Caustic Potash 0.75 0.25 0.00 0.50 0.00 0.50 0.25 0.25 0.50 36.25

Bio-based Chain

Ethanol 1.00 0.50 0.25 1.00 0.25 0.75 1.00 0.50 0.50 67.50 Ethyl Acetate 0.75 0.25 0.00 0.50 0.00 0.75 0.50 1.00 0.50 47.50 Citric Acid 0.50 0.25 0.00 0.50 0.00 0.75 0.50 0.25 0.25 32.50

Sulphur Chain

Sulphuric Acid 1.00 0.50 0.25 0.75 0.00 0.75 1.00 0.75 1.00 68.75

Soda Ash Chain

Sodium Carbonate 1.00 0.75 0.50 0.25 0.50 0.75 1.00 0.75 1.00 71.25 Sodium Bicarbonate 1.00 0.75 0.25 1.00 0.00 0.75 0.50 0.75 1.00 68.75

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Current Industry

Utilisation Market


Import Substitution

Benefit Return on



Issues Risk Total

Score


Other Products

Formic acid 0.75 0.75 0.00 0.75 0.00 0.50 0.00 0.75 1.00 50.00 Hydrochloric acid 0.75 0.50 0.50 0.50 0.00 0.50 0.00 0.75 1.00 52.50 Magnesium Chloride 0.75 0.25 0.00 0.50 0.00 0.50 0.00 0.75 1.00 43.75 Calcium Carbide 0.75 0.25 0.00 0.25 0.00 0.50 0.50 0.50 1.00 42.50

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Considering the overall scores, Table B-53 indicates the products that are recommended for further detailed evaluation: Table B-53: Products Recommended for Investment in Ethiopia


Priority Long Term

Ethylene HDPE, LLDPE EO/MEG/EODs, LDPE/EVA Propylene PP PO/ Polyols Butadiene - Butadiene, SBR Acetyls - Acetic Acid, VAM, PVA Methanol Methanol Formaldehyde, MTBE




Other / Misc. Hydrochloric Acid Formic Acid It is recommended that while developing the configuration, investments in the priority products be considered first, with products with long term potential to be considered in next phase of investment.

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Price Forecast Methodology Trend Pricing Jacobs Consultancy's price forecasting methodology is based on consistent, interrelated forecasts for economic growth, demand for individual products, and energy supplies, capital costs and other such input prices. Prices are forecast by considering both manufacturing economics and future supply/demand relationships. This technique does not attempt to predict some of the short-term anomalies that will naturally occur in any market, but is used to deduce long-term trends, with pricing assumed to respond to fundamental economics over a period of years. This is comparable to the time frame usually adopted to analyze major capital investments. Our methodology for price forecasting involves the building up of cash production costs all the way down the production chain, from crude oil (or gas) to petrochemicals as is appropriate for the project. We break the production process into the following key steps:

• The conversion of crude oil in the refinery into hydrocarbon feeds usable by the fuels and petrochemical sectors.

• The conversion of base hydrocarbons (naphtha, LPG, etc.) to basic petrochemicals (olefins and aromatics) by cracking or reforming processes, with economics considered for appropriate plants.

• The further elaboration of these simple chemical moieties into secondary and tertiary petrochemicals (e.g. the conversion of ethylene into EDC and then in to PVC), with economics considered for appropriate plants in various global regions.

The price forecasts for a given product are usually estimated at a single location and then long-term price differentials are applied to estimate the prices in other major trading centers. Clearly, this is not a precise activity as no market is static. There are numerous reasons that drive price volatility including the following:

• New production capacity is brought on stream

• New, more competitive technologies are commercialized

• Planned and unplanned outages of existing capacity

• Chemical substitution effects that can have appreciable impacts on demand The use of annualized averages over a number of years seeks to minimize the impact of this volatility. The approach of modelling at one location and calculating prices in other locations using historic spreads generally involves less error than estimating a price for each region

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separately from separate analyses of the cost of production and margin. Conceptually, it is perhaps also more appropriate given the relative ease with which some chemicals are transported and traded in a global market. This methodology is less suitable for products that are traded only in very small amounts or by a very limited number of producers and buyers. This is because in such cases it is usually difficult to get reliable listed price data for these chemicals, so alternate methods for price forecasting are employed—such as the use of price spreads with related chemicals or other price correlations that have been developed with some historic data. Historic margins are calculated and long-term averages based on these figures are used to forecast future values. There may be a degree of adjustment of this long-term average if there are some structural changes underway within the industry that are expected to have a long-term impact on the industry. We take a long-term view because the market exerts a self-regulating force that maintains margins and other investment metrics at levels that oscillate around an average level over the long term. The margin we use in our analyses is the cash flow return on assets (CFR), which is equal to the pre-tax delivered cash margin per ton of product as a percentage of the total installed cost (TIC) of the plant measured on a per ton of product basis. This cash margin term is thus measured relative to the cost of the plant and represents a metric that potential investors in new facilities would be interested in knowing.

i.e. CFR = Market Price ($/ton) ― Production Cost ($/ton) ― Delivery Cost ($/ton) TIC ($) / Production (tons)

To expand on a point that was made previously, our methodology for the trend case is based upon the analysis of petrochemical markets as exhibiting behavior intermediate between what economist term perfect competition and monopolistic competition. Under perfect competition a company produces identical and undifferentiated products from a large number of other producers, there are no entry barriers, and the demand curve for any individual producer is inelastic. This does not adequately describe even the most commoditized segments of the petrochemicals market: even commodity focused producers will produce a range of product grades, as no producer faces a wholly inelastic market for a single grade. However, it does address some liquid petrochemical products where there are relatively few or even single product specifications. True perfect competition does not exist in most manufacturing industries because there are generally an insufficient number of producers competing in the market and many logistical and product related barriers to perfect competition. The typical examples of perfect competition are in agricultural production. Under perfect competition, returns to any company are limited to the cost of capital for new investment since any excess return will bring in new entrants or cause existing players to expand their output. By contrast, under monopolistic competition, producers can segment the market into monopolies where there is more limited substitution of rival products. Such segmentation

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may be based on technological innovation, service or product branding. Based on these limited monopolies, price pressure is reduced and companies are able to recover a “monopoly rent” above their cost of capital. The ability to do this is limited, however, due to the ability of other producers to compete with similar products. Companies also bear a cost of such an operation: their cost of production is higher than under perfect competition due to the inherent inefficiencies of producing and marketing many grades of product. It is apparent from the above that most petrochemical markets are not as fully differentiated as monopolistic competition, as there are few examples of sustainable segmented monopolies and yet are typically more structured and less competitive than described under perfect competition. Clearly the commodity segments of petrochemical markets tend toward perfect competition, while the highly differentiated segments approach monopolistic competition. A conservative price forecasting scenario will assume that the prices pertaining in the most commoditized segments of the market are those that would apply under perfect competition. More differentiated products will maintain premium prices (and returns) above these levels. The “experience curve” is an observed phenomenon whereby the differential between product selling prices and raw material prices has been observed to decline roughly linearly against the logarithm of cumulative production, when observed over periods of over 10 years. This is due to:

• Improvements in process technology

• Increasing plant scale

• Fixed cost reductions

• Cost efficiencies in overheads and in purchased third party services (e.g. freight) We do not expect in future the significant process improvements that have occurred in the past. For example, it will always require at least one ton of propylene monomer to produce one ton of polypropylene. The major driver of future “experience effects” will be increasing plant scale over the forecast period. This will bring with it concomitant reductions in specific fixed costs. Plant sizes have steadily increased with time, as companies have sought to achieve reductions in the cost of production through increased capital and fixed cost efficiencies. This has been enabled by technological developments, supporting the construction of ever larger-scale facilities, and market growth, which has supported the output from these new world-scale plants. We have built such scale effects into all of our cost models and this, together with cost efficiencies in freight and overhead costs, provides an ongoing “experience effect” in our forward production cost projections.

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Oil Price Basis The following oil price scenario (all in current dollars) for FOB Brent crude oil has been considered in this Study:

• Base Case—US$60/bbl Trend price forecasts (in current dollars) for all feedstock and products being considered for the Project, for the base case pricing scenario have been prepared. While generating these price sets, 2% inflation has been considered for crude oil price. Figure B-9 shows the three oil price scenarios in current dollars relative to recent history. Figure B-9: Brent Oil Price Scenarios (US$/bbl, current dollars)

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Bren

t Cru

de O

il $/

bbl

Base Case $ 60/bbl

Forecast

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Forecast Market Prices Price forecasts include market prices as well as netback prices, i.e. appropriate market prices in Ethiopia and export market such as Western Europe that have had logistic, tariff and other direct costs deducted to arrive at the plant gate price. Jacobs Consultancy has estimated freight costs for all the chemicals that are a part of this study. We use a number of sources to assist in this, including freight data available from Drewry Shipping and ICIS were also used where required. The netback prices are derived from the forecast market prices as follows. The following are key assumptions for netback price calculations:

• All prices in Ethiopia are based on import parity

• Netback for polymers is for containers ex-works (i.e. polymer is fully packaged and containerized within the works)

• Appropriate freight for domestic market and export markets has been considered.

• For exports, appropriate port fees, insurance and ocean loss has been considered.

• A handling and terminating fee is also assumed for all products being imported and exported from Ethiopia.

Table B-54 shows the netback price forecasts for each key chemical/petrochemical.

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Table B-54: Ethiopia Netback Price Forecast

Price (US $) UNITS 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Natural Gas mmBtu 2.00 2.04 2.08 2.12 2.16 2.21 2.25 2.30 2.34 2.39 2.44 2.49 2.54 2.59 2.64 H. Naphtha ton 519.5 529.2 539.1 549.1 559.3 569.8 580.4 591.2 602.3 613.5 625.0 636.6 648.5 660.7 673.0 L. Naphtha ton 524.5 534.2 544.1 554.1 564.3 574.8 585.4 596.2 607.3 618.5 630.0 641.6 653.5 665.7 678.0 Acetone ton 744.2 753.6 763.2 774.8 786.6 798.7 810.9 823.4 836.1 849.0 862.2 875.5 889.2 903.0 917.1 Styrene ton 926.8 932.9 949.4 969.0 989.1 1009.5 1030.3 1051.5 1073.1 1095.1 1117.5 1140.4 1163.7 1187.4 1211.6 Butadiene ton 1077.3 1096.6 1116.3 1136.4 1156.9 1177.8 1199.1 1220.7 1242.8 1265.3 1288.2 1311.6 1335.4 1359.7 1384.4 eSBR 1500 ton 1543.5 1562.7 1585.1 1611.7 1639.4 1667.0 1695.8 1724.6 1754.5 1784.3 1815.4 1846.4 1878.7 1910.9 1944.4 eSBR 1700 ton 1323.5 1342.7 1365.1 1391.7 1419.4 1447.0 1475.8 1504.6 1534.5 1564.3 1595.4 1626.4 1658.7 1690.9 1724.4 PBR ton 1599.2 1649.6 1672.9 1699.8 1727.3 1755.4 1784.2 1813.6 1842.4 1871.9 1901.9 1932.5 1963.7 1995.5 2026.9 Butene-1 ton 1350.7 1352.9 1355.2 1357.4 1359.8 1362.2 1364.6 1367.1 1369.6 1372.2 1374.8 1377.5 1380.2 1383.0 1385.9 LPG (70/30) ton 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 526.8 LPG (mix) ton 519.2 527.6 536.1 544.8 553.6 562.7 571.8 581.2 590.7 600.5 610.4 620.4 630.7 641.2 651.9 Fatty Alcohols ton 909.1 931.8 955.5 979.7 1004.5 1029.8 1055.7 1082.2 1109.2 1136.9 1165.1 1194.0 1223.6 1253.7 1284.6 DEG ton 874.7 880.4 872.0 880.8 889.7 898.8 908.1 917.5 927.0 936.7 946.5 956.5 966.7 977.0 987.4 TEG ton 1248.1 1261.6 1198.7 1217.6 1236.8 1256.2 1276.0 1296.2 1316.6 1337.4 1358.5 1380.0 1401.8 1423.9 1446.5 Ethoxylate ton 1255.7 1273.8 1292.4 1316.3 1340.8 1365.8 1391.3 1417.4 1443.5 1470.1 1497.3 1525.1 1553.4 1582.3 1611.3 Methanol ton 273.2 270.9 273.7 276.4 280.0 283.7 287.4 291.2 294.8 298.6 302.4 306.2 310.1 314.0 317.9 Urea ton 230.1 220.6 221.7 222.8 225.4 228.1 230.9 233.6 236.5 239.1 241.8 244.5 247.3 250.1 253.0 Amm. Sulphate ton 175.8 169.0 170.3 171.6 174.2 176.8 179.5 182.2 185.0 187.7 190.5 193.3 196.2 199.1 202.1 Superphosphate ton 346.4 353.3 360.4 367.6 374.9 382.4 390.1 397.9 405.8 413.9 422.2 430.7 439.3 448.1 457.0 Amm. Nitrate ton 196.0 187.3 188.0 189.2 192.1 194.9 197.9 200.9 204.0 207.0 210.1 213.2 216.4 219.7 223.0 DAP/MAP ton 93.0 94.2 95.3 96.6 97.8 99.1 100.4 101.7 103.0 104.4 105.8 107.2 108.7 110.2 111.7 Hydrogen ton 1095.1 1109.0 1123.1 1137.5 1152.0 1166.7 1181.6 1196.8 1212.2 1227.7 1243.6 1259.6 1275.9 1292.3 1309.1 MDI ton 2884.4 2899.0 2913.8 2943.8 2974.2 3005.1 3036.3 3067.9 3100.0 3132.5 3165.5 3198.9 3232.7 3267.0 3301.7 TDI ton 2317.5 2331.1 2345.1 2368.2 2391.7 2415.5 2439.8 2464.4 2489.4 2514.9 2540.7 2567.0 2593.7 2620.9 2648.5 Sulphuric acid ton 90.0 91.8 93.6 95.5 97.4 99.4 101.4 103.4 105.4 107.6 109.7 111.9 114.1 116.4 118.8 Sulphur ton 120.0 122.4 124.8 127.3 129.9 132.5 135.1 137.8 140.6 143.4 146.3 149.2 152.2 155.2 158.3 Kerosene ton 516.0 527.2 539.0 550.9 563.2 575.7 588.5 601.6 615.0 628.7 642.7 657.0 671.6 686.5 701.8 Raffinate ton 571.5 582.1 593.0 604.0 615.3 626.7 638.4 650.3 662.5 674.9 687.5 700.3 713.4 726.7 740.3 Benzene ton 869.1 886.6 904.6 923.5 942.8 962.6 982.7 1003.2 1024.2 1045.5 1067.4 1089.6 1112.4 1135.6 1159.2

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Price (US $) UNITS 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 LAB ton 865.6 876.0 893.2 911.7 931.7 952.2 973.3 995.0 1015.8 1037.0 1058.7 1080.9 1103.6 1126.7 1149.2 Heavy alkylate ton 572.0 584.6 597.6 611.0 624.6 638.5 652.7 667.3 682.1 697.3 712.8 728.7 744.9 761.5 778.4 Toluene ton 754.4 768.5 782.9 797.8 813.0 828.5 844.3 860.4 876.8 893.5 910.6 928.0 945.7 963.8 982.3 o-Dichlorobenzene ton 586.7 598.1 609.7 622.0 634.5 647.2 660.2 673.5 687.1 700.9 715.0 729.4 744.1 759.1 774.4 PVC ton 691.0 698.3 705.6 716.7 727.9 739.4 751.2 763.2 775.4 787.9 800.7 813.7 827.0 840.5 854.3 Formaldehyde 37% ton 119.1 117.0 117.2 117.5 118.2 118.8 119.5 120.2 120.8 121.4 122.0 122.6 123.2 123.8 124.4 PF Resin ton 327.6 323.0 324.4 325.8 328.1 330.5 332.9 335.3 337.6 339.9 342.2 344.5 346.9 349.2 351.5 UF Resin ton 101.0 98.0 97.6 97.2 97.3 97.3 97.3 97.3 97.2 97.1 97.0 96.9 96.8 96.6 96.4 MTBE ton 634.6 645.4 656.4 667.7 679.1 690.8 702.6 714.7 727.1 739.7 752.5 765.6 778.9 792.5 806.3 Salt ton 30.0 30.6 31.2 31.8 32.5 33.1 33.8 34.5 35.1 35.9 36.6 37.3 38.0 38.8 39.6 Caustic Soda (100%) ton 368.3 370.8 373.3 377.3 381.4 385.5 389.7 394.0 398.3 402.6 407.0 411.5 416.0 420.6 425.2 m-xylene ton 840.8 855.4 870.3 885.7 901.4 917.4 933.7 950.4 967.3 984.6 1002.2 1020.2 1038.6 1057.2 1076.3 Acetic Acid ton 387.1 388.0 391.4 395.0 399.0 403.0 407.1 411.3 415.4 419.6 423.9 428.2 432.5 436.9 441.4 Phenol ton 1209.4 1229.2 1249.4 1274.7 1300.5 1326.8 1353.6 1381.0 1408.9 1437.3 1466.4 1496.0 1526.2 1557.0 1588.5 Hexamine ton 648.4 645.6 651.2 656.9 664.0 671.3 678.7 686.1 693.5 701.0 708.6 716.3 724.2 732.1 740.0 Polyol ton 1863.1 1907.6 1932.4 1969.6 2007.3 2045.7 2084.8 2124.5 2164.8 2205.9 2247.6 2290.0 2333.2 2377.0 2421.6 Glycerine ton 574.5 586.0 597.7 609.7 621.9 634.3 647.0 659.9 673.1 686.6 700.3 714.3 728.6 743.2 758.1 PET ton 694.1 706.2 719.4 734.7 750.5 766.5 782.8 799.5 816.6 834.0 851.7 869.8 888.3 907.2 926.5 HDPE ton 1175.8 1171.1 1181.3 1194.0 1209.8 1225.2 1241.5 1257.5 1274.3 1291.5 1308.3 1326.0 1344.0 1362.3 1380.4 LLDPE ton 1186.2 1184.0 1195.1 1209.1 1226.0 1242.5 1259.9 1277.0 1295.0 1313.3 1331.3 1350.1 1369.3 1388.8 1408.0 LDPE ton 1236.2 1234.0 1245.1 1259.1 1276.0 1292.5 1309.9 1327.0 1345.0 1363.3 1381.3 1400.1 1419.3 1438.8 1458.0 EVA ton 1326.2 1324.0 1335.1 1349.1 1366.0 1382.5 1399.9 1417.0 1435.0 1453.3 1471.3 1490.1 1509.3 1528.8 1548.0 PVAc ton 472.3 472.8 476.3 480.0 484.2 488.4 492.7 497.1 501.4 505.8 510.2 514.7 519.2 523.8 528.4 PVOH ton 472.3 472.8 476.3 480.0 484.2 488.4 492.7 497.1 501.4 505.8 510.2 514.7 519.2 523.8 528.4 PP-homo ton 1184.4 1196.4 1209.3 1226.0 1243.8 1261.2 1279.5 1297.5 1316.4 1335.7 1354.7 1374.6 1394.8 1415.4 1435.7 PP-copol ton 1244.4 1256.4 1269.3 1286.0 1303.8 1321.2 1339.5 1357.5 1376.4 1395.7 1414.7 1434.6 1454.8 1475.4 1495.7 Gasoline 92 RON ton 606.8 618.5 630.4 642.5 654.9 667.5 680.4 693.5 706.8 720.4 734.2 748.4 762.7 777.4 792.4

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Section C.

Technical Configuration

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Current Situation and Resource Profile Natural Resources and Feedstock Availability Coal Ethiopia’s coal reserves are estimated to be around 375 million tons — a modest amount on the global scale — for instance; the Republic of South Africa’s reserves are estimated at around 50 billion tons. According to the Geological Survey of Ethiopia, the potential deposit sites of coal in the country include: Dilbi-Moye basin coal deposits, Geba basin (Yayu) coal, Chilga basin coal and the Chida - Waka area coal. Ash content of the Ethiopian coal largely falls between 25% and 49%, with major volumes of the coal reserve having ash content in excess of 40% level. Overall, the domestic coal in Ethiopia is largely of lignite quality. Coal constitutes only about 0.4% of the total energy supply in Ethiopia, which clearly indicates its unexploited potential as an energy source. Currently, two companies are engaged in coal mining operations — East African Holdings and Delbi Coal Mining. The operations of Delbi Coal Mining are currently stopped due to technical problems, while an Indian mining company has shown interest in investing in this mine. Coal in Ethiopia is largely used for cement clinker and as a fuel for industrial boilers. A new coal gasification project is being planned to produce urea fertilizer through this route. Nevertheless, coal’s potential as a feedstock for high value chemical and petrochemical production in Ethiopia, through gasification route, remains unattractive mainly due to its high ash content. However, the ash content of the coal does not have much impact on the composition of the produced syngas. Gasifiers can be designed to remove the ash in solid or liquid (slag) form. Nevertheless, for a typical fixed bed gasifier, maximum ash content of around 30% is advisable for an economic operation within permissible environmental regulations. Ethiopian coal, with high ash content, may not be suitable for a gasification process to produce syngas required for methanol and downstream derivatives. Electricity Ethiopian Electric Power Corporation (EEPCO) and the Ethiopian Electric Utility (EEU) are the state-owned enterprises responsible for generation and distribution of electricity in Ethiopia. Hydro Electric Power (HEP) accounts for more than 86% of the total power generating capacity, which accounts for just over 2,300 MW. However, only around 20% of the Ethiopian population have access to electrical power, thus the industry is heavily supply constrained. The government, however, is embarking on an ambitious plan to change this, aiming to increase its generation capacity to about 37,000 MW by 2037.

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Ethiopia has Africa’s second highest HEP potential estimated at around 45,000 MW. Ethiopia’s geothermal power potential has been estimated at around 5,000 MW. The Gilgel Gibe-III HEP project has the potential of 1,870 MW. Electricity from renewable resources via potential and planned projects makes this a major national source of competitive advantage. With the cost of generating HEP the lowest of all options (at 0.38 Birr/Kwh for high voltage used in industrial sector), it is a unique opportunity to use this as a competitive advantage as an incentive for heavy, power-intensive industrialization. There are certain petrochemicals value chains that demand large amounts of power — electrolysis-based processes, for example, that power the chlor-alkali-to-PVC value chain and provide caustic soda. Natural Gas and Natural Gas Liquids (NGLs) Ethiopia has 6 petroleum basins which may contain commercial hydrocarbons: Ogaden, Abay, Gambella, Omo, Chew Bahir and Mekele. The Ogaden and the Blue Nile Basins are the major marine and continental-influenced sedimentary basins in Ethiopia for petroleum exploration. While potential reserves of natural gas and condensate are identified and are being further quantified, various prospecting continues in Ethiopia. With total natural gas reserves in Ethiopia estimated by the USA (source CIA Factbook 2015) to be around 25 billion cubic meters, it would account for only 0.2% of the total proven gas reserve in Africa (14.1 trillion cubic meters). However, the strikes in Hilala-Calub and El Kuran suggest this is a major underestimate (these two fields alone account for 1.2% of African gas). Figure C-1: Map of Natural Gas and Petroleum Reserves in Ethiopia

Source: PetroView

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Ethiopia currently produces very little natural gas or liquids mainly due to the lack of infrastructure. Nevertheless, this situation is likely to change in next few years as many international investors have taken initiative. The Hilala-Calub and El Kuran gas fields are likely to be exploited first. Ethiopia has planned to produce and export natural gas from these reserves from 2017 onwards. Several international firms have acquired licenses to explore more than 40 blocks, the majority of which are located in the south east, close to the Somali border. According to the Ministry of Mines, Petroleum and Natural Gas, the Hilala-Calub gas fields have deposits of 4.7 trillion cubic feet (133 billion cubic metres) of natural gas and 13.6 million barrels of associated liquids (yet to be confirmed), both discovered in the 1970s but not yet exploited. Chinese company Poly-GCL Petroleum Investments signed a production sharing deal with Ethiopian Government to develop this gas field and export it as LNG, through a pipeline extending from the region to the Djibouti port. Currently, supply of natural gas is not planned to be prioritised for power sector or for industrial use. In January 2017 Poly-GCL began drilling its sixth well in the Hilala -7 field on the Ethiopia-Somali border. This well is of interest as, to quote Motuma Mekassa (Minister of Mines) in January 2017, “it takes into consideration both petroleum and natural gas”. If so, this gives the potential for refining of oil in Ethiopia and the generation of heavier feedstocks (esp. naphtha) for petrochemical usage which will broaden the potential product slate and reduce the need for naphtha imports (see “Recommended Configurations” below). At present our analysis and cost modelling (see Section G) assumes naphtha imported from KSA at netforward values. The El Kuran gas field, licensed to a British oil firm – New Age, is estimated to have about 1.2 trillion cubic feet (34 billion cubic metres) of natural gas. New Age is considering joining the Poly-GCL gas pipeline for gas exports, but these plans are yet to be finalised. The Hilala-Calub and El Kuran gas fields offers a potential supply of 5.1 billion cubic meters and 1.1 billion cubic meters of natural gas supply on an annual basis (giving the fields a life of 25-30 years). Gas from these fields is relatively rich in extractable hydrocarbons (ethane, propane, butanes and hexanes) which can be used as a feedstock for a gas fed steam cracker to produce ethylene and other co-products — which would be critical for developing the petrochemical industry in Ethiopia. Ethiopia can extract relevant hydrocarbons (NGLs) from the gas and export the remaining gas as LNG. Extracted hydrocarbon volumes from these two fields can sustain a world-scale ethylene with a capacity of over 1 million tons. Furthermore, part of the gas can also be used to sustain ammonia/urea plants — the basic building blocks for fertilizer industry, which is critical for agriculture development in the country. Crude Oil / Refinery Fuels Ethiopia does not have significant proven oil reserves. In the south-eastern lowlands of Ethiopia, the CIA factbook indicates an estimated reserve of around 430,000 barrels (2016),

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although, there are reports published by private oil exploration companies, which suggests oil reserves in Ethiopia to be up to 2.7 billion barrels in South Omo valley. Furthermore, Ethiopia is also estimated to have 3.89 billion tons of oil shale (equivalent to 1 trillion barrels of oil) in Tigray State and around 100-120 million tons of oil shale in the Delbi region. These oil reserves largely remain untapped, although there are few private firms engaged in exploration of crude oil. Currently, Ethiopia does not have any oil refinery to meet domestic fuel demand. The country is importing about 2.6 million ton of petroleum oil and key refinery fuels such as gasoline, diesel, kerosene, jet fuel, fuel oil and LPG. Lack of local refining facility eliminates the availability of useful petrochemical feedstock such as naphtha. As per the press release, NOC (National Oil Ethiopia), marketer of petroleum products in Ethiopia, is planning to build a 20-30 kbpd refinery in Ethiopia, based on imported oil. The project is yet to be finalised. In Ethiopia’s neighbouring countries, Sudan, South Sudan, Uganda and Kenya have proven crude oil reserves – with refineries currently operating in Sudan, South Sudan, and Kenya. Uganda is planning a new refinery. A 550km fuel pipeline linking landlocked Ethiopia with Djibouti is being planned by US based Blackstone Group. In 2015, Ethiopia and Djibouti signed an agreement to carry on the construction of this fuel pipeline due to be completed in 2018. When this fuel pipeline project, also known as Horn of Africa pipeline (HOAP), becomes operational, it will transport diesel, gasoline and jet fuel to the Horn of African nations. Potash Ethiopia has significant potash reserves in the Crescent and Musley ore bodies in Dallol. Drilling and underground workings developed an ore reserve estimate for Musley of 66 million metric tons proven and 32 million metric tons probable, averaging 33% sylvite, with a cut-off grade of 25% sylvite and a 2.1 meter minimum mining thickness. Reserves in the “possible” category were estimated at 62 million metric tons, resulting in a total of 160 million metric tons of reserves in all categories. In May 2015, Circum Minerals Ltd, prospecting for potash mineral in the Danakil basin of the Afar Regional State, announced that it had discovered a major potash deposit estimated at 4.2 billion tons. Separately, Yara International has also confirmed major potash reserves in the same region, although on a much more modest scale. This announcement still being very recent, the true picture may take a year or two to fully emerge, but there is no doubt that this, together with phosphate resources available in the Middle East and elsewhere in near-Africa, opens up the possibility that together with nitrogen based fertilisers from natural gas, an integrated fertiliser plant built around N-P-K (Nitrogen-Phosphate-Potassium) could be a potential opportunity.

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It is likely that the potash production will start from 2019/20 onwards, largely destined for the export markets. Salt Rock salt occurs in the salt plain of north-western Ethiopia. As long ago as 1966 the reserve of rock salt within the plain was estimated to be more than three billion tons. The second potential source of salt is the brine lakes of Assale, Afdera and Badda. Of these the principal lake is Afdera, located about 125km south east of Dallol, at the southern limit of the Denakil depression. Salt production proceeds by pumping out brine into the man-made ponds and allowing it to evaporate with subsequent precipitation of salt ready for harvesting. Soda Ash In Ethiopia, soda ash is found in the sodic lake brine of Lake Abiyata and Lake Shala in the central main Ethiopian Rift (Oromia Region). Soda ash volumes from these two lakes are adequate to support a major mining operation. Currently a pilot plant (with 20 ktpa capacity) is mining soda ash from Lake Abiyata, which is used presently as raw material to manufacture caustic soda in Ziway for detergents, bottles and glass. It is estimated that current level of soda ash production in Ethiopia is around 3kta. MIDROC Ethiopia Technology Group has announced a 250kta soda ash project, which will ensure abundant availability of soda ash to downstream industries in Ethiopia. Sulphur Sulphur deposits are available in the Dallol mount and surrounding area, but are not mined currently. Ethiopia currently imports 4kta of sulphur to produce sulphuric acid and for other applications such as fertilizers. Sugar / Bio-ethanol Ethiopia is a significant producer of sugarcane and sugar. The State run Ethiopia Sugar Corporation (ESC) have taken initiatives in terms of setting up new sugar factories, reviving old sugar plants, and expanding sugar cultivation. Sugar production from six existing plants (of three sugar mills) was estimated to be about 330kt during 20114/15, while this is estimated to increase to about 400kt by 2015/16. Ethiopia still imports about 200kt of sugar. Ethiopia has blended a total of 59.6 million litres of bio-ethanol into gasoline during the past five years, saving $46.9 million of gasoline imports under its E10 policy. Ethanol is produced at the Metehara and Fincha sugar factories but expansion is underway at most of the country’s sugar mills. Nile Oil was the first company to begin ethanol blending with E5, but now Oil Libya and National Oil Company also blend ethanol. In 2014/15, Ethiopia produced and blended about 12.5 million litres of bio-ethanol into the gasoline pool – equivalent to around 10.4 kilotons. Whilst Ethiopia’s sugar production will continue to grow each year as processing capacity expands with new and revitalized

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processing operations coming online, this amount of ethanol is well below that required to supply an economical size of ethanol-to-ethylene (E2E) plant. Currently, the minimum economic size is 60-70 kilotons per year of ethylene and this would require 100 kilotons of ethylene – ten times the amount currently available in Ethiopia. Even at this scale an E2E operation cannot compete with even a modest scale of steam cracker in terms of ethylene cost and has no by-product credits to offset its costs. These units are only competitive for the production of ethylene where there is no alternative industrial scale route to ethylene production. Alternative Sources – Iron & Steel Sector During discussions in Addis at the time of the July 2017 presentation to the ministers the subject of naphthalene was raised as a possible feedstock for olefins production. Naphthalene can be obtained from the coke which is formed as a by-product of the reduction of iron ore in a blast furnace. However, there is no resemblance between naphtha and naphthalene – naphtha is a mixture of hydrocarbon liquids with carbon contents from C8 to C20. Naphthalene has a chemical formula of C10H8 and is used as a wetting agent/surfactant or as a fumigant for pest control (naphthalene is the principal component in ‘moth-balls’). It is not a suitable cracker feed. Conclusions – Natural Resources & Feedstock Availability It is evident that availability of raw material / feedstock at a competitive cost is critical for the chemical and petrochemical sector development. Review of the natural resources and feedstock situation in Ethiopia reveals some strengths and weaknesses from the perspective of sector development. This is summarized in Table C-1 below.

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Table C-1: Ethiopia – Availability of Natural Resources and Feedstock

Resource / Feedstock Potential Availability Comment Potential

for use?

Coal 375 million ton reserve Modest reserve, but high ash (lignite) quality may not be suitable for gasification.

Limited

Electricity Although there is a shortage for general use, it is assumed that adequate supply will be available for industries.

Hydroelectric power available at low cost (at 0.38 Birr/Kwh) – major strength for power intensive projects such as chlor-alkali.

Yes

Natural Gas and NGLs

Hilala-Calub = 5.1 bill. cu.m. per year El Kuran = 1.1 bill. cu.m. per year

Hydrocarbons extracted from gas can sustain a world-scale ethylene cracker. Gas availability also critical for producing ammonia/urea based fertilizers.

Yes

Crude oil Not proven (but reserves listed at 430 000 bbl by CIA Factbook 2016)

Oil reserves are untapped. Ethiopia needs to develop a local refinery to meets its fuel (diesel, gasoline) and feedstock (naphtha) needs. Possible potential to use projected fuel pipeline from Djibouti to Awash to import naphtha.

Not currently

Potash Significant reserves available

Good opportunity to develop NPK based fertilizers.

Yes

Salt Significant reserves available

Adequate availability to develop chlor-alkali value chain, including detergents.

Yes

Soda Ash Significant reserves available

Adequate availability. Yes

Ethanol Current supply = 12.5 million litres (equivalent to c.10 ktpa)

Supply likely to increase with new sugar mills under construction but a minimum economic size ethylene plant is currently producing 62.5 ktpa of ethylene based on ethanol dehydration. This would require 100 ktpa of ethanol. Process economics are critical in order to compete with ethane/naphtha based alternatives and clearly Ethiopia’s ethanol availability is an order of magnitude too small to be economical.

Not currently

It is imperative for Ethiopia to leverage and monetize its natural gas reserves as only gas offers the full potential and opportunity to develop its chemical and petrochemical sector. Ethiopia still has an option to extract hydrocarbons from the gas to develop the petrochemical sector and export the gas as LNG. Ethiopia does not have any other significant alternate feedstock such as crude oil or high quality coal. The country certainly needs a refinery to meets its basic fuel requirements. This could be based on local crude (should adequate reserves be identified and developed) and/or imported crude from nearby countries. Coal appears to be fit for fuel in the industrial and power sector, but certainly not for gasification plants. Other natural resources such as potash, salt and soda ash are abundant, but can sustain only inorganic chemical based derivatives, which can supplement its raw material requirement, but only to a limited extent.

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Overall, the chemical and petrochemical sector development in Ethiopia hinges on monetization to natural gas and NGL resources in the best possible manner.

Recommended Configurations This section presents the analysis work undertaken in respect of developing configuration cases to evaluate investment options for Ethiopia. Methodology The process of proposing a feed slate and derivative option for Ethiopia is the one that aims to optimise the following range of factors:

• Availability of appropriate feedstock, especially based on country’s natural resources – which can be monetised to generate significant contributions to the economy. We have considered all feedstock options available, considering its suitability and economic cost competitiveness to produce desired derivatives.

• Product market supply and demand outlook and the recommendations regarding particular products that are made in the previous report section.

• Strategic fit of these recommended products with the existing product portfolio of Ethiopia and/or the potential attractiveness for future requirement.

• Availability of suitable technologies for license.

• The current size of world scale units for the recommended derivatives and the potential for economies of scale.

• The potential for process integration between process units including vertical integration.

• Final derivative slate based on Ethiopia’s country strategy, cost competitiveness, marketing attractiveness, and value-to-Ethiopia and national industrial plans.

The following section discusses the key steps considered for developing configuration cases. Feedstock Options Primary feedstocks available in Ethiopia are coal, natural gas/NGLs (natural gas liquids), crude oil, potash, salt, soda ash and ethanol. In the initial phase of the study, we have evaluated availability as well as cost competitiveness of these feedstocks (see Cost Competitiveness Methodology at the end of

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this report section). Thus, feedstock constraint and cost economics were considered while generating feed slate options for various configurations. This is summarized as follows.

• Coal — Ethiopia has a 375 million ton coal reserve. This is a modest reserve from the global perspective, but high ash (lignite) quality will not be suitable for a gasification project. Hence, coal is not considered as a potential chemical feedstock.

• Natural gas / NGL (natural gas liquids) — Hydrocarbons extracted from gas can sustain a world-scale ethylene cracker. Gas fields located at Hilala-Calub (5.1 bill. cu.m.) and El Kuran (1.1 bill. cu.m.) are the key source for gas supply. Gas availability is also critical for producing ethylene based petrochemicals and ammonia/urea based fertilizers. Economic analysis indicates chemicals produced from local gas supply will be competitive. Hence, a natural gas-derived ethane cracker is considered for the configuration cases.

• Propane/Butane — Ethiopia does not have local supply of LPG from gas fields or from refineries. Furthermore, our cost competitiveness analysis indicates that LPG is not a competitive feed for cracker or PDH (propane dehydrogenation) plant. Hence, LPG is not considered as a potential feedstock.

• Naphtha — Gas volumes available from either of the gas fields may not be adequate to sustain a world scale cracker, and in this case using a supplementary heavier feed such as naphtha could be the route to pursue. As Ethiopia does not have any local refinery, naphtha will have to be imported from nearby countries or from Middle East. Cost competitiveness analysis indicates that naphtha is more economical than LPG as cracker feed.

• Salt — Ethiopia has significant salt reserves available. Hence, adequate availability of salt will be critical to develop chlor-alkali value chain, including detergents in Ethiopia.

• Electricity — Although there is a shortage for general use, it is assumed that adequate supply will be available for industries. Hydroelectric power available at low cost (at 0.38 Birr/Kwh) in Ethiopia will be critical for power intensive projects such as chlor-alkali.

• Ethanol — Currently, about 12.5 million litres of ethanol (around 10 thousand tons) is available locally. Supply is likely to increase with new sugar mills under construction. However, as this volume is not adequate to sustain a typical size of ethanol-to-ethylene plant (62.5kt) based on ethanol dehydration (being only enough for around one tenth of this volume), ethanol is not considered as a potential feedstock as our cost competitiveness analysis concludes that ethylene production through this process route is not economical.

Apart from these, Ethiopia does not have any other major feedstocks to develop petrochemical value chains.

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Thus, only natural gas, naphtha and salt are considered as key feedstocks to develop the feed slate options. Gas Processing for Cracker Feedstock Ethiopia has moderate gas volumes available at fields located at Hilala-Calub and El Kuran. Hydrocarbons (mainly ethane plus other C3-C6 alkane fractions) from this gas can be extracted using a cryogenic gas processing facility and this extracted hydrocarbon can be used as a feedstock for ethylene cracker. The natural gas subsequent to extraction can be injected back into the gas line, which can be used as an industrial fuel locally or can be exported in form of LNG (liquefied natural gas). This hydrocarbon extraction will lower the energy content of the gas only marginally and will not affect its specifications. Thus a combined facility of gas processing and a steam cracker forms a basic configuration to produce olefin monomers and other intermediates for production of final derivatives.

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Derivative Options The value chain ranking analysis carried out earlier in the report evaluates all major derivative options from the market perspectives. We have considered these short-listed products as a basis to develop the configuration cases. Table C-2 below summarises the key products recommended from the perspective of Ethiopian market. Table C-2: Petrochemical Derivative Options


Priority Long Term

Ethylene HDPE, LLDPE EO/MEG/EODs, LDPE/EVA

Propylene PP PO/ Polyols

Butadiene - Butadiene, SBR

Acetyls - Acetic Acid, VAM, PVA

Methanol Methanol Formaldehyde, MTBE

Ammonia Ammonia, Urea, Ammonium

Sulphate -

Chlor-alkali Chlorine, Caustic Soda, PVC -

Configuration Cases Configuration cases are developed considering likely gas volumes available from El Kuran and Hilala-Calub gas fields. Ethylene steam cracker unit and reformer will be the key process units producing major intermediates such as olefins (ethylene, propylene and butadiene), aromatics (benzene, toluene and xylenes) and methanol – which are the basic raw materials for downstream derivative plants. Cracker size anticipated will range from minimum economic size (550/600 kta) to medium size (800 kta) to a world scale size (1000 kta). A maximum gas supply volume is assumed from both the gas fields, subject to its achievable limits. Naphtha volume required will be adequate to achieve full ethylene production in the cracker. A sized steam reformer is also considered in the cases which has methanol derivatives as a part of the configuration. Table C-3 below defines the 10 configuration cases in terms of feedstock and cracker size.

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Table C-3: Configuration Cases – Cracker / Steam Reformer Options

Cases Ethylene

cracker size Natural Gas source Naphtha Required

Methane Steam Reformer (for methanol production)

Case 1 Minimum


El Kuran 448 kta

1.1 mtpa Yes

Case 1A Medium size


1.7 mtpa Yes

Case 1B Medium size


1.8 mtpa Yes


El Kuran 448 kta

2.4 mtpa Yes

Case 2 Minimum



0.8 mtpa Yes

Case 2A Medium size (800 kta)


1.3 mtpa Yes

Case 2B Medium size (800 kta)


1.4 mtpa Yes



2.0 mtpa Yes

Case 3 Minimum



Not required Yes

Case 3A World scale (1000 kta)


1.4 mtpa Yes

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Table C-4 below defines the 10 configuration cases in terms major derivative options. Table C-4: Configuration Cases – Key Derivative Options

Key Derivatives Case 1

Case 1A

Case 1B

Case 1C

Case 2

Case 2A

Case 2B

Case 2C

Case 3

Case 3A

Polyethylene Polypropylene EVA

Acetic Acid VAM/ PVAC/PVOH EO/MEG Ethoxylates Methanol Ammonia Ammonia based Fertilizers

Caustic Chlorine PVC MDI/TDI PO (TBA) Polyol Syn. Rubbers MTBE

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Table C-5 below gives the derivative capacity details for all configuration cases. Table C-5: Configuration Cases – Derivative Capacity


Case 1A

Case 1B

Case 1C

Case 2

Case 2A

Case 2B

Case 2C

Case 3

Case 3A

HDPE (gas phase) 300 374 - 300 300 400 - 300 300 300

LLDPE (butene-1) 282 300 - 300 282 302 - 300 - 301

LDPE (tube) - - 340 - - - 331 - - -

EVA (18%) - - 100 - - - 102 - - 50-

VAM 100 - 231 100 100 - 235 100 - 100

PVAc 48 - 101 48 48 - 103 48 - 43

PVOH 48 - 101 48 48 - 103 48 - 43

EO - - 400 372 - - 409 370 355 345

MEG - - 360 363 - - 370 401 417 345

Ethoxylates - - 148 116 - - 162 54 - 104

PP - homo (Gas) 279 210 - 300 188 291 - 247 - 261

PP - copol (Gas) - 200 - - - - - - - 0

Methanol 967 637 424 266 1250 1250 1250 1250 1250 1250

Acetic Acid - - - - - - 204 109 - 104

Ammonia - 322 102 425 - 286 609 425 - 367

Urea - 500 - 500 500 1000 - 500 - 400

Amm. Sulphate - 50 - 50 - 50 - 50 - 50

Superphosphate - 50 - 50 - 50 - 50 - 50

Amm. Nitrate - 50 - 50 - 50 - 50 - 50

CO - - 252 153 - - 253 207 - 204

Chlorine - 151 31 182 - 151 31 181 - 152

HCL Elect. - - 358 358 - 161 358 197 - 229 Weak Nitric Acid (64%) - 41 362 403 - 41 362 403 - 403

Conc. Nitric (98.5%) - - 220 220 - - 220 220 - 220

Nitrobenzene - - 249 249 - - 249 249 - 249

Aniline - - 187 187 - - 187 187 - 187

MDI - - 250 250 - - 250 250 - 250

DNT - - 304 304 - - 304 304 - 304

TDA - - 195 195 - - 195 195 - 195

TDI - - 250 250 - - 250 250 - 250

EDC - 209 - 209 - 209 - 209 - 167

VCM - 251 - 251 - 251 - 251 - 201

PVC - 250 - 250 - 250 - 250 - 200

Butane Splitter - - 313 145 - - 239 116 97 73

Butamer Unit - - 728 337 - - 555 270 226 169

PO (TBA) - - 499 231 - - 381 185 155 116

Polyol (flexible) - - 540 250 - - 412 200 168 126

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Case 1A

Case 1B

Case 1C

Case 2

Case 2A

Case 2B

Case 2C

Case 3

Case 3A

SBR (eSBR 1500) - - 85 75 - - 67 58 24 88

SBR (eSBR 1700) - - 85 76 - - 66 57 33 81

PBR - - - 50 - - - 47 - 0

Sulphuric Acid - 49 - 55 - 49 - 54 - 56 Formaldehyde 37% - - 197 197 - - 197 197 - 197

MTBE - 55 916 482 - 43 1100 595 465 390 A detailed financial model was developed to evaluate the viability of these configuration cases.

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Technology Considerations Introduction In this section we provide an overview of the sourcing and availability of the key licensable technologies that feature in the various technology configuration cases that are proposed for consideration by the Ethiopian authorities. Jacobs Consultancy Ltd. is a division of Jacobs Engineering but unlike most of the engineering companies, Jacobs is not involved in the promotion of specific licensed technologies and we can therefore offer an unbiased opinion on the significant technologies in the petrochemical sector. The key consideration is to ascertain that the value chains proposed are not restricted in any way by the non-availability of key technologies. The following sections will look at the principle units that appear in all/several of our proposed configurations and highlight any potential issues regarding availability and specifics of the Ethiopian situation Olefins – Ethylene and Propylene These two materials are the foundation stones of many petrochemical value chains. The method of production is highly dependent on the feedstock availability in the locality. The key process route to ethylene is the steam cracker. Depending on the local position a steam cracker can process naphtha (a by-product of oil refining which gives a broad spectrum of products including ethylene, propylene, butadiene etc.), ethane gas (which limits the product slate to ethylene), a mixed gas feed of ethane and propane (which extends the product slate to propylene) or heavier feeds such as gas oil (again this would be associated with refining of crude and extend the product slate into higher carbon content molecules). All the commercially available cracker designs can be readily specified to deal with any specific feedstock from the above and indeed any combination of feedstocks by having separate furnaces dedicated to feed types. As Ethiopia’s local feedstock advantage is natural gas with a relatively low ethane content this sets the cracker capacity limits but each of our configurations allows for a cracker of at least average scale for the industry and certainly not laggard scale. We are basing this on the ability to employ a gas processing step to recover the useful (ethane/propane) fractions from the natural gas reserves at El Kuran, Hilala and Calub before the balance of the gas stream is used for LNG export or local power etc. In order to achieve most of the suggested configurations however, we must also consider the import of naphtha to complete the full spectrum of advantageous petrochemical products as any option that is wholly reliant on the use of only Ethiopian gas would be limited primarily to modest scale ethylene production, uneconomically scaled propylene derivatives and a lack of aromatics capability.

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The global olefins sector is reliant for technology provision on the developments and experience of a small group of licensors and contractors that own and licence proprietary technologies the following players have provided the technology for almost all the olefin production units in the world:

• Kellogg Brown & Root (KBR)

• Linde AG

• Lummus Technology

• Shaw, Stone and Webster (SS&W)

• TPL/Technip (Coflexip)

Although the licensed processes differ in significant detail in the cracking furnace and quench system designs and to a lesser extent in the olefins recovery sections the fact is that all the licensors offer what is basically the same underlying process. All of them can provide leader scale installations and all are widely accepted in the industry. The key section where differences in proprietary technology are found and where development is generally focussed is in the “hot end” of the plant (i.e. around the furnaces themselves). The “cold end” (product recovery, distillation etc.) shows less difference between licensors’ offerings. A licensor would generally not accept a licence arrangement for only “hot end” or “cold end” for a new plant but in the case of plant expansions or revamps this can occur. Alternative Routes to Olefins Ethiopia’s methane rich natural gas reserves are a limit to the amount of ethane and propane available for conventional steam cracking to ethylene and propylene. There are some alternative routes to both however that we will touch on here. None of these are recommended at this stage for Ethiopia – either for reasons of their relative novelty and unfamiliarity (MTO) or the lack of economy of scale (propane dehydrogenation) Methanol to Olefins (MTO)

MTO was first developed by Exxon Mobil during the 1990s as an offshoot of the methanol-to gasoline (MTG) process that was being developed in Australasia. During the MTG development phase it was discovered that, at certain operating conditions and using a ZSM-5 catalyst, it was possible to make a significant portion of the product as ethylene rather than the target of gasoline range hydrocarbons. Exxon Mobil had no immediate interest in this process to ethylene but UOP took up the development in collaboration with Norsk Hydro and built a pilot unit in Norway. Another engineering group, Lurgi, developed its own variant of the process to push the reaction towards C3 and produce propylene (MTP) in response to the tendency in global ethylene production to focus on ethane feeds rather than heavier feeds which was leading to a shortage of propylene. The Chinese (Dalian Institute) have also pursued the development

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of this technology to exploit local gas from coal distillation since methanol can be derived from coal, gas or biomass. Propane Dehydrogenation (PDH)

PDH was developed initially from isobutane dehydrogenation but more recent processes are adaptations of butadiene production. PDH is economically feasible where low value propane is available, there is no propylene from steam cracking or refining and a local market exists for propylene derivatives. In this case, the second and third conditions may be correct (unless Ethiopia cracks E/P feed in the cracker or imports naphtha) but low value propane does not exist to the extent that it does in the Gulf states where propane gas associated with oil extraction has proven very low cost option for PDH for companies such as Tasnee and Natpet. The process was initially piloted in Northern Europe with an operation in Antwerp based on the Catofin process by Lummus. Early indications were not encouraging in terms of cost per ton. However, the application of PDH to very large scale units (500+ ktpa) has resulted in economies of scale for those with very low value propane. The process is now readily licensable from any of the following developers:

• UOP: Oleflex process

• Lummus: Catofin process

• Linde-BASF: PDH

• Snamprogetti – Yarsintez: FBD

• Krupp Uhde: STAR

Commodity Polymers This group of potential derivatives are based on the import substitution opportunities that Ethiopia offers which would give the chance to build plants that are approaching leader scale based on the output of an appropriately sized cracker based on gas and/or naphtha. Polyolefins are the most straightforward so we will deal with their technologies first.

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Polyethylene There are three basic categories of polyethylenes:

• low density polyethylene (LDPE),

• linear low density polyethylene (LLDPE),

• high density polyethylene (HDPE).

Figure C-2 shows the different molecular architectures of these key types of polyethylene. Figure C-2: Molecular Architecture of the 3 Basic Types of Polyethylene

LDPE exhibits very low growth characteristics as all the growth in packaging and other low density film applications is being absorbed by LLDPE. Therefore we will exclude LDPE from this analysis. LLDPE and HDPE also have the advantage that they can both be produced via a range of commercially available ‘swing’ processes which can produce both of these common polyethylenes. Polyethylenes are classified according to their density and molecular structure. Three key attributes are melt index (also termed melt flow rate (MFR)), density and comonomer. For HDPE, a further factor is of commercial significance – molecular weight distribution.

• The first commercial polyethylene, LDPE, typically has a density range of 0.910-0.935 grams per cubic centimetre and is often referred to as “branched” polyethylene. LDPE is produced by the free radical polymerization of ethylene. The molecular structure is characterized by the presence of many unsymmetrical branches (some as long as the polymer chain itself — referred to as long chain branching; some short — referred to as short chain branching) on the chain of carbon atoms. LDPE is also referred to as “high pressure” polyethylene, which relates to the very high plant operating pressures (2000-3000bar) required for reaction.

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• LLDPE and HDPE are referred to as linear polyethylenes because their molecular structure has a basic linear chain with the amount of short chain branching determining the density. Linear polymers are produced by the co-ordination polymerization of ethylene using transition metal complexes. The short chain branching varies with the quantity and type of comonomer used.

• LLDPE has many short side chain branches in its molecular structure (the short chains comprising the groups attached to the vinyl group in the comonomer — thus butene-1 provides ethyl short chain branches, hexene-1 butyl short chain branches and octene-1 hexyl short chain branches). LLDPE has a density of less than 0.925 grams per cubic centimetre. Polymers of density 0.925-0.94 comprise a separate intermediate class of polymers, termed medium density polyethylene (MDPE). MDPE is of limited commercial interest except for rotomoulding grades and some pipe grades. When the density falls below 0.915, the material is classified as very low density polyethylene (VLDPE) or ultra-low density polyethylene (ULDPE). With a more regular molecular structure, LLDPE is more crystalline than conventional LDPE at the same density. LLDPEs, while varying by comonomer type (butene-1, hexene-1 or octene-1), are all low crystallinity polymers of medium molecular weight (50K-100K Daltons). LLDPEs exhibit a relatively narrow range of melt flow rates (MFR) (most commercial polymers are in the range 0.5-4 for films and 20-30 for injection moulding), and density (most commercial polymers are in the range 0.918-0.925).

• Metallocene catalysts are of growing importance in LLDPE production, accounting for around 15% of the LLDPE market, with a growth rate of 10% p.a. Metallocene catalysts provide improved properties in LLDPE polymers due to narrower molecular weight distribution (improved mechanical properties) and due to more regular incorporation of comonomer (improved optical properties).

• HDPE has little or no side chain branching in its linear molecular structure. Therefore, it is more crystalline, and has densities which range between 0.94-0.965 grams per cubic centimetre. Commercial HDPE has molecular weights between 50K-750K Daltons.

• When the density is greater than 0.965, the material is called ultra-high molecular weight polyethylene (UHMW-PE). HMW HDPE has a molecular weight of 250K-750K Daltons, whereas UHMW-PE’s molecular weight is more than two million Daltons. UHMW-PE is a specialty product which is made in dedicated small plants for use in fibres and mouldings.

• While HDPE would at first sight appear to be the simplest and least complex form of polyethylene, in fact it is the most diverse and differentiated polymer. HDPEs not only span a wide range of density and melt flow rate (i.e. molecular weight), but also the molecular weight distribution (MWD) is important. The high molecular weight fractions of HDPE polymers provide excellent mechanical properties for films, pipes and mouldings, but are very difficult to process due to the very high viscosities of these polymers. Such very high molecular weight polymers need to be incorporated

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with low molecular weight species which act as internal lubricants and enable the polymer to be processed. Thus broad or very broad molecular weight distributions are needed where high molecular weight polymers are produced. Such very broad molecular weight distributions can either be obtained in a single reactor using a single catalyst (Phillips original discovery of chrome oxide on silica as a polyethylene catalyst provides such broad molecular weight distributions), or such a distribution can be created by a catalyst that produces a narrow molecular weight distribution in two (or more) reactors with different reaction conditions (in practice Ziegler-Natta catalysts are used with varying concentrations of hydrogen present. Hydrogen acts as a chain transfer agent to the Ziegler-Natta catalyst). Such a polymer is referred to as “bimodal” since it has two underlying molecular weight distributions — although in practice these may be heavily overlapped. With two reactors, the distribution of the comonomer between the low molecular weight and high molecular weight fractions can also be controlled. The low molecular weight fraction is prepared with little or no comonomer such that it has a high density, while the high molecular weight fraction is prepared with the inclusion of a higher proportion of comonomer to provide a lower density (lower crystallinity) and which contributes to reduced slow crack growth in PE pressure pipes, and improved environmental stress crack resistance. This is in contrast to the situation in unimodal resins where it is found that the comonomer concentrates in the low molecular weight fraction. Further very high molecular weights are needed to inhibit rapid crack propagation in PE pressure pipes, and it is for this reason that some licensors are now using more than two reactors, with a third reactor used to generate a small fraction of very high molecular weight polymer for the production of high performance pipe grades (PE100+). In bimodal polymers the presence of a small fraction of such very high molecular weight polymer does not adversely affect processability due to the large fraction of low molecular weight polymer already present in the resin.

• Bimodal (and so-called “tri-modal” or “multimodal”) HDPE polymers provide broader molecular weight distributions than can be achieved on single catalyst/reactor systems, with the polymer distribution concentrated around the high performance high molecular weight and processability enhancing low molecular weight fractions, with a lower abundance of intermediate molecular weights. Bimodal polymers are particularly valued in the pressure pipe, thin film and blow moulding sectors of the HDPE market.

• By contrast, narrow molecular weight distribution unimodal HDPE polymers are preferred for injection moulding. Other sectors such as fibre and tape require intermediate molecular weight distributions which can be produced by most technologies.

Bimodal HDPE polymers were first developed for the high molecular weight film market, where bimodal resins offer improved processability and dart drop impact strength, enabling the production of very thin films. This remains an important market, but the price premiums obtained for film grade resins have fallen such that today it is difficult to justify the additional

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capital for a bimodal plant based on the HD film market. Bimodal resins are also valued in the blow moulding market due to their high environmental stress crack resistance (‘ESCR’) and superior mechanical performance compared with unimodal resins; this enables downgauging of smaller blow mouldings and the production of large blow moulded items. However, the requirement to change dies has inhibited the take up of bimodal resins in the small container market and so the premium for bimodal resins has been small. Again, it is not possible to justify the additional investment based on this market alone. The one market where bimodal resins have been highly successful and where the competition from unimodal resins is limited to non-existent is in the pipe market. Early generations of PE pipe were made from LDPE, and later from medium density polyethylene (MDPE). Bimodal HDPE was first used in PE80 pipes, where it enabled significant downgauging compared with unimodal MDPE. However, with the advent of PE100 standard pipes, it is not possible to achieve these specifications with unimodal PE; only bimodal HDPE can achieve the key specifications (see below in Figure C-3). Figure C-3: PE100+ HDPE Pressure Pipe Grade Specifications

Hence today most bimodal HDPE plants are constructed to address the rapidly growing PE100 pressure pipe market for natural gas and potable water distribution. Such plants will also typically produce a range of other bimodal HDPE resins for other uses.

All polyethylene is produced in one of four basic reactor processes:

• high pressure — tubular and autoclave — for LDPE;

• solution — for LLDPE and HDPE;

• slurry — for HDPE (especially bimodal grades by cascade reactors);

• gas phase — for LLDPE and HDPE.

When combined with specific catalysts and comonomers, these reactor processes make products having the desired density and properties.

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Figure C-4: Molecular Architecture of the 3 Basic Types of Polyethylene

Figure C-5: Molecular Weight Distribution in High Density Polyethylenes — Unimodal, Classical Bimodal and Modern Multi-modal HDPE (especially for PE100 Pipe Grades)

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The contrasting molecular weight distribution patterns of unimodal, bimodal and multimodal HDPE grades are shown in Figure C-5 above. Bimodal resins are so called as they contain two distinct phases of polyethylene which are produced in 2 reactors operating in cascade (there is one process offering a two catalyst one reactor process but this process does not produce a fully compliant PE100 resin). One phase is low molecular weight and contains comonomer. This phase has poor mechanical properties but is readily processable. The other phase is a very high molecular weight resin (very good mechanical properties but poor processability) which contains little or no comonomer. In the extrusion section, these phases are homogenised to produce a resin which balances the properties of these two materials. Unlike conventional (unimodal resins), the extruder performs an additional function of homogenisation, for which duty it must be appropriately designed. Due to this increasing market demand, all major HDPE licensors now offer bimodal processes. The available polyethylene processes for both LLDPE and HDPE and their licensors are shown in Table C-6: Table C-6: Licensors and available LLDPE/HDPE process technologies – both ‘swing’ and

dedicated

Process Type

Zeigler Slurry Slurry Loop Gas Phase Solution LyondellBasell Equistar-Maruzen

Chevron Phillips Ineos Innovene G

Dow Dowlex

LyondellBasell Hostalen

Ineos Innovene S

LyondellBasell Spherilene

DSM Compact

Mitsui Mitsui CX

Mitsui EVOLUE

NOVA Advanced Sclairtech

Grace UNIPOL

NOVA Sclairtech

Westlake ENERGX

Grace PRODIGY

Legend LL/HD Swing HD Dedicated

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Polypropylene Polypropylene is a thermoplastic polymer with a low specific gravity, high stiffness, relatively high temperature resistance and good resistance to chemicals and fatigue. In the invention of isotactic polypropylene by Giulio Natta of Montedison in 1954, Natta discovered that propylene could be polymerized with a Ziegler catalyst to a new crystalline, stereoregular fraction. Polypropylene can be produced in three forms: isotactic, syndiotactic and atactic.

• Isotactic polypropylene is a polymer in which the propylene units are attached in a head to tail fashion and the methyl groups are aligned on the same side of the polymer backbone. This highly crystalline structure gives the polymer stiffness, good tensile strength and resistance to acids, alkalis and solvents.

• Syndiotactic polypropylene has methyl groups on alternating sides of the polymer chain in a regular pattern. The resultant polymer has low crystallinity and is difficult to make. Some syndiotactic polypropylene has been made recently using a metallocene catalyst. No significant commercial uses for this polymer have been identified.

• Atactic polypropylene is a non-crystalline polymer that is too soft and rubbery for most applications, similar in appearance and properties to an uncured elastomer.

The commercial polymer of interest is isotactic PP. This is the predominant form of PP produced. Each time the desired isotactic polypropylene is produced, some atactic polypropylene is also made. The objective is to keep the atactic component of the polypropylene to a minimum level. In older processes, atactic polymer had to be removed and was sold for use in hot melt adhesives, roofing and other specialized applications or incinerated. Today, atactic has to be produced on-purpose for these small applications. During the 1980s high-yield and higher selectivity catalysts were developed. These catalysts eliminated the need for atactic and catalyst residue removal. All modern PP processes are of this type. Developments in catalyst technology have continued to the present day to improve isotacticity, activity and molecular weight distribution. Polypropylene homopolymer has high stiffness, good clarity, low density (0.900 to 0.906 grams per cubic centimetre), good chemical resistance and relatively high temperature resistance. However, the homopolymer has poor impact resistance, especially at low temperatures. Polypropylene copolymers are produced to improve properties for certain applications.

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Random copolymers have ethylene molecules inserted randomly between the propylene molecules in the polymer chain. Random copolymers have higher impact resistance, higher clarity and more flexibility than homopolymers. The ethylene content is typically two to four percent by weight. Random copolymers are generally produced in the same process configuration as homopolymers. Block copolymers (sometimes referred to as impact copolymers) are composed of a block of propylene homopolymer, combined with a block of ethylene-propylene copolymer. These form two separate phases, resulting in an opaque polymer. Block copolymer has better impact strength at lower temperatures and higher melting points than random copolymer. In order to produce block copolymers, a second reactor is required for the process. Non-reactor produced impact copolymers have been made by compounding a homopolymer polypropylene with an EPDM or EP rubber (homopolymer “alloys”). The use of polypropylene has increased through the years because of its versatility and cost effectiveness. The largest market segments for polypropylene are in injection moulding and fibre and filaments. Key injection moulding applications are caps/closures, transport packing (crates) and thin wall injection moulded (TWIM) containers for rigid packaging. PP is also injection moulded for appliances, consumer products, medical products and auto parts. Polypropylene has become the dominant material in household containers. The main uses of polypropylene fibres are in fabrics and carpets (carpet backing and face yarn), as well as nonwoven fabrics for disposable applications and geotextiles. Blow moulding applications are mainly used for the manufacturing of containers and polypropylene sheet is generally used for packaging. The two processes primarily used to produce polypropylene are the gas phase process and the bulk slurry in liquid propylene process. In addition, there are a number of older slurry process plants in operation that use a saturated liquid hydrocarbon as a reaction medium. Concerning the addition of additives, there are a number of additives used in PP. Antioxidants are important, given the presence of a methyl side chain in the polymer that can be chemically attacked. Slip and anti-block agents are used, as needed, for specific grades requiring these properties. UV additives are used only where specifically needed for PP exposed to direct sunlight, as these are expensive. Peroxides are also used as an additive/catalyst to induce cracking in the extruder to obtain grades with an MFR >40 with narrow MWD. Such grades are used for fibres and thin wall injection moulding. Nucleated PP grades are commercially important, especially where stiffness and clarity are desired. PP demonstrates a high degree of supercooling when crystallised from the melt (around 50°C). Natural PP will crystallise in large crystals which reduce both optical and

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mechanical properties. Various nucleating agents can be added ranging from talc at the cheap end, but with limited performance, to specialised organic chemicals that have high performance. The structural differences between nucleated and non-nucleated PP grades are illustrated in Figure C-6. Figure C-6: Non-nucleated and Nucleated PP

Nucleated with Commercial Nucleating Agent

Sodium Benzoate Nucleated

Talc Nucleated

Non-Nucleated

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Compared with non-nucleated PP, nucleated PP exhibits the following advantages:

• Higher impact/stiffness balance

• Improved clarity

• Thinner end products

• No plate out problem

• Consistent shrinkage with different pigments selected.

• Cost savings for customer through light weighting

Polyvinylchloride (PVC) and the vinyls chain Whilst PVC remains a versatile polymer with a wide portfolio of applications and strengths in the construction sector, it is a very mature commodity and is ‘overbuilt’ in many regions relative to its growth opportunities. PVC is a downstream derivative of ethylene but unlike polyethylene only approximately half of its molecular structure is derived from ethylene. The balance comes from inorganic chemistry via chlorine and this gives PVC its much wider range of mechanical properties compared to the polyolefins and its ability to accept a variety of post reactor additives to enhance its performance. Although Ethiopia has a demonstrable need for PVC driven by its continued infrastructure development there are a number of cautionary points to note in entering the vinyls production landscape:

• Industry operating rates are already poor due to overbuilding, depressed demand and interpolymer competition from polyolefins. This has put pressure on prices and margins.

• Unlike other commodity polymers, there is no ‘sink’ or base load demand coming from China. China has more than enough PVC capacity for its own needs and is pushing cheap material based on coal into all other significant markets.

• Complexity – entering the vinyls business has a number of complications

o By-product caustic: for every ton of chlorine you use you will have 1.1 tons of caustic soda by-product to find a market for.

o Ethylene – very few vinyls operations are fully integrated to ethylene production. Ethiopia has the opportunity to enter the market with just such an integrated advantage.

o Power – electrolysis is reliant on large quantities of electrical power. In many of the major PVC producing regions the national networks offer the chlorine producers a discounted rate based on volume and other benefits if they are able

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to concentrate production in off-peak times thereby equalising demand and reducing peak & troughs in the management of power supply in the national grids. It is not evident that the Ethiopian network will be offering this benefit.

o Formulation – PVC cannot be processed at the temperature needed to form a workable ‘gel’ without incorporation of a number of additives. Without these, the polymer chains will decompose. Formulation expertise is also needed to progress application development and it is likely that to promote growth in the local PVC sector it will be necessary to build a compounding operation to provide ready formulated pelletised feedstock to the processors.

PVC PVC, often referred to as vinyl, is one of the most widely used commodity polymers. It is formed by the polymerisation of vinyl chloride monomer (VCM) via one of two main processes. These are suspension polymerisation and emulsion polymerisation (aka ‘paste’). Other processes are available (e.g. microsuspension, solution) but these are so small in global volume as to be insignificant in this overview. Suspension and emulsion types have very different applications and processing routes. Suspension is the most prevalent PVC polymer, having at least 90% of the global market. PVC’s competitive position in the spectrum of commodity polymers is largely due to its ability to be combined with a wide range of additives which enhance and extend its processability and physical performance. One of the key distinctions within the PVC application spectrum is the rigid/flexible split. Flexible PVC has been combined, generally through compounding, with plasticisers to impart a wide range of “softness” depending on the application. Here PVC competes for market share with polyolefins (polyethylene and polypropylene) and elastomeric materials in the main. Rigid PVC has no plasticisers and exploits the mechanical robustness of the base polymer (once compounded/processed) to secure markets in construction, industrial applications, electronic and electrical etc. where it competes with low end engineering polymers and non-polymeric alternatives such as concrete, wood, aluminium and steel. PVC has proven to be an extremely versatile material in both rigid and flexible forms. Rigid PVC applications include pipe and fittings (largely for water service - supply and drainage), profiles (for windows, doors and siding), film and sheet for packaging and construction uses and blow moulded containers for household and health and beauty products. Flexible PVC, in compounds characterised by a high loading of plasticisers, is used in a variety of applications including film and sheet for packaging, coated fabrics for upholstery and wall coverings, floor coverings for institutional and home use (bathrooms and kitchens), tubing for medical uses and wire and cable insulation. PVC can be fabricated into useful end products by a number of techniques, including extrusion, calendering, injection moulding, blow moulding, and coating. The largest amount of PVC is processed by extrusion to manufacture pipe, siding and window/door profiles, wire and cable insulation and rigid film/sheet. Calendering is used in processing flexible

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film/sheet for upholstery and wallpaper. Injection moulding is used primarily for pipe fittings and automotive/appliance parts. Coating of various substrates provides an impervious protective layer. PVC coated fabrics are used in protective clothing including outerwear, aprons, and gloves and for leathercloth and luggage applications. This is one of the key uses of emulsion PVC (ePVC). The application split between the various types of PVC is shown here in Figure C-7. Figure C-7: Global Application Split for PVC

Figure C-8 illustrates the vinyl’s industry value chain and it should be noted that this shows the key step between polymer and application is the ‘compounding step’. This is where product and application development are linked and, depending upon the status of the downstream processing sector it is likely that the developer would also need to consider incorporating a compounding operation downstream of the polymerisation step. This would be a key part of the PVC offering to the market as it will drive formulations that are customised to applications, especially new applications in the Ethiopian market. It is also important to recognise the importance of caustic soda to the profitability of PVC throughput the business cycle. The majority of chlorine is produced in response to the demand for PVC and caustic soda is a by-product of this driver. When PVC demand slackens in response to supply/demand pressures or financial impacts (in particular the effect of economic pressures on construction demand) electrolysis output is reined back to suit chlorine demand. This shortens the availability of caustic soda, pushing caustic prices

Floor Coverings5%

Tubes & Profiles5%

Wire & Cable8%

Other Flexible4%

Leathercloth/coatings

4%

Film Sheet8%

Profiles18%

Other Rigid3%

Pipes & Fittings27%

Blow Moulding8%

Film & Sheet10%

FLEXIBLEFLEXIBLE

RIGIDRIGID

PP: 40569/Sec_3

Floor Coverings5%

Tubes & Profiles5%

Wire & Cable8%

Other Flexible4%

Leathercloth/coatings

4%

Film Sheet8%

Profiles18%

Other Rigid3%

Pipes & Fittings27%

Blow Moulding8%

Film & Sheet10%

FLEXIBLEFLEXIBLE

RIGIDRIGID

PP: 40569/Sec_3

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upwards. This effect is a major contributor to the ability of integrated vinyls players to withstand cyclical downturns in the sector, reflecting the relatively fragile economics of PVC which is now a very mature commodity polymer.

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Figure C-8: Vinyl’s Value Chain

VINYLS INDUSTRY VALUE CHAIN

Cracker

Chlor-Alkali Unit

Chlorine

Caustic Soda

EDC Direct EDC Pyrolysis sPVC

ePVC

Compounds

Film

HOMO

COPOLYMER(15%)

MicroSuspEmulsion

SeededEmMiniEm

ContinuousEm

POWDER(10%)

GRANULESRIGID(45%)

FLEXIBLE(45%)

Calendaring

Other?

approx 90%

approx 10%

Coated FabricsConveyor Belts

Cushion/wear floorWall covering

Pipes/TubesWindow

Wire/CableFloor/WallAutoPartsPacking

Bottle/Container

MedicalSmartCard/ID

StationaryDecorating

PrintingFootware

ComputerHousingCoating

PipeWindowCable

PackagingAuto

Domestic AppMedical(tube/bag)

approx 80%

approx 12%

approx 8%

Salt

Naphtha / LPG /Ethane

EDC OxyChlorinationOxygen

HCl

EDC VCM

Co-Products

EDC/VCMProduction

PVC ResinProduction

PVC ResinProcessing

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Technology Availability

Technology for the entire chain from chlorine production via electrolysis to PVC polymer production is readily available through licensors. Chloralkali Step

In the chloralkali electrolysis process, an aqueous solution of sodium chloride is decomposed by direct current, producing chlorine, hydrogen, and sodium hydroxide (caustic soda) solution. The overall reaction is as follows:

2NaCl + 2H2O > Cl2 + H2 + 2NaOH Regardless of cell type (mercury, diaphragm or membrane – see below), the evolution of chlorine takes place at the anode (positive electrode) of the cell:

2Cl- > Cl2 + 2e- Based on cell type, hydrogen and the hydroxide ions to form sodium hydroxide (caustic soda) are generated, directly or indirectly, at the cathode (negative electrode) of the cell:

2H2O + 2e- > H2 + 2OH- In each of the three basic electrolytic processes for chlorine, the nature of the cathode reaction and the means of keeping the chlorine produced at the anode separate from the hydrogen and caustic soda produced at the cathode vary. Electrolytic hydrogen is very pure, >99.9 percent. Traces of oxygen can be reacted away over a platinum catalyst. Suitable uses include organic hydrogenation, catalytic reductions and ammonia and hydrogen chloride synthesis, as well as use as a fuel either for general purposes or specialised industrial uses in metallurgical or glass making operations. In the mercury cell process, sodium amalgam is produced at the cathode. A separate decomposer is used to react this amalgam with water to generate hydrogen gas and sodium hydroxide. The recirculated brine must be quite pure and supplemented with solid salt. Product chlorine is extremely pure, containing only a little oxygen and hydrogen, and can generally be used without further purification. The sodium hydroxide solution from the decomposer contains little chloride and is at a 50 weight percent concentration. Of the three processes, the mercury process uses the most electricity, but this is offset by its not requiring steam for caustic solution concentration. The process involves a large inventory of mercury, requiring tight workplace and environmental controls and the removal of mercury from the hydrogen gas and sodium hydroxide solution. In the diaphragm process, the anode area is separated from the cathode area by a permeable asbestos-based diaphragm. Brine obtained from wells can be used as the salt source. The relatively dilute diaphragm cell liquor (DCL), also known as caustic brine,

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leaving the cell must be freed of salt in an elaborate evaporative process, resulting in a 50 weight percent caustic solution that still contains up to 1 weight percent sodium chloride. This level of salt disqualifies the caustic from certain uses such as the manufacture of rayon and cellophane. The chlorine contains oxygen and is usually purified by liquefaction, phase separation, and re-evaporation. The consumption of electricity in the diaphragm cell process is about 15 percent less than for the mercury cell process, but the total energy consumption is higher because of the steam required to concentrate the cell liquor. In the membrane cell process, a cation-permeable membrane separates the anode and cathode areas, permitting passage only of sodium ions and a little water. As in the mercury cell process, the brine is dechlorinated and recirculated, thus solid salt is required to restore the brine. Brine purification for membrane cells includes additional treatment via ion exchange to extend the life of the expensive membranes. The cell liquor has a caustic concentration of 30-35 weight percent, requiring concentration to the usual product specification of 50 weight percent. Chloride content of the caustic is as low as with the mercury cell process. The chlorine product is freed of oxygen by liquefaction-evaporation. Membrane cell electricity consumption is the lowest of the three cell types, and steam consumption for caustic concentration is relatively small. Figure C-9 depicts the relative energy requirements of the three cell types. Figure C-9: Comparison of Energy Consumption of Chloralkali Processes

Advantages and disadvantages of the three chloralkali processes are shown in Table C-7.

0

500

1000

1500

2000

2500

3000

3500

Mercury Diaphragm/TreatedAsbestos

IX Membrane/Bipolar

Electrolysis Power Consumption Motor Power Consumption Steam Consumption

Ener

gy co

nsum

ption

/ACk

Wh/N

aOH

ton

XL: 40569 Sec_4

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Jacobs Consultancy would, under no circumstances, recommend that Ethiopia adopt the use of mercury cell technology. In the European Union all mercury cell rooms are being decommissioned by 2020 under an agreement between the EC, ECVM and Eurochlor (these latter being the industry associations of the PVC and chlorine producers) to limit the presence of mercury in the environment. Table C-7: Advantages and Disadvantages of Chloralkali Processes

Process Advantages Disadvantages

Diaphragm process

Use of well brine, low electrical energy consumption

Use of asbestos, high steam consumption for caustic concentration in expensive multistage evaporators, low purity caustic, low chlorine quality, cell sensitivity to pressure variations

Mercury process

50 percent caustic direct from cell, high purity chlorine and hydrogen, simple brine purification

Use of mercury, use of solid salt, expensive cell operation, costly environmental protection, large floor space. Being actively removed from use in several developed producing regions.

Membrane process

Low total energy consumption, low capital investment, inexpensive cell operation, high purity caustic, insensitivity to cell load variations and shutdowns, further improvements expected

Use of solid salt, high purity brine, high oxygen content in chlorine, cost of membranes

The diaphragm cell process is able to use inexpensive well brine and offers low electrical consumption; however, the process suffers from high steam consumption, low chlorine and caustic purities, and the environmental liabilities of handling asbestos for the diaphragms. The mercury cell process has significant environmental costs and liabilities and requires solid salt feedstock, while benefiting from avoiding caustic concentration and delivering high purity chlorine and hydrogen. The membrane cell process offers low total energy consumption and capital investment, but employs expensive membranes and requires solid salt to be converted into a high-purity brine feed. Relative capital costs for the three chloralkali processes are illustrated in Figure C-10.

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Figure C-10 : Comparison of Chloralkali Process Relative Construction Costs

Given its low capital cost, low energy consumption and high purity caustic product it is found that the membrane cell has become the most popular option for new build and mercury cell replacement. Indeed the removal of mercury cell technology from the European sector is generally referred to as ‘membranisation’. Licensors of Chloralkali Technology

Table C-8 indicates the major licensors of chloralkali technology. Table C-8: Chloralkali Technology Licensors

Company Approved Contractors Offering

Asahi Chemical Industry Ion exchange membrane technology Asahi Glass Membrane cell electrolysis Bayer Krupp-Uhde Diaphragm electrolysis Cellchem Cellchem Membrane cell technology Eltech Systems Corp. Membrane and diaphragm cells

including non-asbestos diaphragm and activated cathodes

INEOS Chlor Simon Carves, Fluor Daniel, Tecnicas Reunidas, CTCI

Monopolar and bipolar membrane cells

Krebbs Swiss, Krebs & Co. Krebbs Swiss Purification/liquefaction for storage Krupp-Uhde Krupp Uhde Membrane process Kvaerner Chemetics Kvaerner

0

20

40

60

80

100

120

Diaphragm Process Mercury Process Membrane Process

Brine Purification Electrolysis and Gas ProcessingD.C. Power Suppy Pollution AbatementCaustic Soda Evaporation

Relat

ive co

nstru

ction

costs

, per

cent

XL: 40569 Sec_4

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Lurgi Oel-Gas-Chemie Lurgi Membrane process, can be integrated with chlorine dioxide

Tokuyama Membrane cell electrolysis Tosoh Membrane cell EDC/VCM Step Ethylene-Based

The majority of commercial VCM technology utilises direct chlorination of ethylene to produce ethylene dichloride, followed by pyrolysis to VCM and HCI as shown in Table C-8 (above). In the oxychlorination step, the hydrogen chloride released by the subsequent pyrolysis of EDC is reacted with ethylene and oxygen to yield more EDC, and water. The commercialisation of oxychlorination technology paved the way for the “balanced process”, combining direct chlorination, oxychlorination, and EDC pyrolysis reactions. This widely used commercial process utilises the hydrogen chloride stream and produces only vinyl chloride and water. The principal features of the balanced process are:

• A direct chlorination section where ethylene dichloride (EDC) is produced from ethylene and chlorine.

• An oxychlorination section in which EDC is produced from ethylene, hydrogen chloride and oxygen.

• A purification section in which the crude EDC from both the direct and oxychlorination sections is purified to a pyrolysis grade specification.

• A pyrolysis section in which the purified EDC is thermally cracked to yield VCM, HCl, and unreacted EDC.

• A fractionation section in which pure VCM is separated from the other pyrolysis products (e.g. HCl), which are recycled.

Acetylene-Based

Vinyl chloride monomer (VCM) was first commercially produced by reacting acetylene with hydrogen chloride. Until the early 1950s, acetylene-based technology predominated. Due to the high energy input necessary to produce acetylene, the greenhouse gas production associated with this process and the hazards of handling it thereafter, ethylene-based routes have since become predominant. Nonetheless, there are specific circumstances where the acetylene route has advantages. In China, for example, almost 60 percent of the VCM capacity is based on acetylene. This is because many of the gas reserves in China are not ethane rich and at the same time China has large reserves of easily accessible coal. However, the Chinese authorities are taking

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steps to curtail further acetylene process development for the reasons stated above. As the oil price has fallen, any cost advantage of coal to acetylene to VCM has been eroded and there are also issues regarding by-product carry over into the finished polymer and toxicity concerns around the mercury based catalysts that are commonly used. Licensors of EDC/VCM Technology

The following Table C-9 and Table C-10 indicate the major licensors of EDC and VCM technology. Table C-9: EDC Licensors


ABB Lummus Global/Solvay

Any sPVC and stripping technology

Arkema Krebs-Speichim Cold direct chlorination, fluidised bed oxychlorination

INEOS Technologies Case by case Low and high temperature direct chlorination, fixed bed oxychlorination

Mitsui Chemicals Toyo, Chiyoda, JGC, Lurgi Direct chlorination and/or oxychlorination

OxyVinyls Washington (Raytheon) Direct chlorination and oxychlorination Tosoh Corp. Direct chlorination VinTec Krupp Uhde Direct chlorination and oxychlorination Table C-10: VCM Licensors


ABB Lummus Global/Solvay

Any

Arkema Krebs-Speichim Cold direct chlorination INEOS Technologies Case by case Thermal pyrolysis, integrated heat

recovery. Mitsui Chemicals Toyo, Chiyoda, JGC, Lurgi OxyVinyls Washington (Raytheon) Partec Resources KBR Low temperature EDC cracking Solvay Various Tosoh Corp. VinTec Krupp Uhde EDC cracking and VCM distillation PVC Step Polyvinyl chloride (PVC) was first prepared by Baumann in 1872 after its initial discovery in 1835 by Regnault. The material proved less than interesting due to its brittleness and tendency to decompose on heating. Commercial development was delayed until the early 1930s, when it was discovered that heating PVC with plasticisers gave a flexible material functionally equivalent to rubber and that the thermal stability of the polymer could be

C-40


extended by using metal salts to prevent decomposition. Rubber shortages due to World War II accelerated the use of plasticised PVC in such applications as wire and cable insulation and waterproofing of garment fabric. Improved performance of PVC and its low cost compared to rubber made PVC the material of choice even when the rubber shortage (owing to the war) was over. PVC is almost always converted into a compound by the incorporation of additives such as heat stabilisers, light stabilisers, lubricants, processing aids, impact modifiers, fillers, smoke suppressants and pigments. This is almost always accomplished by a post reactor mechanical process step. The major technique of polymerising vinyl chloride monomer (VCM) to PVC is by suspension polymerisation carried out in small droplets of monomer suspended in water. VCM is dispersed in water by agitation, and the droplets are stabilised by the action of a suspending agent such as a protective colloid. The activation for polymerisation comes from monomer soluble initiators that generate free radicals upon thermal decomposition. Other additives are also used, such as chain transfer agents, which, together with the polymerisation temperature, determine the polymer chain length and hence molecular weight. IN spite of efforts by the technology providers through the years to develop a continuous process the production of suspension PVC remains a batch process. Other small volume PVC types are produced by processes which include microsuspension, emulsion, and solution polymerisation. PVC production technology is now quite mature, with only minor ongoing improvements being made to the established process routes. As such, competitive advantage centres on such issues as:

• upstream integration into EDC/VCM production and chlorine production if power costs are favourable

• larger capacity reactors to obtain economies of scale in capital investment

• more sophisticated control systems to reduce production costs and provide better and more consistent product quality

• improved anti-scale agents to increase the number of batches between mechanical cleaning of the reactors

• improved production additive packages for better base resin properties

• improved compounding additive packages to improve performance and tailor compounds for new applications

• optimisation of initiators in combination with improved cooling systems to shorten batch times

• in-situ or ex-situ initiator production.

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Licensors of PVC Technology

The following Table C-11 indicates the major licensors of suspension PVC (sPVC). Table C-11: Suspension PVC Licensors


Chisso Corp. Chisso Engineering

Costain

sPVC and stripping technology

INEOS Technologies Case by case sPVC/ePVC and build up suppressants (Evicas 90)

Mitsui Chemicals Hitachi Zosen

Toyo Engineering

JGC

sPVC

Solvay/Solvin Various sPVC

Tosoh Corp. sPVC

Vestolit sPVC, ePVC and graft copolymers

Vinnolit Krupp Uhde sPVC, cyclones

Monoethylene Glycol (MEG) Production of MEG is generally carried out in series with the production of ethylene oxide from ethylene itself and the majority of significant installations are found adjacent to steam crackers. The reaction steps are:

• Oxidation of ethylene using pure oxygen to form ethylene oxide (EO)

• EO recovery and carbon dioxide removal

• Hydration of EO to EG

• Glycol refining to produce the MEG variant (and minimise the DEG component – diethylene glycol)

Technology for these operations can be readily licensed and the three leading providers are Dow Chemical, Scientific Design and Shell Global Solutions. Dow has been not only a technology provider but a producer of EO/MEG for many decades and its METEOR technology has developed out of its own operational experience. The current single reactor design was first seen in the mid-1990s and has the following advantages:

• Simple process with reduced equipment and ‘bulks’

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• No handling of concentrated EO

• Low volume reactor head design

• No EO/water mixing and associated control needs in the glycol reactor system

• EO purification system design reduces the risk of EO decomposition

Scientific Design (SD), though based in the USA, is jointly owned by SABIC and Sud-Chemie having been acquired in 2003. It has however been a developer of technology and a vendor of EO/EG catalysts systems since the 1950s. SD is probably better known for its promotion of EO/EG as a downstream activity paired with its technology to produce ethylene from ethanol (particularly bio-ethanol). It therefore finds its opportunities in locations where there is insufficient demand for a cracker project but where smaller ‘parcels’ of ethylene are required. SD has probably licensed about 75% of these so-called ‘non-captive’ EO/EG installations worldwide. Shell Global Solutions has two technology offerings for EO/MEG. The MASTER process is a conventional approach with catalytic oxidation of ethylene to EO followed by hydrolysis of EO into EG (requiring the removal of DEG and TEG –triethylene glycol – by-products). The OMEGA process eliminates the DEG/TEG production by a two-step process from EO to MEG in which EO is converted to ethylene carbonate and this is then catalytically hydrolysed to MEG only with no DEG/TEG by-products. Early work on the OMEGA approach was carried out by Union Carbide Corp but the first commercialisation was not until 2008 by Daesan in S Korea. Shell has its own large plant in Singapore (750 ktpa).

Gas Based Fertiliser Technology The common route to gas based fertilisers is shown in Figure C-11 in which natural gas is converted to ammonia via the Haber process (combining nitrogen from the air with hydrogen from natural gas to produce ammonia and carbon dioxide). This first step is then linked to a urea production unit which takes both the ammonia and the carbon dioxide and converts these into urea and water. The CO2 emissions from the plant itself are therefore reduced to that associated with generating power. These ‘balanced’ plants are the most common form of urea production seen today.

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Figure C-11: Typical Integrated Ammonia/Urea Production Flow Chart

Feedstock advantage is key to this process and the most recent plants tend to have been built at large scale (i.e. 1.2 million tons of urea pa plus) in regions with cheap gas with little alternative value. The final product of solid urea is either presented in the traditional prilled form or a granulated product. Prills are made by spraying the urea solution into the top of a tall ‘prilling tower’ with an opposing air flow. This spray drying produces long, thin pellets or prills. These are well suited to more manual farming methods (India, for example, much prefers this form) or older forms of mechanical distribution but they are friable and can degrade in transit producing a lot of dust. The granular form suits more modern farming methods with wider mechanical spreading equipment and is more robust in transit. All of the process steps are readily licensed via a small number of technology providers and engineering contractors as shown in Table C-12 below. These packages are largely driven by the existence of preferred contractor lists by the licensors or (in the case of Toyo) where the contractor himself has a proprietary technology for one or more reaction steps.

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Table C-12: Typical Ammonia/Urea License packages

CONTRACTOR AMMONIA LICENSOR UREA LICENSOR UREA GRANULATION LICENSOR

Mitsubishi Haldor Topsoe Snamprogetti UHDE Saipem Haldor Topsoe Snamprogetti UHDE Technip Haldor Topsoe Snamprogetti UHDE Tecnimont KBR Stamicarbon UHDE Samsung KBR Stamicarbon UHDE Toyo KBR Toyo Toyo

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Cost Competitiveness Methodology Introduction In this section, we examine the competitive position of a range of base molecules (fundamental chemical ‘building blocks’) from a theoretical Ethiopian chemical complex against various competing global producers using a variety of feedstocks. The base molecules within the review include:

• Ethylene

• Propylene

• Butadiene

• Aromatics & Para-xylene

• Methanol

• Ammonia

• Acetic Acid

The cost of production at an Ethiopian complex for each of the products listed above is compared to competing global producers and is based on the cash cost of production, which includes plant variable and fixed costs.

Overall Basis & Methodology To assess the relative cost competitiveness of producing the base molecules outlined above in Ethiopia, Jacobs Consultancy has prepared a quantitative analysis comparing competing producers’ cash costs at their respective plant locations. Main Assumptions For all of the base molecules we make the following key assumptions when estimating cash costs:

• Plant archetypes: The plants that have been selected for comparison are representative leader plants of the regions in which they are located in terms of capacity, technology, the level of vertical integration and other factors.

• Production routes: We have modelled various alternative production routes to base molecule production as is appropriate for each region. Using ethylene as an example, we have a Saudi Arabian ethane cracker that uses discounted feedstock; while for Western Europe we have modelled naphtha crackers sourcing feed from the

C-46


regional market. For China, we’ve considered an integrated naphtha cracker and a coal based MTO (methanol-to-olefin) unit. US production economics are based on a shale gas derived ethane cracker.

• Year of analysis: The year 2025 has been selected as it corresponds to the first year for the Ethiopia’s new facility by which they are likely to be fully stabilised in terms of operations.

• Feedstock and product pricing basis: Trend feedstock and product prices are taken for the Base Case oil price scenario (US$60/bbl).

• Cost Inflation: Future capital replacement costs (used in estimating maintenance costs) and labour costs have been inflated by an appropriate amount, typically 3% per annum.

No capital charges are included in the cost of production calculation. This is because in the event of a severe economic downturn there will be an oversupply of capacity and market prices will be set by the Short Run Marginal Cost of supply of the high cost producer. This is either the cash cost or, in an extreme situation, the variable cost, of the highest cost suppliers to the Project’s target markets. The aim of our analysis is to demonstrate that in such a scenario the Project can continue to operate profitably (though with much reduced profitability) and can maintain its operations. As a non-cash item, a capital charge is not a component of the above analysis. The financial charges which the Project has to pay but some of its competitors do not (debt having been repaid for older plants) should thus be accounted for elsewhere (i.e in ROI). Our cost models for international producers are based upon public domain information collected over many years. Cost Component Estimation The cash cost of delivering product, calculated on a per ton of product basis, are made from a consideration of a large number of parameters, the principal ones being those described below.

• Feedstock cost: Estimated as the product of price and consumption per ton of product. For ethylene, this represents cost of feedstock such as naphtha, ethane, propane, etc.

• Co-product credit (applicable to olefin economics): Estimated as the product of price and co-product yield per ton of product. Summed for all co-products.

• Utilities, catalysts and chemicals costs: Estimated as the requirement of each utility, catalyst or other additive chemicals per ton of product multiplied by their individual price. For the proposed project, the fuel, power and water costs are calculated on the basis of unit costs typically prevailing in Ethiopia.

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• Replacement capital cost: We estimate the replacement capital cost for each plant on the basis of a reference plant. We will adjust this capital cost for capacity, location, technology, year of EPC and other factors as appropriate and as permitted by the quality of the data. The replacement capital cost is used to estimate a number of fixed costs such as maintenance.

• Fixed costs: The estimate for the fixed cost of production is based on an estimate of the manpower required to operate the plant from which various other costs are scaled. Thus the starting point is an estimate of the total number of staff directly involved in the operation of the plant multiplied by their individual costs (expressed in $ per man-year). We estimate the number of operators, foremen and supervisors. The cost of employees that are engaged in overhead activities such as laboratory work, engineering, HR, IT, business planning and so on are estimated as a proportion of this cost.

• Maintenance cost: Estimated as a percentage of replacement capital cost typically 2.0% of ISBL + OSBL in the petrochemical industry. However this percentage does vary with process operation (e.g. solids handling) and age of the plant. The figure includes both the labour and material costs for ongoing maintenance as well as the normal periodic turnarounds but not for any plant capacity de-bottlenecking.

• Total Cost of Production: Summation of all the costs mentioned above:

= Feed cost - Co-product credits + Utilities + Fixed Cost

Results Ethylene Cash Cost Comparison This section compares the cost of production for ethylene in various regions with that of the proposed Project. The cost of comparison is based on the main assumptions above, but with additional specific assumptions as detailed below:

• Co-product prices for KSA Ethane crackers are priced at fuel value. This is because the co-products are uneconomic to extract due to the small volumes produced and therefore the relatively high capital cost required for separating these streams in to saleable products.

The cost of the following ethylene producers is assessed for comparison purposes.

• Ethiopian Naphtha Cracker

• Ethiopian Propane Cracker

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• Ethiopian Ethanol to Ethylene

• A lead USGC shale gas based ethane cracker

• A lead Western European naphtha cracker

• A lead Chinese naphtha cracker

• A lead Chinese coal based methanol-to-olefin unit

• A KSA integrated cracker using local ethane Table C-13 below illustrates the cost of production of these ethylene producers.

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Table C-13: Ethylene Cash Cost Comparison


Plant DescriptionFeedstock Ethane Ethane Naphtha Naphtha Naphtha Propane Coal Ethanol

Location KSA USGC Ethiopia WE China Ethiopia China Ethiopia

Technology Steam Cracker Ethane Steam Cracker Steam Cracker Steam Cracker Steam Cracker Methanol to Olefins Ethanol to Ethylene

Capacity 1400 800 600 1080 660 600 620 250

Operating Rate 95% 95% 95% 95% 95% 95% 95% 95%

Annual Production 1330 760 570 1026 627 570 589 238

Variable Costs 98 171 294 362 405 513 766 1220Raw Materials 112 264 2007 1947 2030 1339 794 1181By-products -49 -161 -1798 -1742 -1820 -890 -81 0Utility Costs 35 67 85 157 195 64 53 39

Fixed Costs 73 83 127 92 94 66 60 29Direct 48 56 83 61 62 42 40 19Indirect 25 27 44 31 32 24 20 10

Total Cash cost 171 254 421 454 498 579 827 1249

C-50


Figure C-12: Ethylene Cash Cost Comparison

0

200

400

600

800

1000

1200

1400


US$

/ton


C-51


The main points from Table C-13 and Figure C-12 are:

• The lowest cost archetypes are the world scale ethane crackers. This is largely due to their access to low cost feedstock (e.g. KSA associated ethane gas and USGC shale gas).

• Propane and Naphtha crackers have around twice the cost of production than that of the ethane crackers, with higher utility and feed costs. The feed costs are significantly higher for Naphtha crackers and this is not helped by the ethylene yield which is much lower than that of an ethane cracker. However this is partially offset by the credits given for the co-products produced.

• The other technology routes to produce ethylene have the highest costs of production (with E2E only included to illustrate its laggard position in this comparison):

o Methanol-to-Olefins

o Ethanol-to olefins

Although these routes are very different the yields and feed costs of both technologies make them the least competitive.

• The fixed costs of the various archetypes make up a relatively small proportion of each archetype’s cost of production (except where the overall cost of production is very small: KSA and USGC). This is largely due to the massive economies of scale that olefin plants have. Those plants with the lowest capacities will tend to suffer the highest costs (the exception being the ethanol to ethylene process).

Propylene Cash Cost Comparison This section compares the cost of production for propylene in various regions with that of the proposed project. The cost of comparison is based on the main assumptions above, but with additional specific assumptions as detailed below:

• Co product prices for KSA Mixed feed (E/P) crackers are priced at fuel value, due to being uneconomic to extract.

• The cost of production for propylene is calculated on a cost per ton of olefin basis.

The cost of the following propylene producers is assessed for comparison purposes.

• Ethiopian Propane Dehydrogenation Unit

• Ethiopian Naphtha Cracker

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• A lead USGC Propane Dehydrogenation Unit

• A lead Western European naphtha cracker

• A Chinese Propane Dehydrogenation Unit

• A Chinese coal based methanol-to-olefin unit

• A Chinese coal based methanol-to-propylene unit

• A KSA Propane Dehydrogenation Unit

• A KSA Naphtha Cracker

• A KSA integrated mixed feed cracker using local ethane and propane (70:30) Table C-15 below illustrates the cost of production of these propylene producers.

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Table C-14: Propylene Cash Cost Comparison


Plant DescriptionFeedstock Mixd Feed Ethane Naphtha Propane Ethane Naphtha Coal Ethane Coal Naphtha

Owner/Operator N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Location KSA USGC WE KSA China KSA China Ethiopia China Ethiopia

Technology Steam Cracker PDH Unit Steam Cracker PDH Unit PDH Unit Steam Cracker Methanol to Propylene PDH Methanol to Olefins Steam Cracker

Capacity 863 800 1625 460 600 993 620 471 620 1060

Operating Rate 95% 95% 95% 95% 95% 95% 95% 95% 95% 95%

Annual Production 820 760 1544 437 570 943 589 447 589 1007

Variable Costs 302 465 610 677 683 677 757 776 766 739Raw Materials 298 430 1296 660 616 1261 1065 752 794 1329By-products -28 0 -794 0 0 -620 -341 0 -81 -647Utility Costs 31 35 109 17 67 35 32 24 53 57

Fixed Costs 116 50 77 37 43 89 31 50 60 124Direct 79 33 51 24 29 59 20 33 40 81Indirect 37 16 26 13 15 30 10 17 20 43

Total Cash cost 418 514 687 714 727 766 787 826 827 862

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Figure C-13: Propylene Cash Cost Comparison

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• As with ethylene production the KSA cracker (this time fed with ethane/propane) has the lowest costs of production for olefins. This is due to the low cost ethane feedstock.

• This next lowest cost of production is the USGC PDH unit which also benefits from low cost propane feedstock.

• The remaining archetypes are all significantly more costly in producing olefins (or propylene), mainly due to higher feedstock costs.

• The Ethiopian archetypes are at the high cost end of this comparison with cost per ton of olefin in excess of US$800. This is largely due to the higher cost of the feedstock. In the case of the naphtha cracker this is because of importing Naphtha and exporting the additional by-products (the distance to market results in higher logistic costs and lower product value for exports).

• The high cost of production for Ethiopian naphtha crackers and PDH units indicates that targeting solely propylene production would not be cost competitive. However propylene is a valuable by-product from mixed feed crackers and should still be considered in an integrated Project.

• The PDH plants do not gain a by-product credit but do have a higher propylene yield than steam crackers. They also benefit from lower fixed costs than the competing technologies.

• Steam crackers have some of the highest fixed costs of the archetypes examined of which estimated maintenance cost will be a significant portion due to the high capital cost of these plants.

Butadiene Cash Cost Comparison This section compares the cost of production for butadiene in various regions with that of the proposed project. The cost comparison is based on the main assumptions above, but with additional specific assumptions as detailed below:

• The crude C4 feedstock requirement is calculated on a per ton of naphtha basis.

The cost of the following butadiene producers is assessed for comparison purposes.

• Ethiopian Extractive Distillation Unit

• China Extractive Distillation Unit

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• USGC Extractive Distillation Unit

• WE Extractive Distillation Unit

Table C-16 below illustrates the cost of production of these butadiene producers.

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Table C-15: Butadiene Cash Cost Comparison

Figure C-14: Butadiene Cash Cost Comparison


Plant DescriptionFeedstock Naphtha / CC4's Naphtha / CC4's Naphtha / CC4's Naphtha / CC4's

Owner/Operator N/A N/A N/A N/A

Location Ethiopia WE China USGC

Technology Extractive Distillation Extractive Distillation Extractive Distillation Extractive Distillation

Capacity 100 100 100 100

Operating Rate 95% 95% 95% 95%

Annual Production 95 95 95 95

Variable Costs 600 595 646 627Raw Materials 1268 1236 1282 1298By-products -698 -706 -706 -714Utility Costs 30 65 70 43

Fixed Costs 76 107 77 115Direct 35 53 37 58Indirect 41 54 40 56

Total Cash cost 676 702 723 742

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• All of the archetypes’ costs of production are relatively similar, partly due to them having the same process route.

• The Ethiopian archetype presents a competitive production option for Butadiene.

• Despite the lower feedstock prices in WE, the comparatively lower utility and lower direct labour costs give Ethiopia a marginal advantage. (In this 2025 cost of production basis the WE cracker is cheaper than USGC and China. The price forecast for naphtha in WE is lower than that for USGC and China, which is consistent with historic price differentials.)

• USGC becomes the highest cost producer as the results of higher utility and labour costs.

Overall, the low cost of feedstock, labour and utilities in Ethiopia provide it with a competitive position in butadiene production. Aromatics / Paraxylene Cash Cost Comparison This section compares the cost of production for Aromatics / Para-xylene in various regions with that of the proposed project. The cost of the following Aromatics / Para-xylene producers is assessed for comparison purposes.

• Ethiopian Naphtha feed

• Ethiopian Virgin Xylene feed

• Ethiopia Toluene feed

• ME Naphtha feed

• China Naphtha feed

• WE Naphtha feed

• WE Virgin Xylene feed

• WE Toluene feed

• USGC Virgin Xylene feed

• USGC Toluene feed

Table C-17 below illustrates the cost of production of these Aromatics / Para-xylene producers.

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Table C-16: Aromatics / PX Cash Cost Comparison


Plant DescriptionFeedstock Naphtha Naphtha Naphtha Naphtha Virgin Xylene Ethane VX Ethanol Toluene Ethane

Owner/Operator N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Location Ethiopia WE KSA China USGC USGC WE Ethiopia WE Ethiopia

Technology Naphtha Feed Naphtha Feed Naphtha Feed Naphtha Feed Virgin Xylene Toluene Feed Virgin Xylene Toluene Feed Toluene Feed Virgin Xylene Feed

Capacity 180 560 400 250 890 340 250 125 140 250

Operating Rate 95% 95% 95% 95% 95% 95% 95% 95% 95% 95%

Annual Production 171 532 380 238 846 323 238 119 133 238

Variable Costs 404 489 496 539 902 912 954 942 980 1068Raw Materials 1759 1715 1670 1779 983 2138 1021 2300 2133 1144By-products -1381 -1283 -1192 -1307 -98 -1366 -96 -1471 -1356 -102Utility Costs 26 57 19 67 17 141 29 113 202 26

Fixed Costs 161 129 160 135 63 115 115 144 178 93Direct 97 79 98 82 39 72 72 88 112 57Indirect 64 50 62 52 24 42 43 56 66 36

Total Cash cost 564 618 656 674 964 1027 1069 1086 1158 1160

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Figure C-15: Aromatics / PX Cash Cost Comparison

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• The most cost competitive options for the production of Aromatics / PX use naphtha feedstock which benefit from high by-product credits.

• The alternative process routes are much less cost competitive due to high virgin xylene and toluene feedstock costs.

• The high utility requirements of the toluene fed process contribute to the higher cost of production for these archetypes.

• Despite the higher direct costs associated with the smaller scale Ethiopian naphtha fed unit, the lower net feed costs (after accounting for by-product credits) give the Ethiopian naphtha archetype a cost benefit. The Ethiopian naphtha archetype also has the benefit of lower labour and utility costs relative to WE and China.

Overall, the naphtha route to Aromatics / PX is the most competitive, with Ethiopia performing favourably due to lower variable costs. It should be noted that the blue bar in the graph is again Net Feed/Product (i.e. feed cost minus by-product credit). Based on the credit derived from the high value (and volume) of the by-products the blue bar for the naphtha based processes is much smaller than for other processing options – credit is dependent on the netback value of the component. In KSA most by-products are only recycled as fuel hence smaller by-product credit and higher overall feed costs. Methanol Cash Cost Comparison This section compares the cost of production for methanol in various regions with that of the proposed project. The cost of the following methanol producers is assessed for comparison purposes.

• Ethiopia Natural Gas Reforming

• USGC Natural Gas Reforming

• Middle East Natural Gas Reforming

• Western Europe Natural Gas Reforming

• Russia Natural Gas Reforming

• Africa (Egypt) Natural Gas Reforming

• China Coal gasification route

Table C-17 below illustrates the cost of production of these methanol producers.

C-62


Table C-17: Methanol Cash Cost Comparison


Plant DescriptionFeedstock Natural Gas Natural Gas Natural Gas Natural Gas Natural Gas Natural Gas Coal

Location KSA Russia USGC Ethiopia Egypt WE China

Technology Methanol SMR Methanol SMR Methanol SMR Methanol SMR Methanol SMR Methanol SMR Methanol

Capacity 1650 900 1300 440 1300 440 1800

Operating Rate 95% 95% 95% 95% 95% 95% 95%

Annual Production 1568 855 1235 418 1235 418 1710

Variable Costs 53 104 115 95 183 177 265Raw Materials 49 100 110 93 179 166 151By-products 0 0 0 0 0 0 0Utility Costs 4 4 6 2 3 11 114

Fixed Costs 34 35 35 98 25 60 72Direct 16 16 17 44 11 29 17Indirect 18 19 18 55 14 31 55

Total Cash cost 87 139 150 193 208 237 337

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Figure C-16: Methanol Cash Cost Comparison

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The main points from Figure C-16 and Table C-17 are:

• The steam methane reforming route provides the most competitive route to methanol production.

• The Chinese MTO units are the least competitive facing high utility costs and maintenance costs (with maintenance costs a function of this technology’s high capital cost).

• The most competitive steam methane reforming archetypes are those with access to the lowest cost feedstock. Therefore we should not be surprised to see the KSA methanol plant as the lowest cost producer followed by Russia and the USGC. All of which benefit from very low cost gas feeds.

• The magnitude of the fixed costs for these plants is determined largely by the plant capacity so that those plants with large capacities benefit the most from economies of scale. The Western European and Ethiopian archetypes suffer from having the smallest capacities for which to divide the fixed costs by and thus have the highest fixed costs.

• Ethiopia has a competitive production cost compared to both the Egyptian and Western European plants. Indeed if Ethiopia invested in a worldscale capacity methanol plant it would likely be cost competitive with some of the lowest cost producers thanks to its priced advantaged feedstock.

Ammonia Cash Cost Comparison This section compares the cost of production for ammonia in various regions with that of the proposed project. The cost of the following ammonia producers is assessed for comparison purposes.





• Russia Natural Gas Reforming

• Africa (Nigeria) Natural Gas Reforming


Table C-18 below illustrates the cost of production of these ammonia producers.

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Table C-18: Ammonia Cash Cost Comparison


Plant DescriptionFeedstock Natural Gas Natural Gas Natural Gas Natural Gas Natural Gas Natural Gas Coal

Owner/Operator N/A N/A N/A N/A N/A N/A N/A

Location Nigeria KSA Russia Ethiopia USGC WE China

Technology Ammonia SMR Ammonia SMR Ammonia SMR Ammonia SMR Ammonia SMR Ammonia SMR Ammonia

Capacity 1452 1100 1800 360 800 690 660

Operating Rate 95% 95% 95% 95% 95% 95% 95%

Annual Production 1379 1045 1710 342 760 656 627

Variable Costs 65 60 119 97 126 199 156Raw Materials 47 47 99 92 109 167 132By-products 0 0 0 0 0 0 0Utility Costs 18 12 20 5 16 32 24

Fixed Costs 19 30 15 61 41 45 114Direct 9 14 7 27 20 22 81Indirect 10 16 8 34 21 24 34

Total Cash cost 84 90 134 158 167 244 270

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Figure C-17: Ammonia Cash Cost Comparison

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• As with methanol production the steam methane reforming route provides the most competitive route to ammonia production and the Chinese MTO units are the least competitive.

• The Nigerian and Saudi Arabian plants are the lowest cost producers of ammonia by a substantial margin with a clear cost advantage with access to very low priced feedstock.

• The USGC and Russian plants also have similar feed costs compared to Ethiopia but have some scale advantages over the Ethiopian plant.

• The smaller scale of the Ethiopian ammonia facility increases costs associated with maintenance and general overhead significantly, far outweighing the low labour costs seen in Ethiopia. As for methanol, an increased capacity approaching word scale would improve the overall cash cost position of the Ethiopian ammonia plant.

Overall, the higher feedstock and fixed costs associated with the Ethiopia ammonia production archetype result it being the higher cost methanol producer using natural gas. Acetic Acid Cash Cost Comparison This section compares the cost of production for acetic acid in various regions with that of the proposed project. The cost of the following integrated acetic acid producers is assessed for comparison purposes.






Table C-19 below illustrates the cost of production of these acetic acid producers.

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Table C-19: Acetic Acid Cash Cost Comparison


Plant DescriptionFeedstock MeOH & NG MeOH & NG MeOH & NG MeOH & NG Coal

Location KSA Ethiopia USGC WE China

Technology Acetic Acid Acetic Acid Acetic Acid Acetic Acid Acetic Acid

Capacity 493 250 493 493 616

Operating Rate 95% 95% 95% 95% 95%

Annual Production 468 238 468 468 585

Variable Costs 158 220 251 356 416Raw Materials 132 198 213 295 354By-products 0 0 0 0 0Utility Costs 26 22 37 60 61

Fixed Costs 77 80 70 71 47Direct 44 45 41 41 27Indirect 33 35 29 30 20

Total Cash cost 235 300 321 427 462

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Figure C-18: Acetic Acid Cash Cost Comparison

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• As with methanol and ammonia production the steam methane reforming route for CO production provides the most competitive route to acetic acid production and the Chinese coal gasification based methanol units are the least competitive.

• The Middle Eastern archetype has the lowest cost of production, namely due to the lower feedstock costs overall.

• The low gas price in the Middle East is used to produce both feedstocks for acetic acid: Methanol and CO, thus giving it a lower feedstock cost relative to its competitors being ~23% lower than the Ethiopian archetype.

• The coal based Chinese archetype is penalised with the higher cost methanol (via the coal route) and a high local natural gas price (~5.9 $/MMBtu) for CO production.

• The Ethiopian archetype has much lower labour and utility costs compared to ME and USGC.

The high local Ethiopian hydrogen price greatly reduces the cost of production for the CO used in acetic acid production. This reduces the net feedstock cost overall and provides Ethiopia with a competitive basis for Acetic Acid production. Overall, the Ethiopian archetype competes closely with the USGC in acetic acid manufacture due to the favourable net feedstock and reduced utility costs.

Summary The following points highlight the cost competitiveness of base chemical production in Ethiopia:

• Overall Ethiopia could be competitive in producing the following chemical building blocks:

o Ethylene: With a natural gas liquids (NGL) fed cracker is Ethiopia cost competitive, even though it is limited in capacity and economy of scale. This advantage is due to the feed being based on a relatively low natural gas price and the cracker yield resulting in a large volume (in comparison with an ethane only cracker) of valuable by-products. A mixed feed cracker (NGL/Naphtha) is also likely to be competitive, benefiting from the economies of scale afforded by a larger capacity cracker.

o Butadiene: Ethiopia has similar feedstock costs to competitors but benefits from relatively low power costs and labour rates

o Para-xylene: Ethiopian plants benefit from high values of the by-products (versus the cost of importing same), reducing net feedstock costs.

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o Acetic Acid: The by-product credit, gained from the high local hydrogen price, reduces the net feedstock costs for CO which is passed on to the downstream Acetic Acid plant reducing the overall cost of production.

• Ethiopia is less competitive in producing the following chemical building blocks:

o Propylene: Production of propylene via a naphtha only cracker is clearly not cost competitive in Ethiopia. However, a mixed feed cracker (NGL/Naphtha) will be cost competitive in olefin production overall, due to the NGL feedstock cost impact on ethylene costs.

o Methanol & Ammonia: The availability of low cost gas (though not comparable to global leader plants with access to stranded gas and “mega” scale capacities) make Ethiopian methanol and ammonia sufficiently competitive within the accessible market.

• There are some positive cost points for Ethiopian projects which include access to a relatively low cost feedstock, labour and power costs. Where market opportunities to build at world scale present themselves, these factors contribute to reducing both variable and fixed costs relative to competitors.

• However Ethiopia must target world scale plants to achieve economies of scale to be cost competitive. This will reduce the large fixed costs penalties incurred where derivatives are operating at sub world scale.

D-1


Section D.

Transport/Logistics Infrastructure

D-2


Introduction The several configurations set out in other sections of this report, give rise to a need to transport the raw materials and products to locations within Ethiopia where they can be processed into finished/semi-finished goods and then either distributed to the internal market place or exported via the conventional route through the port at Djibouti. The scenario here is similar to that experienced in the former Soviet Union where the hydrocarbon feedstocks were concentrated at the Eastern end of the territory whilst the demand and markets where situated around Moscow in the West. Here we see that Ethiopia has natural resources concentrated in the gas fields in the South East of the country but the centre of demand is around Addis Ababa. The dilemma is whether to build cost effective scale operations close by the feedstock source or to build market size related assets close to the market and transport feedstocks. In our experience, it is almost always more advantageous to build world scale at the feedstock source, than market scale at the demand point. To effectively exploit Ethiopia’s natural feedstock advantage we are looking to transport between 1,500 and 10,000 tons of products to Addis where it is most likely that entrepreneurially driven chemicals processing entities will be established. This represents between 150 and 1,100 truck movements per day out of the complex. A number of factors involved in logistics can be seen to impact Ethiopia’s competitiveness. These include:

• High logistic cost for the local producers — during our interviews in Addis we were informed about high local freight cost for moving industrial raw materials and products (for example, Potash trucking freight from Mekella to Addis Ababa (800km) is about $60/ton). This high cost will have a major bearing on the country’s cost competitiveness.

• Major shortcomings and challenges in the current situation (e.g. delays in delivery of goods, high cost, decline in productivity, inefficient work methods, and bureaucratic process for custom clearance, etc.) compile further losses in efficiency and competitiveness

We have become aware that a large potash fertilisers’ project – Allana Potash – sponsored by ICL has recently been cancelled. The company cited poor infrastructure and lack of government support as the key shortfalls. However, we are also aware that the company launched an initiative to have its tax position reviewed and the government was not willing to do so. To give a benchmark for comparison of Ethiopia’s current logistic performance in comparison to other countries in Africa and elsewhere, we have adopted the World Bank’s Logistic Performance Index, LPI.

D-3


Figure D-1 illustrates the concept in a comparison with the world’s leading performer under the definition of LPI – Germany. The benchmark scores a location on several KPIs:

• Customs performance

• Infrastructure

• Predominance of International shipments

• Logistics competence

• Ability of Tracking/Tracing

• Timeliness of deliveries/tasks

The figure shows that Ethiopia is outperformed by the Leader in all these aspects but the largest shortfall in performance is concerned with the lack of transport infrastructure. Overall, Ethiopia has an LPI of 2.7 versus Germany’s 4.2. Figure D-1: LPI Comparison – Ethiopia vs. Germany, 2014

Closer to home, the best player in Africa is South Africa. Figure D-2 shows the comparison to Ethiopia. Here again the infrastructure issue indicates where Ethiopia lags the furthest behind RSA but it is clear that even the best African performance – RSA’s LPI of 3.4 – falls well short of best international practice.

D-4


Figure D-2: LPI Comparison – Ethiopia vs. RSA, 2014

Ethiopia’s materials movements are also hindered by the fact that import of raw materials for chemicals production and export of products are handled through Djibouti as Figure D-3 shows; Djibouti’s performance versus international best practice is inferior even to Ethiopia’s which adds extra burden on the Ethiopian logistics situation. Djibouti has an LPI of just over 2 with performance in all aspects that is inferior to Ethiopia. Figure D-3: LPI Comparison – Djibouti vs. Germany, 2014

D-5


Existing Transport Infrastructure It is clear from our discussions in Addis and from our research, that the road and rail transport network in Ethiopia is largely focused on the rail link between Addis and Djibouti which has primarily been a product import route. There has been recent investment in this rail route such that it is now both dual track and international standard gauge but it has no real connection with the South Eastern region and its gas fields. The only infrastructural investment concerned with this has been the proposed – and Chinese sponsored – pipeline link to Djibouti in order to export the gas reserves to China. This is, in our opinion, not the most effective way of providing value-add to Ethiopian feedstocks in comparison to exploiting the gas to address the current import/export trade imbalance. There has been considerable publicity of late concerning the Modjo-Hawassa expressway development which has been sponsored by the World Bank and by China EXIM Bank and S Korea EXIM Bank. This is a 200 km expressway extending south from Addis and much has been made of its relevance to the Cairo – Cape Town highway. However, this bears no relevance to the already poor roadway from Addis to Djibouti nor does it address the requirement to move materials from the South East to Addis for processing and to Djibouti for export. Figure D-4: Existing Major Road Network in Ethiopia

D-6


This dilemma is highlighted in Figure D-4 which clearly shows the lack of road ways into and out of the South East which will be needed to maximise the development of gas derived products and the establishment of large scale industrial chemicals operations in that region. There is only one significant rail route in Ethiopia which is the one from Djibouti to Addis via Dire Dawa. This has been subject to improvement in the recent past but is of little use in terms of imports of large plant units to the gas-rich South Eastern regions or the movement of products from there to the likely processing sectors around Addis and their adjacent markets. Discussions with experts in the region have suggested that the Government of Ethiopia needs to consider one of the following options:

• Establish major road links between Addis and the South East such that plant items can be transported to the gas-rich regions and thence chemicals products transported to Addis for processing

• Provide a rail link between the Addis-Djibouti railroad and the South East for the exact same purpose with a suitable railhead being established at, say, Dire Dawa.

• Provide a gas pipeline from the South East to the railhead and a gas processing operation at the railhead in order facilitate the establishment of a major scale chemicals industrial complex at the railhead and to utilise the Djibouti-Addis rail link to permit both internal sale and exports.

Jacobs Consultancy Limited is not routinely qualified to indicate the level of cost that this entails but on the basis that the 57 km first section (to Meki) of the Modjo-Hawassa highway that is being invested in by IFC/China EXIM/S Korea EXIM will cost US$ 165 million, with the whole road to Hawassa costing an initial estimate of US$ 700 million. On this basis, the cost of the first bullet point above via an extension from Hawassa to Kelafo to replace the existing road (a distance of some 886 km) would be over USD 2.5 billion.

D-7


Figure D-5: Proposed Gas Pipeline Routings and Proximity to Dire Dawa

The existing scheme for a pipeline from Poly-GCL and New-Age’s drillings at Ogaden to join with the wells of Poly-GCL at the Kalub – Hilala fields and thence take gas to the port at Djibouti could offer a compromise solution. The chart D-5 is one of many public domain images of the projected gas pipeline arrangements from the fields in the South East to Djibouti and is taken from the website of New Age (one of the oil/gas exploration companies to which the Ministry of Mines has granted exploration licences and seemingly the second most notable in terms of gas finds after Poly-GCL). New Age is looking to link its gas finds at Ogaden with a pipeline to meet the Poly-GCL line at Hilala-Kalub. We are aware from our contact with the Ministry of Mines that a PSA (production sharing agreement) has been signed between the GoE and Poly-GCL with a view to exporting gas via a pipeline and a new gas terminal at Djibouti. The pipeline and terminal will be financed by Poly-GCL (according to Global Construction Review) and the foundation stone for the terminal in Djibouti was laid in March 2016. Although an MOU was signed in July 2014 between Poly-GCL and the Chinese pipeline contractor “CNPC Pipeline Bureau”, recent reports via Poly-GCL’s website indicate that progress has been slow. Initially, the work should have started in 2016 with a view to exports of LNG commencing in 2018 but Poly-GCL now projects that the first phase of LNG of around 3m tons per year will not commence until 2019. In terms of priorities, the LNG pipeline itself may be taking second place to Black Rhino’s new (much shorter) fuels pipeline proposed from Djibouti to Awash. If so, the LNG pipeline development may more conveniently be scheduled in parallel with the development of a petrochemical sector hub.

D-8


As Figure D-5 shows, this pipeline passes close by Dire Dawa. If a gas processing complex could be established there to split the necessary feedstock fractions out of the natural gas and leave the balance for export then the petrochemicals sector could be established at Dire Dawa with its rather better logistic links to both Djibouti Port (especially for naphtha and equipment imports) and Addis Ababa. Whilst this location appears to be acceptable from the perspective of gas processing and exports and is also on the Addis – Djibouti rail line, the major issue might be availability of skilled labour and willingness of the entrepreneurs and business houses to invest at this location. Dire Dawa is about an 8 hour drive by road from Addis, so a commuting workforce is not possible. Certainly, skilled labour has to be available locally. However, there are some positive factors in favour of Dire Dawa;

• An Industrial park is being planned at Dire Dawa

• OCP is planning a large fertilizer plant at Dire Dawa

• Actual and projected Industrial clusters around Dire Dawa include heavy industries, textile & apparel, vehicles assembly and food processing.

• Dire Dawa is located at a reasonable distance from other industrial parks – e.g. Kombolcha and Adama

• Dire Dawa already has a University.

Water and Land Requirements Key requirements of any petrochemical development are water and land. Given the seasonal variation in Ethiopian river volumes this will be a focal point of final site selection. Water is consumed in the processes themselves, for steam generation, as a cooling medium and for other applications. Much of this is recovered/recycled but the water demand will depend upon, among other things, the process technologies selected, the cooling philosophy (air or water), steam system design and the degree of integration of the process units. For each of the configurations proposed in Section C, the high-level water consumption estimates are shown in Table D-1. Table D-1: High Level Water Consumption Estimates for Each Configuration

Configuration Units 1 1A 1B 1C 2 2A 2B 2C 3 3A

Water consumption Gross(1)

Million ton p.a. 650 1410 2750 3250 1170 1950 3180 3720 1910 3750

Water consumption Net(2)

Million ton p.a. 20 43 83 98 36 59 96 113 58 113

D-9


(1) Includes cooling water circulation, all steam consumption and allowance for process/potable water (2) Includes estimates for all make-up streams to replace blowdown, losses, vents and direct consumption The table indicates the water consumption for each configuration as if the full list of production plants were operating at capacity. Hence, across the combined production of intermediates and final products water consumption is between 7 and 15 tons per ton of this mixed product. The only exception to this is configuration 2 which has a relatively smaller spectrum of derivative production downstream of the cracker and its consumption is therefore higher (c.25 tons per ton of mixed product). With regard to land requirements, estimates for the combined ISBL (inside battery limits) and OSBL (outside battery limits) sections of the complex are presented in Table D-2 below. These are high level estimates only and will depend on the final technologies selected and level of integration between the process units adopted. Table D-2: Initial Land Area Estimates by Configuration

Configuration Units 1 1A 1B 1C 2 2A 2B 2C 3 3A

Project land area required Hectares 110 220 350 470 110 210 350 470 170 480

E-1


Section E.

Institutional Matters

E-2


Current Status of Sector and the Support Activities of the GoE Industrial Sector in Ethiopia The industrial sector in Ethiopia comprises a number of small and medium enterprises (SMEs), and accounts for about 13 percent of GDP. The major manufacturing activities are in the production of food, beverages, tobacco, textiles and garments, leather goods, paper, metallic and non-metallic mineral products, cement and chemicals. Under the Growth and Transformation Plan 1 (2010/11-2014/15) production of textile and garments, leather products, cement industry, metal and engineering, chemical, pharmaceuticals and agro-processing were priority areas for investment. The section below highlights the industrial policy, incentives and current status of various industrial sectors. Ethiopia’s Industrial Policy Ethiopia’s industrial policy was first developed in 2002 and revised in 2005/06. The ongoing second Growth and Transformation Plan (GTP II) of Ethiopia, and its industrial development strategy are all focussed on agricultural-based, manufacturing sector-driven and export-led development. The GTP pursued the growth through the export-driven industrialization strategy focusing on: labour and capital intensive manufacturing industries, export-oriented and import substituting industries, those that contribute to rapid technology & know-how transfer, have broad linkages with the rest of the economy and use agricultural products as inputs (agro-processing). The key strategic directions are small and medium scale industrial development, and large scale industries with special emphasis — all geared to poverty elimination and development. The manufacturing industries that have been given due attention include agro-processing industries, textile and clothing, food and beverage industries, tannery and leather goods, pharmaceutical industries, chemicals and chemical products industries, paper and paper products, plastic industries, building materials, glass & glass products, metal & metal engineering, etc. The following sectors have been identified as priority areas for industrial development.

• Agro-Processing

• Textile and garment

• Leather and leather products

• Sugar and related industry

• Chemicals

E-3


• Pharmaceuticals

• Metal and engineering

Incentives The Ethiopian Government has laid out the following incentives to the manufacturing industry: 1. Fiscal incentives

A) Customs duties exemption • 100% exemption from payments of customs duties and other taxes levied on

imported is given to all granted capital goods, such as plants, machinery, & equipment, and construction materials

• Spare parts worth of 15% of the total value of imported investment capital goods

• An investor granted of customs duty exemption will be allowed to import capital goods duty free any time during the operational phase of the enterprise

• Investment capital goods imported without the payment of custom duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges

B) Income tax exemption • Exporters 50 % the product sale or services, or supplies 75% of the products or

services as production or services input to an exporter will be exempted from income tax for 5 years

• Exports less than 50% of the products or services of the products or supplies only to the domestic market will be exempted from income tax for 2 years.

• Investors who invest in priority areas such as textile and garments leather products agro processing etc. to produce mainly export products will be provided land for their investment necessary at reduced lease rate.

2. Non-Fiscal Incentives

• Investors who invest to produce export products will be allowed to import machinery and equipment necessary for their investment projects through their supplier’s credit.

• The government of E/a will cover 30% of the cost of infrastructure ( access to road, water supply, electricity, % telephone lines) for investors investing in the industrial zone development.

3. Loss carry forward

Business enterprise the suffer losses during the income tax exemption period can carry forward such losses following the expiry of the exemption period.

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Export Incentives The Fiscal incentives given to all exporters will include the following:

• With the exception of few products (e.g. semi-processed hides & skins, no export tax is levied on export products of Ethiopia

• Duty draw back Scheme: it offers investors an exemption from the payment of customs duties and other taxes levied on imported and locally purchased raw materials used in the production of export goods. Duties and other taxes paid are drawn 100 % at the time of the export of the finished goods.

• Voucher scheme: A voucher is a printed document having monetary value which is used in lieu of duties and taxes paid on imported raw material. The beneficiaries of the vouchers scheme are also exporters.

• Exporters are allowed to retain and deposit in a bank account up to 20 % of their foreign exchange export earnings for future use in their operation of their enterprises and no export price control is imposed by the National bank of Ethiopia.

• “Franco-valuta” import of raw materials is allowed for enterprises engaged in export processing. (“Franco-valuta” is a license issued to importers of goods on which no foreign exchange is payable; which means importer uses foreign currency from its own source.)

Finance Access for Industrial Projects Economic growth in Ethiopia during the last two decades was driven mainly by the agriculture and service sectors. The country has also enjoyed sustained inflows of official development assistance and foreign direct investments (FDI), as well as sizable growth in exports, dominated by coffee, oilseeds and flowers. Growth has however slowed since 2008 as economic performance was affected by deteriorating terms of trade and balance of payments problems. Ethiopia's financial system is small and largely dominated by the state. Government dominates lending, controls interest rates and owns the largest bank, the Commercial Bank of Ethiopia (CBE). Ethiopia's banking sector included 16 commercial banks from 2012 onwards. Although term lending and working capital finance for new projects and operating units are easily available in Ethiopia, the cost of financing remains relatively high due to high interest cost. Project finance is largely through government lending via banks. Given below are the prevailing interest rates:

• Term loan - Interest rate

o For export oriented industrial units = 9.5%

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o For non-exporting industrial units = 12.0%

• Working capital loan – Interest rate

o For trading and services = 15.5%

All major industrial projects will require a debt-equity ratio of 70:30. Industrial Parks The Ethiopian Industrial Parks Development Corporation (IPDC), established in 2014, is responsible for nurturing manufacturing industries, through development of industrial parks in Ethiopia. IPDC serves as industrial park land bank, develops industrial parks and hands over to private industrial park developers (leases or subleases land, sells or rents sheds). Presently, only two parks are under operation, which are focussed on apparel manufacturing. Table E-1: Existing Industrial Parks in Ethiopia

Industrial Park Location Proximity to the Port (Km)

Delimited land (Hectare)

Eligible Industries

Operation Started

Addis Industrial Village Addis Ababa 863 8.7 Apparel 1980's Bole Lemi Industrial Park Phase I Addis Ababa 863 175.2 Apparel 2014

The latest addition to the industrial parks is in the city of Hawassa 275km southeast of Addis Ababa. This 1.3 million m2 park will be focussed on textile and apparel. IPDC intends to develop 100,000ha of land between 2016 and 2025 — i.e. 10,000ha annually — for a total factory floor area of 10 million m2 (1 million m2 annually).

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Table E-2: Planned Industrial Parks in Ethiopia

Name of Park

Location from Addis

Ababa Kms from

Addis Ababa Proximity

to the port (Km)

Delimited land

(hectare) Eligible Industries Completion

period

Bole Lemi II Addis Ababa Addis Ababa 863 186 Textile and apparel 2017 Kilinto Addis Ababa Addis Ababa 863 337 Mixed 2017 Hawassa South 275 998 300 Textile and apparel 2016 Dire Dawa East

473 380 1500


2016

Kombolcha North-East 380 480 700


2016

Mekelle North 760 750 1000


2016

Adama South-East

74 678 2000


2016

Bahir Dar North-West 578 985 1000


2016/17

Jimma South-West 346 1098 500


2016/17

Air Lines Logistics park

Addis Ababa Addis Ababa 863 200

Logistics service 2019

It is evident that much of the focus is on textile/apparel and food processing sector. Ethiopia needs to realign its industrial policy for uniform sector development, ensuring upstream and downstream linkages. For the development of chemicals and petrochemical sector, it is imperative that Ethiopia provides adequate support in terms of industrial infrastructure support and feedstock/raw material availability at competitive price.

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Overview of Government Initiatives for Growth in Ethiopia Introduction The Government of Ethiopia clearly recognises that the Ethiopian economy remains largely agrarian but that the country is in a phase of rapid transition to an urbanised status with an aspirational population. Table E-1 shows the situation in terms of contribution to GDP up to 2010 between the three key sectors — agriculture, services and industry. Figure E-1: Ethiopian GDP Growth by sector, 2004-2010

Under the government’s “Sustainable Development & Poverty Reduction Plan” (SDPRP) which ran from 2002 to 2005 and the follow on “Plan for Accelerated and Sustained Development to End Poverty” (PASDEP) which set targets and initiatives during the period 2005 to 2010 we can see that, in general, targets for GDP growth were met, as shown in Table E-3. However, industry continued to lag behind the other sectors. Table E-3: GPD Growth Achieved versus PASDEP Targets

In spite of this sector performance, the trade balance for Ethiopia remains negative (as shown in Table E-2) and it is apparent that many commodity products from other industrial nations are being brought into Ethiopia. This creates a significant opportunity for import substitution (which is discussed elsewhere in the market section of our report) and it here that the chemical industry can most usefully contribute to both improving the balance of

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trade and monetising the country’s natural resources - primarily gas and, to a lesser extent, minerals. Figure E-2: Trade Balance Percentage Growth – 2004-2010

Following on from PASDEP, the government has instigated two 4-year Growth and Transformation Plans – GTP1 which ran from 2010/11 to 2014/15 and GTP2 which will run from 2015/16 to 2020/21. In GTP1 the chemicals and petrochemicals sectors were included in a grouping of ten GTP growth targets but at that stage there was little emphasis on a structure for chemicals that was founded on local raw material advantage and the fundamental chemical feedstocks to promote industry sectors such as polymers, detergent intermediates and the process sectors that would then develop from them. Whilst progress was made against the targets for fertiliser production the plastics processing initiative (linked to import substitution) did not happen owing to the lack of capital to invest. GTP2 has gone a stage further however by introducing the concept of the cluster (which is effectively the value chain concept that we explore in this study) and the use of industrial parks. The latter has been exploited in all regions of the world and enables, through the establishment of downstream processing that is reliant upon the materials made in, or adjacent to, the park the generation of a baseload demand that enables economy of scale in the upstream units whilst multiplying the job opportunities as the value chain extends further downstream from feedstocks into finished/semi-finished goods. The GP2 targets (for example in polymers) are, however, modest (60ktpa PVC, 60ktpa polyethylene [PE] and 60 ktpa polypropylene [PP]). All of these represent laggard scale of operation compared to industry practice. The PVC project is already underway based on by-product chlorine from the recently established caustic soda operation whilst polyethylene and polypropylene are yet to reach the concept stage. In this regard, we believe that the potential for import substitution and the availability of natural gas resources would enable

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Ethiopia to build at least average and possibly leader scale PE and PP plants to enable the establishment of an upstream olefins production unit and instigate several other value chain options. These options are examined in more detail later in the study. Moving beyond the GTP2 targets will of course infer the need to attract more FDI and the Ethiopian government is well advanced in planning for this. The government has instigated many fiscal and non-fiscal benefits for private and corporate investors to attract foreign investment, project development and to promote exports from Ethiopia. The key measures that are of most relevance to the development phase of chemicals/petrochemicals have already been touched upon. These are all part of the overall approach to chemicals/petrochemicals development as encompassed by these seven key activities that are to be undertaken under the GTP2 framework:

• To look for local and foreign financial sources to implement the sector’s strategic projects that is in the planning stage.

• Enhance project implementation capacity and attract investment in a large scale.

• Increase quality production by enhancing technological capability.

• Make available enough trained man power.

• Reduce the production cost of the industry by using alternative and cheap energy sources (and raw material resources*).

• Strengthen the linkage between production and inputs supply of the sector

• Create a comfortable and coordinated business investment atmosphere.

*phrase in brackets inserted by Jacobs Consultancy Ltd to emphasise the importance of monetisation of Ethiopia’s natural resources.

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Section F.

Environmental, Social, Health and Safety Considerations of the PCPMP

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Introduction Overview Jacobs Consultancy has been commissioned by the Government of Ethiopia (GoE), in collaboration with the UK Department for International Development (DFID), to carry out a pre-investment inception study of petrochemical and chemical product investment opportunities (‘the study’), with the ultimate aim of creating a sustainable and internationally competitive petrochemical and chemical product sub-sector in Ethiopia. It is intended by the GoE that the study will help in plans to stimulate private sector development of the market and attract associated foreign direct investment and technical skills. The findings of the study have identified that the following five domestically available raw materials as likely to be the most feasible in developing and sustaining a petrochemical and chemicals industry in Ethiopia:

• Natural Gas — rich in extractable hydrocarbons (ethane, propane, butanes and hexanes) which can be used as a feedstock for a gas fed steam cracker to produce ethylene and other co products. Other gas extracts can also be used to sustain ammonia/urea plants for the fertilizer industry, critical to support continued development of the agricultural sector;

• Potash — together with nitrogen based fertilisers from natural gas, potash could be used in an integrated fertiliser plant to provide a N-P-K (Nitrogen-Phosphate-Potassium) feedstock source;

• Salt — there are adequate reserves of salt available to develop chlor-alkali value chain products, including detergents;

• Soda Ash — soda ash is found in the sodic lake brine of Lake Abiyata and Lake Shala in the central main Ethiopian Rift (Oromia Region). A pilot plant (with 20 kta capacity) is mining soda ash from Lake Abiyata. It is presently used as raw material to manufacture caustic soda in Ziway for detergents, bottles and glass. It is estimated that current levels of soda ash production in Ethiopia is around 3kta and further projects are planned which should ensure abundant availability of soda ash to downstream industries in Ethiopia; and,

• Bioethanol from sugar — supply of bioethanol is likely to increase with the government drive to advance the industry with several new sugar mills under construction. There is likely to be adequate availability to sustain a minimum economic size ethylene production plant (250kt) based on ethanol dehydration process.

In addition to the above domestic sources, another possible consideration may be the import of Naphtha from Sudanese refineries. Table F-1 is a repeat of Table B-56 from the main study and presents the chemicals recommended by the PCPMP for priority and longer term investment in order to establish a sustainable chemicals industry in Ethiopia. It is noted that these represent the findings at the current stage of the study and that the recommended options for feedstocks will be further refined in final phase of the study. The current findings indicate that a petrochemicals industry based on domestic Ethiopian gas may ultimately be likely to be the most feasible option.

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Table F-1: Products Recommended for Investments in Ethiopia

Feedstock Value Chain

Products Recommended

Priority Long Term

Petrochemicals (hydro-carbon derived feedstock)

Ethylene HDPE, LLDPE EO/MEG/EODs, LDPE/EVA Propylene PP PO/ Polyols


Acetyls - Acetic Acid, VAM, PVA Inorganic mineral resource feedstock

Methanol - Methanol, Formaldehyde, MTBE




Other / Misc. Hydrochloric Acid Formic Acid

In order to manufacture these chemicals, it is planned to develop chemical and/or petrochemical plants at appropriately selected sites within the government’s planned industrial parks. The Ministry of Infrastructure (MoI) has indicated that current plans are for new facilities in (initially) up to four locations, as described below under the Project Location section.

Scope of ESHS Review One of the key siting considerations for any new facility is the potential environmental, social, health and safety (ESHS) impacts associated with the construction, operation and ultimately decommissioning of the facility. The study terms of reference were clear that “Safety, health and environmental excellence can be assumed to form part of an effective product stewardship”. Each of the different value chain options will have specific chemical processes with associated ESHS impacts and construction of the associated plants will have broadly similar ESHS impacts. In determining or advocating the ultimately recommended products for development, it is vital to obtain a clear understanding of the potential impacts of each option. As detailed in our proposal, detailed Environmental Impact Analysis and Socio-economic analysis are typically conducted at the full feasibility stage once the investment profile is known with a degree of certainty. At this stage, the intent is to draw attention to the major EHS issues, charting a path forward with recommendations for next steps. Operational safety is typically covered at the licensor/technology selection and finalisation decision point. A high level review of potential ESHS considerations has been undertaken. The review has comprised the following activities:

• Desk based review of processes associated with the production of the current Stage 1 recommended priority chemicals;

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• Site visit to meet with key stakeholders and obtain relevant data;

• Review of identified national ESHS legislation, regulations and guidance, and commonly applied international standards and guidance;

• Production of a matrix of general and sector-specific limits and guideline levels for emissions to air, land and water from national legislation and the above international standards; and,

• Production of this ESHS review in line with the objectives below.

The agreed approach for the review is to provide the following1:

1) A framework of key national and international ESHS legislation and guidance typically applicable to chemical and petrochemical facilities;

2) A matrix of the key ESHS impacts commonly faced by chemicals facilities and a preliminary summary of commonly applied mitigation options. This to include “air emissions, waste water discharge, recycling, solid waste discharge, noise and odour and the treatments for effective control including best practice regulatory frameworks”; and,

3) Recommendations for next steps in the sector development process regarding integration of ESH issues in the planning and associated government/proponent processes.

This EHSH review considers the production process associated with all the potential products in Table F-1.

Project Location and Site Selection Information provided by the MoI on the location and associated details of new industrial parks which are under consideration as potential sites for chemical/petrochemical production facilities is summarised in Table F-2. Table F-2: Information on Proposed Industrial Parks for Chemicals/Petrochemicals Production

Location Labour Consideration

Proximity to Addis Ababa

(km)

Proximity to Port of

Djibouti (km) Industrial Cluster

Land Area (million

m2)

Gelan /Klinto (Kilinto Industrial Park)

Access to high skill labour 6 700

Agro-processing, pharmaceuticals

3

Dire Dawa (Dire Dawa Industrial Park)

600,000 local population 300

Multiple sectors including heavy industries

10 (1 in first phase)

Adama (Adama Industrial Park)


Equipment manufacturing, textile


Kalub and Ella No information currently identified

1 Due to the delay in identification/provision of actual site location information, this approach was approved by with DFID/GoE by email 09/08/16.

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At the time of writing, information on the actual site locations for these parks and any chemical facilities have not been provided by MoI. Therefore, at this stage, a review of potential site-specific ESHS impacts is beyond the scope of this exercise and this study focusses on ESHS issues associated with the production processes of each of the Stage 1 recommended chemicals. In addition, the following are noted with regard to potential site selection:

• Depending upon the nature of the ultimately recommended priority chemicals developments, it is very possible that the location of the corresponding chemicals production facilities is likely to be tied to the location of the source domestic raw materials, rather than a location selected to fit with pre-existing plans for development of the industrial parks. For example, any gas based petrochemical facility would generally need to be located close to the gas fields. This can have significant implications for the nature of and potential ESHS impacts of relevant associated facilities (e.g. pipelines, power generation and transmission and water supply); and,

• In line with the requirements of the national environmental regulatory requirements and good international industry practice, the development of a new industrial sector should generally undergo Strategic Environmental Assessment (SEA) prior to confirming the potential development sites. This is discussed further in the recommendations of this review.

Legal Framework The Government of Ethiopia is looking to encourage private sector investment to fund the growth of the chemicals / petrochemicals sector. The ultimately proposed facilities must therefore be designed, constructed, operated and decommissioned in accordance with relevant national ESHS laws and guidance, and international standards, including the requirements of international financing institutions. In consideration of the above, this section therefore details the following:

• Identified national institutional and legislative framework for ESHS considerations;

• Typically applied international standards and guidelines2; namely:

o the Equator Principles (III);

o International Finance Corporation (IFC) Performance Standards for Environmental and Social Sustainability (the Performance Standards or PS); and,

o the World Bank Group (WBG) / IFC General and sector-specific Environmental, Health and Safety Guidelines (EHS Guidelines).

• A framework of national and international limits (from the WBG/IFC EHS Guidelines) and/or guideline values for emissions to air, water and land.

2 The WBG/IFC Performance Standards and EHS guidelines have been used as the generally accepted international standards framework. However, it should be noted that dependent upon the makeup of the financing syndicates selected by private sector developers, additional requirements of individual international finance institutions may be applied to a development.

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National ESHS Legal Framework

Institutional Framework

The Ethiopia governmental system is organized into a federal constitutional structure, with a federal government and nine National Regional States governed by the parliamentary system, including (in alphabetical order):

1. Afar National Regional State; 2. Amhara National Regional State; 3. Benshangul/Gumuz National Regional State; 4. Gambela People Regional State; 5. Harari People Regional State; 6. Oromia National Regional State; 7. Somalia National Regional State; 8. The Southern Nations, Nationalities and Peoples Regional State; and 9. Tigray National Regional State.

Regional state governments have line ‘Bureaus’ which reflect the federal ministries. States are divided into 800 Woreda administrative divisions / districts with corresponding local government. Woredas are further sub-divided into Zones and then the smallest unit of local government, known as Kebeles, of which there are approximately 15,000 in Ethiopia. Regional states are organized such that major decisions are made by the Woreda local government. In addition to the regional states, Addis Ababa and Dire Dawa are governed by ‘City Administrations’ under the Federal Government. Ethiopia is a federal parliamentary republic and executive power is exercised by the government. The Prime Minister is head of government and is designated by the winning party following legislative elections. The 1995 constitution provides that the House of People's Representatives determines a Council of Ministers, comprising the Prime Minister, Deputy Prime Minister and various other Ministers or members as required. Administrative Structure This section discusses summarises the national administrative structure relevant to the chemicals/petrochemicals sector and associated ESHS considerations. Key Federal Government ministries relevant to the proposed chemicals sector development are:

• Ministry of Environment and Forestry;

• Ministry of Industry;

• Ministry of Mines; and,

• Ministry of Water, Irrigation and Energy.

Other ministries which would be key stakeholders in the development of chemical production facilities, particularly with regard to ESHS issues are:

• Ethiopian Wildlife Conservation Authority (EWCA);

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• Ethiopian Roads Authority;

• Ministry of Agriculture;

• Ministry of Culture and Tourism;

• Ministry of Federal Affairs;

• Ministry of Finance and Economic Development;

• Ministry of Health;

• Ministry of Labour and Social Affairs;

• Ministry of Trade; and,

• Ministry of Women’s, Children and Youth Affairs.

At the regional state level, State ‘Bureaus’ mirror the federal ministries3 and will be important stakeholders for ESHS consultation as part of the site selection and associated impacts assessment process. These may include, but are not limited to the following:

• Bureau of Agriculture and Rural Development; Bureau of Mines and Energy;

• Bureau of Culture and Tourism;

• Bureau of Environmental Protection, Land Use and Administration;

• Bureau of Finance and Economic Development;

• Bureau of Health;

• Bureau of Labour and Social Affairs;

• Bureau of Trade, Industry;

• Bureau of Water Resources; and,

• Bureau of Women, Children and Youth Affairs.

3 Note that different states may have different Bureau names or Bureaus covering different areas.

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National Environmental Legislation, Regulations, Policies and Plans

Table F-3 summarises the national environmental legal and regulatory conditions identified as relevant for the development of the sector. Table F-3: Environmental and Social Legislation, Regulations, Policies and Plans

Proclamations/Article Title Relevant Article No and/or Relevance to the Proposed Chemical Sector Development

1994 Constitution of Ethiopia (adopted in 1995 as Proclamation No. 1/1995, 21 August 1995)

The following key Articles of the Constitution enshrine principles of sustainability and environmental protection: Article 41 (Economic, Social and Cultural Rights) – includes elements around economic rights, equal access to public services, rights for farmers and pastoralists, and freedom to choose livelihoods. It includes the government responsibility to protect and preserve cultural legacies, but does not include any requirements related to other aspects of social protection. Article 43 (Right to Development) – identifies rights to sustainable development and living standards; consultation and participation of affected communities in national developments, and policies/projects which impact specific communities; and, improved capacities for development to meet basic needs. Article 44 (Environmental Rights) – includes rights to a clean environment and for compensation for displacement impacts. Article 92 (Environmental Objectives) – programme design and implementation must not damage the environment; full community consultation must be undertaken for policy/project development; duty of both government and citizens to protect the environment. Article 51 (3) (Powers and responsibilities of the Federal Government and Regional States) – requires establishment of national standards/policy for public health, education, science, technology and protection of cultural heritage and archaeology. [Proclamations No. 33/1992, 41/1993, and No. 4/1995] The following Articles of the Constitution are relevant to land acquisition and potential physical or economic displacement: Article 40 (The Right to Property) (1-7) – provides for the state ownership of all land; free access to land for peasant farmers and for pastoralists, and protection against displacement; right for private investors to obtain land on payment of fees; and, the right to compensation for displacement. Article 40 (8) provides for expropriation. It provides powers for government to acquire land and buildings if beneficial to society, but only on the basis of prior compensation to the land ‘owner’ commensurate to the value of the property (at rates determined in relevant legislation).

Plan for Accelerated and Sustained Development to End Poverty (PASDEP)

PASDEP was the original GoE plan to help achieve the millennium development goals. PASDEP was effectively superseded by the National Growth and Transformation

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(2005/06 to 2009/10); And; National Growth and Transformation Plan (GTP)

Plan (GTP). The GTP sets out medium term growth and investment targets for Ethiopia to achieve the government’s long term development vision. Under GTP I (2010/11 to 2014/15), production of textile and garments, leather products, cement industry, metal and engineering, chemical, pharmaceuticals and agro processing were priority areas for investment. The ongoing second GTP II (2015/16 to 2020/21) strategy is focussed on agricultural-based, manufacturing sector-driven and export-led development. The key strategic directions are small and medium scale industrial development, and large scale industries with special emphasis — all geared to poverty elimination and development. Chemicals and petrochemicals are included in GTP II targets. GTP II also introduced the cluster (or value chain) concept and use of industrial parks to group downstream processing / use of primary chemicals products. Regional bureaus are required to align to national development strategies. The GTP has been a key driver of development in Ethiopia and has underpinned the initial planning for development of the chemicals sector in Ethiopia.

Ethiopian Industrial Development Strategic Plan (2013-2025)

Builds on the PASDEP and GTPs to provide the overall framework in terms of the vision, goal, strategies and programs that need to be implemented in the coming thirteen years in order to support the country’s progress towards becoming a middle-income country by the year 2025. The vision of the plan is given as “building an industrial sector with the highest manufacturing capability in Africa which is diversified, globally competitive, environmentally-friendly, and capable of significantly improving the living standards of the Ethiopian people by the year 2025.” Part 4 of the plan includes manufacturing programme and implementation plans including Priority Sector Expansion Plan and the Industrial Zone Development Plan. The plan highlights a number of risks and barriers to development including the need to attract Foreign Direct Investment, encourage participation of development capitalists (private sector developers) and environmental challenges of certain sectors (e.g. leather tanneries). The development of a petrochemicals industry sector is a key aspect of the Priority Sector Expansion Plan and is a major focus of the main study. Early planning and management of ESHS risks can assist in mitigating some of the risk identified in the plan.

National Environmental Policy of Ethiopia (1997)

Provides the initial framework for environmental protection in Ethiopia with various guiding principles to ensure that environmental and social issues are considered appropriately in the development of programmes and projects.

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The policy requires that project development be done in a way that does not compromise environmental integrity and includes basic requirements for environmental impact assessment including public consultation, and mitigation and monitoring requirements.

Establishment (No. 9/1995) and Re-establishment (No. 295/2002) of the Environmental Protection Authority Institutional Arrangement for Environmental protection (No. 295/2002)

Proclamations covering the establishment and modification of the institutional elements for environmental/social protection and enforcement. See further discussion of the national ESIA process in following sub-section.

Proclamation of Environmental Impact (EIA) Assessment (No. 299/2002)

The EIA Proclamation enshrines EIA as a mandatory requirement for all major projects and government programmes and plans. It defines the basis and procedure for EIA (including proportional studies and consideration of cumulative/transboundary impacts); list of projects subject to full/partial EIA and those which do not require EIA; the relevant EIA determining body; and, the contents of EIA report. An EIA (or ESIA) will be required for all new chemicals production facilities. Whilst the EIA Proclamation does not specifically mention Strategic Environmental Assessment (SEA), it does required EIA for government programmes and plans, which is effectively SEA.

Relevant National Directives and Guidelines for EIA/ESIA

The following national directives and guidelines are relevant to EIA: EIA Directive No. 1/ 2008, A Directive to Determine Projects Subject to Environmental Impact Assessment - lists the various activities that require the undertaking of an EIA. Draft Guideline for Environmental Management Plan for the Identified Sectorial Developments in the Ethiopian Sustainable Development & Poverty Reduction Programme (ESDPRP), May 2004 - outlines the necessary measures for the preparation of an Environmental Management Plan (EMP) for proposed developments in Ethiopia and the institutional arrangements for implementation of EMPs EIA Guideline, July 2000 – provides background to environmental impact assessments and environmental management in Ethiopia. The Federal Environmental Protection Authority, Environmental Assessment Reporting Guide, 2004, Addis Ababa - provides a standardised reporting framework for environmental assessments.

Public Health Proclamation (200/2000) Includes environmental requirements around discharge of untreated effluent and disposal of solid waste, and also occupational health requirements including around safe operation of machinery.

Proclamation on Environmental Pollution Control (No. 300/2002)

Allows the EPA or relevant devolved agency to fine identified polluters and/or shut down, move or enforce requirements for retrospective mitigation controls.

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Solid Waste Management Proclamation (513/2007)

Provides waste collection and management framework including disposal permitting through use of waste management plans written by and implemented throughout the administrative units and promotes community participation.

Prevention of Industrial Pollution Council of Ministries Regulation (159/2008)

Whilst directed at “factories” (which is not clearly defined), parts of this regulation would likely apply to the proposed chemical production plant(s), including requirements for pollution control and emergency response planning and monitoring plan requirements.

Ethiopian Water Sector Policy (2001) Promotes efficient, equitable utilisation of Ethiopian water resources and allows for socioeconomic considerations in development of resources.

Water Resource Management Proclamation (Proclamation No. 197/2000 and Regulation No. 115/2005)

Requires the incorporation of protection and conservation requirements in to planning and development of water resources. Establishes permitting regime for abstractions, discharges and associated construction works. Compliant permit applications are determined by the ‘Supervising Body’ (the Ministry of Energy, Water and Irrigation, or delegated body) in 60 days and are renewable annually with associated fees. Regulation 115/2005 provides further detail on permitting requirements, including process for determination of charges, and specifically includes requirements for permits for effluent discharges to surface and groundwater. Abstraction and discharge permits will be required by the proposed chemical production development(s).

River Basin Councils and Authorities Proclamation (No. 534/2007)

Establishes integrated water resources management for river basins. Designates federal government powers to Basin High Councils and Basin Authorities which ultimately determine permit applications and receive fees.

Cultural Policy of Ethiopia (1997) Determines policy objectives for recognition, protection and conservation of cultural heritage

Proclamation on Research and Conservation of Cultural Heritage (209/2000)

Proclamation 209/2000 provides the framework for application of the 1997 cultural policy through definition of tangible (moveable and immovable) and intangible cultural heritage. Allows for the gazetting of protected areas and a permitting / enforcement framework for activities within such areas, including the requirement to stop work and report any chance finds. Will apply to the proposed chemical facilities planning and construction activities. Also relevant is the Convention for the Safeguarding of the Intangible Cultural Heritage Ratification Proclamation (484/2006) which formalised Ethiopia’s ratification of the convention.

Payment of Compensation for Property Situated on Landholding Expropriated for Public Purposes Regulation (135/2007)

Provides a framework for compensation and livelihood restoration assistance for persons physically or economically displaced by government projects. Will apply to the project if acquisition of land for the

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proposed chemical plant(s) is undertaken by the GoE – e.g. for the formation of the various proposed industrial parks. [It is noted that if private sector developers will develop the chemical facilities as planned, resettlement or displacement activities undertaken by GoE should apply the requirements of IFC PS 5 in addition to national requirements]

Other land acquisition related legislation or regulations

In addition to the relevant articles of the Ethiopian Constitution, the following additional legislation / regulations are applicable: Land administration and Use Proclamation (Proc. 87/1997), replaced by Proclamation 456/2005, which delegates regional states with the power to “enact rural land administration and land use law” consistent with 456/2005. The Expropriation Proclamation 455/2005, articles 3 to 6, describes the process for government land expropriation. Urban Land Lease proclamation (Proc. 721/2011) In addition, many regional states (Tigray, Amhara, Afar, Oromia, Benishangul Gumz and SNNPRS) use regional Rural Land Administration and Use proclamations and urban lands holding lease regulations to implement federal rural and urban land related proclamations.

Labour Proclamation (377/2003), as amended (466/2005) and (494/2004)

Determines requirements on employers for workers’ occupational health and safety protection, working hours (including overtime), roles and responsibilities and penalties for typical offences. This is a key aspect of national health and safety legislation and is discussed further in the health and safety section below.

Additional relevant environmental and social national legislation, guidance or plans

The following may also be relevant to the development of the chemicals sector depending upon the ultimately selected sites: Wildlife Development, Conservation and Utilisation Council of Ministries Regulation (163/2008) - Provides the framework for administration of wildlife conservation areas (National Parks, Wildlife Sanctuaries and Wildlife Reserves) Policy for Rural Development (2003) – guides future development in rural areas, which may be relevant if facilities are located in remote areas close to natural resource development sites. Tourism Development Policy (2009) – bring together various government and private sector actors to policy designed to assist in the development of tourism. May be relevant if the proposed development area is located in an existing or proposed area of tourism interest. The Federal Democratic Republic of Ethiopia Rural Land Administration and Land Use Proclamation (456/2005) – promotes sustainable development of rural areas and natural resources through land use planning. Rights to Employment of Persons with Disability Proclamation (568/2008) – provides framework for equal

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opportunities considerations for disabled persons. Accession to African Human and People’s Rights Charter Proclamation (114/1998) – supports achievement of common basic standards for human rights in Africa. Ethiopia’s Climate-Resilient Green Economy Strategy – set up to identify green economy opportunities to support the Growth and Transformation Plan. Proc 716-2011 Ozone Proclamation – for control of ozone depleting substances. Proc No 542-2007 Forest Proclamation – for the management and conservation of forest resources.

Mining related legislation / guidance The following may be indirectly relevant to chemicals production facilities if these are ultimately tied to raw material extraction (e.g. mining of potash or oil and gas extraction): Mining Operations Proclamation (No. 678/2010), and amendment (802/2013) – including the requirements for EIA and rehabilitation of mining sites. Mining Operations Council of Ministers Regulation (182/1994) and amendments (27/1998) and (124/2006) – covering operational procedures for mines.

Environmental and Social Protection and Enforcement in Ethiopia

The following summary is taken primarily from information provided by the Netherlands Commission for Environmental Assessment4, supplemented by information obtained during stakeholder consultations in Addis Ababa in June 2016:

• In 1995, the Environmental Protection Agency of Ethiopia was established by proclamation No 9/1995. The 1997 environmental policy laid a foundation for environmental management in Ethiopia. It provided for the integration of environment and development at policy, planning and management levels for an improvement of decision-making.

• In 2000, the EPA developed an EIA guideline, which was given a legal basis with the adoption of the EIA Proclamation No. 299 of 2002 by the House of Peoples’ Representatives. EIA then became a legally required procedure. Further, the EPA was re-established through the EPA proclamation No 295/2002 which gave it a legal mandate in EIA. The EIA Proclamation enshrines EIA as a mandatory requirement for all major projects and government programmes and plans. It defines the basis and procedure for EIA (including proportional studies and consideration of cumulative/transboundary impacts).

• Since the EIA Proclamation was adopted, efforts have been made to implement the law by the EPA and the relevant regional environmental organisations, which were themselves established by the Proclamation. An EIA directive under article 5 of the EIA proclamation was issued in 2008. This directive gives a list of projects that require EIA. In 2013, the EPA transitioned into the Ministry for Environmental Protection and Forestry.

• The EIA system is decentralised vertically. The EPA is in charge of EIA at the federal level and decides on EIAs for projects that are likely to produce trans-regional impacts. Regionally, EIA

4 http://www.eia.nl/en/countries/af/ethiopia/eia

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administration is mainly by regional state environmental agencies. Above all, the Environmental Protection Council (EPC) is in place for overseeing and coordinating environmental matters. Powers to evaluate and review EIAs have been delegated to 6 sector institutions mainly; Ministry of Mines and Energy, Ministry of Health, Ministry of Communications and Transport, Ministry of water and energy, Ministry of Trade and Industry, and the Ministry of Agriculture and rural development.

• Ethiopia has developed General EIA guidelines (2000), EIA review guidelines (2003) and EIA procedural guidelines (2003) which elaborate the framework EIA proclamation and provide for the schedules of activities and the level of EIA required as well as roles of various stakeholders. A number of EIA sector based, review and procedural guidelines have also been developed. Examples include guidelines for dams and reservoirs construction, for preparation of EMPs5, for activities dealing with forestry, fertilizer, livestock, fisheries and range management among others.

• The EIA guidelines of 2003 state that the primary purpose of environmental assessment is to ensure that impacts of projects, policy and programs, etc. are adequately and appropriately considered and mitigation measures for adverse significant impacts incorporated when decisions are taken. The guidelines state that EA serves to bring about:

o administrative transparency and accountability;

o public participation in planning and decision taking on development that may affect the communities and their environment; and,

o sustainable development.

Ethiopian National ESIA Process

The ESIA process in Ethiopia is broadly consistent with generally accepted international practice for environmental assessment, following a screening, scoping and ESIA Terms of Reference stages followed by the main ESIA phase. Figure F-1 is taken from the Environmental Impact Assessment Guidelines (Federal Democratic Republic of Ethiopia EPA, 2000):

5 Draft Guideline for Environmental Management Plan for the Identified Sectorial Developments in the Ethiopian Sustainable Development & Poverty Reduction Programme (ESDPRP), May 2004

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Figure F-1: EIA Application Process

Following determination and approval of the ESIA by the Ministry (or relevant sector institution), a proponent will be awarded an EIA licence. There is no currently stipulated determination period for review of the ESIA, which may require public hearings dependent upon the project. However, for planning purposes, a potential project proponent may wish to allow up to twelve months as an indicative target for the ESIA programme6, to allow for the potential need for seasonal surveys and an arbitrary determination period.

6 The process will of course be project- and site-specific, therefore may ultimately require a greater or lesser time period.

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National Legislation, Regulations and Plans for Occupational Health and Safety

Table F-4 presents a summary of identified national legal requirements for occupational health and safety (OHS) in Ethiopia. The information is taken primarily from a 2013 report by the US Department of Labour (USDL)7 and the International Labour Organisation (ILO) OHS Profile for Ethiopia (2006) as the national OHS information obtained during stakeholder consultations in Addis Ababa in June 2016 were only available in Amharic at that time. It is noted that there may be additional national OHS-related requirements which have been implemented since 2011, though none were specifically highlighted to the team during the consultations. Table F-4: Identified National Legal Requirements for Occupational Health and Safety in Ethiopia

Proclamations/Article Title Relevant Article No or Relevance to the Proposed Chemical Sector Development

1994 Constitution of Ethiopia (1994 – adopted in 1995)

The following key Articles of the Constitution relate to OHS considerations Article 18 includes protection against servitude and compulsory labour. Article 25 covers equal rights and Article 35 addresses gender disparity. Article 36 (1e) Children are entitled to be protected from social or economic exploitation and shall not be employed in or required to perform work that is likely to be hazardous or to interfere with their education or to be harmful to their health or physical, Mental, spiritual, moral or social development. Article 42 (2) provides that workers have the right to reasonable limitation of working hours, to rest, leisure, to periodic leaves with pay, to remuneration for public holidays as well as healthy and safe work environment. Article 89 (8) in relation to economic objectives, it states that, government shall endeavour to protect and promote the health, welfare and living standards of the working population of the country.

The Labour proclamation NO 377/06. This is the main labour law in Ethiopia and includes various requirements around equal opportunities, working hours and fundamental labour conditions, young workers and child labour, and contract preparation. Article 92 covers employer obligations for occupational health and safety, including: The requirement to adhere to conditions in Article 92; Establishment of an OHS officer and safety committee; Provision of personal protective equipment (PPE); Medical examinations as appropriate for new employees; Review and improvement of all work processes to ensure that there will be no negative OHS impacts from undertaking working duties. Article 93 covers worker responsibilities for adhering to the OHS requirements including use of PPE and obey all OHS requirements of the company. Article 177 details the government’s labour inspection

7 Assessment of Ethiopia’s Labor Inspection System, U.S. Department of Labor (Bureau of International Labor Affairs), March 2013

https://www.dol.gov/ilab/reports/pdf/2013AssessmentEthiopiaLaborInspection.pdf


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obligations, including: To ensure the implementation of the provision of the proclamation and other regulations and directives issued in accordance with the proclamation – this is done through the establishment of relevant inspection body and officers; Supervise and ensure that where undertaking are constructed, expanded, renovated or their appliances installed, are not dangerous to the safety and health of workers; and, Prepare training on occupational safety, health and working environment. Articles 178 to 182 provide procedural requirements (effectively a code of conduct) for inspectors and define activities which could be constituted as obstructions to inspections. Other articles cover aspects such as work place accidents and associated compensation (Articles 95-112) and provisions for collective bargaining.

The Occupational Health and Safety Directive (2008)

The OHS Directive is the key instrument supporting the Labour proclamation. It includes employers’ duties, workers duties/rights including organizational requirements such as safety and health policy and PPE. The directive includes provisions on ambient working conditions and certain hazards; specific risk management measures for hazardous materials/activities including chemicals, noise and machinery; and, requirements for recording and notifying occupational accidents and diseases. It provides mandatory conditions on overcrowding, sanitation, fire safety, and [emergency] preparedness.

Other directives supporting the Labour Proclamation

Other supporting directives include: Types of works that are Dangerous to Health and Reproductive Systems of Women Workers (1996/97); Lists of Activities Prohibited for Young Workers (1996/97); and, Safety and Health Committee’s Establishments Directive (2005/2006).

Other National OHS laws or laws with aspects relevant to OHS matters

Public Health Proclamation (200/2000) – provides the framework for public health and sanitation management and enforcement. This includes OHS considerations around operation of machinery and waste handling/disposal. The Pollution Control Proclamation (295/2005) – relevant OHS aspects include assigning appropriate management, control and remedial processes/actions to protect the health and safety of workers. The Environnemental important assessment proclamation (No299 / 2002) – includes the requirement to consider OHS issues. The Radiation protection proclamation (79/ 1993) – covers control of The Invest code proclamation (No 37/1996) – this provides a framework for a type of investment permit that includes the requirement to demonstrate compliance with all relevant laws including OHS requirements. It appears there may be the facility for a permit to be revoked in the absence of evidence of

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compliance. Further information should be sought on this. Pesticide registration and control Decree (No. 20/1990) – provides the framework for safe handling and management of pesticides. The Pension and Social Security for Civil Servants Proclamation No. (345/2003) – allows for invalidity pension for public workers who have occupational accidents.

OHS related policies No specific Ethiopian national OHS policies were identified. USLD report indicates that a draft National OHS policy was to be published in 2012. However, this was not provided during the site visit and could not be identified by web search. The ILO country summary indicates that the Economic Policy of 1992 and National Health Policy of 1993 include a small number of articles which promote workers’ health and safety and the development of OHS systems.

ILO Conventions The current ILO website data8 and information from the USDL report indicates that Ethiopia has ratified 22 ILO conventions to date (with 21 in force), including: all of the fundamental conventions (covering the right to organise and prohibit forced and child labour); A Governance (Priority) Convention on tripartite consultations; 13 of the technical conventions which includes the convention on occupational health and safety requirements. The OSH Convention (Convention No. 155) sets principles for national level government action. It provides definitions, establishes requirements for national policy and specifies the responsibilities of governments, employers and workers. It also provides guidance for developing a well-functioning labour inspectorate.

National OHS Institutional Framework and Implementation

The USDL report indicates that Ethiopia’s Labour Proclamation is partly modelled on the ILO’s Convention on Labour Inspections (No. 81). The competent Federal authority for OHS implementation is the Ministry of Labour and Social Affairs (MOLSA). This is to be achieved in cooperation with unions and workers’/employers’ organisations at national and local level. Also in co-ordination with other lead agencies including various ministries, the EPA, Radiation Protection Authority and the Quality and Standardization Authority. Engagement workers’/employers’ organisations covers regarding inspection visits, implementation of the ideal of the law, provision of training and information pertaining to occupational injuries. The departmental mandate is summarised in the ILO report as “to ensure the legal provisions pertaining Safety, Health and Minimum labour conditions are respected and put in to practices. With regard to OSH in particular the major objective is evaluating and controlling the physical, chemical, psychological, social and technical factors that affect a person at work and working environment. With respect to improvement of working conditions the department has the objective of ensuring the stipulated terms and conditions of labour are respected and maintained in order to bring about peaceful and harmonious labour relations at work places.”

8 http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:102950

http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:102950

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Within MOLSA, corresponding regional Bureaus of Labour and Social Affairs (BOLSA) and city departments in Addis Ababa and Dire Dawa, the inspection and enforcement functions are undertaken by the Department of Occupational Safety, Health and Working Environment which proposes policy and legislation related instruments. The following flow charts taken from the USLD report summarise the institutional organisation in Ethiopia with regard to labour and OHS inspectorates (as of 2013): Figure F-2: Organization at Federal Level within MOLSA

Figure F-3: City and Regional Inspectorates

Worker and Employer Organisations

The ILO report indicates that as of 2006, workers’ representation included the Confederation of Ethiopian Trade Union (consisting of 9 Industrial Federations representing 462 basic trade unions, with ~350,000 workers in total). It was indicated that there were only ‘a few employers’ organisations’ at that time, which formed part of the Ethiopian Employers Federation.

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The USLD report indicates the EEF had 14 member associations as of 2013 and that the Congress of Ethiopian Trade Unions (CETU) is a trade union alliance with over 200,000 members. CETU provides OHS training and co-ordination services. The report states [regarding the CETU] that: “they conduct OSH training, at times with labor inspectorate officials, on worksites for one day or half day sessions and three day sessions for leaders. They report that OSH hazards and violations are common in the private sector. They recently conducted a study that found a significant level of OSH deaths and injuries in construction”. Compliance and Enforcement

The USLD report indicates that compliance and enforcement success as of 2013 was still relatively low. City inspectors in Addis Ababa lacked resources and data and had tried only two cases (winning one) in 8 years, out of a total of 20 filed cases. Information provided for regional inspectorates (Oroma Region) showed greater activity (the Regional Labor Inspectorate had been trying three cases per year at that time), but that inspectors lacked training and equipment to keep up with the increasingly industrial (as opposed to agricultural) work environment, including skills to identify occupational diseases. It was also reported that court judges lacked sufficient awareness of labor laws and the role of inspectors. The report goes on to identify issues with lack of adequate resourcing (both number of inspectors and supporting administration), data management systems (including nature of reporting forms) of the inspection capability. It provides recommendations in the form of a summary of various challenges and associated actions to strengthen the inspection planning, education and outreach, and enforcement capability of the national and regional inspectorate(s). As of the writing it is not clear whether any of the recommendations are implemented. Summary of National OHS Context

The labour and OHS framework in Ethiopia is progressing towards an overall framework which will be in line with good international industry practice. However, as of 2013 there were a number of areas which were identified by the USLD report as requiring action to strengthen the relevant national and regional OHS institutional capacity and operational enforcement capability. The extent to which any of the USLD report’s recommendations have been implemented is not currently clear at the time of writing. For the purposes of this review, it is assumed a transitional implementation period is likely to be ongoing at the time of the proposed development of chemicals installations. It is therefore assumed that to satisfy requirements of international finance institutions and other drivers such as internal investor / shareholder expectations, the proposed private sector chemicals developments will need to apply good international industry practice in developing an integrated environmental, social, health and safety management system in line with the requirements of IFC Performance Standards 1 and 2, ILO requirements and relevant WBG/IFC EHS guidelines (as discussed in the International Standards sections below).

International Standards The Equator Principles III

If the project looks to seek international finance there may be a requirement to meet the requirements of the Equator Principles. The Equator Principles are a voluntary set of standards intended to ensure

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that projects financed by Equator Principle Finance Institutions are developed in a manner which is environmentally and socially responsible. The Equator Principles apply to all new project financings with a total project capital cost in excess of US$10 million or more. There are ten Equator Principles as follows:

• Principle 1: Review and Categorization.

• Principle 2: Social and Environmental Assessment.

• Principle 3: Applicable Social and Environmental Standards.

• Principle 4: Action Plan and Management System.

• Principle 5: Consultation and Disclosure.

• Principle 6: Grievance Mechanism.

• Principle 7: Independent Review.

• Principle 8: Covenants.

• Principle 9: Independent Monitoring and Reporting.

• Principle 10: EPFI Reporting.

For projects located in low income, non-OECD (Organization for Economic Co-operation and Development) countries, such as Ethiopia (according to the World Bank Development Indicators Database), Equator Principle III requires the project to be compliant with the IFC Performance Standards and the corresponding applicable industry-specific EHS Guidelines. The IFC Performance Standards

IFC PS 1: Assessment and Management of Social and Environmental Risks and Impacts

PS1 states the following objectives:

• To identify and evaluate E&S risks and impacts of the project;

• To adopt a mitigation hierarchy to anticipate and avoid, or where avoidance is not possible, minimize, and, where residual impacts remain, compensate/offset for risks and impacts to workers, Affected Communities, and the environment;

• To promote improved environmental and social performance of clients through the effective use of management systems;

• To ensure that grievances from Affected Communities and external communications from other stakeholders are responded to and managed appropriately; and,

• To promote and provide means for adequate engagement with Affected Communities throughout the project cycle on issues that could potentially affect them and to ensure that relevant environmental and social information is disclosed and disseminated.

PS 1 underscores the importance of managing environmental and social (including labour, health, safety, and security) performance throughout the life of the investment. The ESIA process forms the first step of the process to identify and assess the risks.

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Ongoing management of E&S risks through the lifetime of the project is achieved through the implementation of an effective Environmental and Social Management System (ESMS) which allows the project to “plan, do, check, act” regarding E&S risks and outcomes. The ESMS is informed by the findings of the ESIA and remains a live system with various live documents, including the E&S Risk Register and various detailed construction and operational management plans as identified within the Environmental and Social Management Plan (ESMP), which forms part of the ESIA.

The detailed requirements of PS1 are not repeated here, but key elements required as part of and/or that must be considered to inform the ESIA processes are summarised as follows:

• The extent of assessment required should be commensurate with the scale and potential impacts of the projects and the approach taken should be in line with Good International Industry Practice (GIIP);

• PS1 states that “the key process elements of an ESIA generally consist of (i) initial screening of the project and scoping of the assessment process; (ii) examination of alternatives; (iii) stakeholder identification (focusing on those directly affected) and gathering of environmental and social baseline data; (iv) impact identification, prediction, and analysis; (v) generation of mitigation or management measures and actions; (vi) significance of impacts and evaluation of residual impacts; and (vii) documentation of the assessment process (i.e., ESIA report).”

• ESIA should be based on recent environmental and social baseline data9 at an appropriate level of detail and consider all relevant E&S risks including the issues identified in PS2-PS8. It should consider climate change impacts and adaptation opportunities, and transboundary impacts;

• Define the ‘area of influence’ affected by direct or indirect effects of the project, which includes:

o The area directly affected by the project infrastructure and activities; predictable developments caused by the project;

o Indirect impacts on biodiversity/ecosystem services used by Affected Communities;

o Associated facilities10 (e.g. transmission lines); and,

o Cumulative impacts on areas or resources used or directly impacted by the project in addition to those from other existing, planned or reasonably defined developments at the time of the ESIA completion.

• Comply with local legal and planning requirements, including environmental policy, emissions limits, permitting requirements and any strategic environmental assessments. Consider existing (identified) technical studies;

• Implementation of an effective consultation, engagement and disclosure process with stakeholders affected communities. The outcomes of these activities should be considered as appropriate in all aspects of the risk identification and impact assessment process. Where

9 PS1 guidance note states: “Accurate and up-to-date baseline information is essential, as rapidly changing situations, such as in-migration of people in anticipation of a project or development, or lack of data on disadvantaged or vulnerable individuals and groups within an Affected Community, can seriously affect the efficacy of social mitigation measures.” Limitations on data should be clearly identified.” 10 Facilities that are not funded as part of the project and that would not have been constructed or expanded if the project did not exist and without which the project would not be viable

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potentially significant adverse impacts on affected communities are anticipated, a more in-depth process is required, known as Informed Consultation and Participation.

• Consider impacts associated with primary supply chains (including as part of ecosystem services);

• Consideration of business human rights issues;

• Impacts to indigenous peoples, disadvantaged or vulnerable groups, the disabled and gender-differentiated impacts;

• Address emergency preparedness and response, including project personnel, workers and community health and safety.

• Confirm requirements for how the project will establish procedures to monitor and measure the effectiveness of the various actions / mitigation measures defined by the ESIA/ESMP.

IFC Performance Standard 2: Labour and Working Conditions

PS 2 states the following objectives:

• To promote the fair treatment, non-discrimination, and equal opportunity of workers.

• To establish, maintain, and improve the worker-management relationship.

• To promote compliance with national employment and labour laws.

• To protect workers, including vulnerable categories of workers such as children, migrant workers, workers engaged by third parties, and workers in the client’s supply chain.

• To promote safe and healthy working conditions, and the health of workers.

• To avoid the use of forced labour.

IFC Performance Standard 3: Resource Efficiency and Pollution Prevention


• To avoid or minimize adverse impacts on human health and the environment by avoiding or minimizing pollution from project activities.

• To promote more sustainable use of resources, including energy and water.

• To reduce project-related GHG emissions.

IFC Performance Standard 4: Community Health, Safety and Security


• To anticipate and avoid adverse impacts on the health and safety of the Affected Community during the project life from both routine and non-routine circumstances.

• To ensure that the safeguarding of personnel and property is carried out in accordance with relevant human rights principles and in a manner that avoids or minimizes risks to the Affected Communities.

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Performance Standard 4 recognizes that project activities, equipment, and infrastructure can increase community exposure to risks and impacts. In addition, communities that are already subjected to impacts from climate change may also experience an acceleration and/or intensification of impacts due to project activities. While acknowledging the public authorities’ role in promoting the health, safety, and security of the public, this Performance Standard addresses the client’s responsibility to avoid or minimize the risks and impacts to community health, safety, and security that may arise from project related-activities, with particular attention to vulnerable groups.

IFC Performance Standard 5: Land Acquisition and Involuntary Resettlement


• To avoid, and when avoidance is not possible, minimize displacement by exploring alternative project designs.

• To avoid forced eviction.

• To anticipate and avoid, or where avoidance is not possible, minimize adverse social and economic impacts from land acquisition or restrictions on land use by (i) providing compensation for loss of assets at replacement cost and (ii) ensuring that resettlement activities are implemented with appropriate disclosure of information, consultation, and the informed participation of those affected.

• To improve or at least restore the livelihoods and standards of living of displaced persons.

Performance Standard 5 recognizes that project-related land acquisition and restrictions on land use can have adverse impacts on communities and persons that use this land. Involuntary resettlement refers both to physical displacement (relocation or loss of shelter) and to economic displacement (loss of assets or access to assets that leads to loss of income sources or other means of livelihood) as a result of project-related land acquisition and/or restrictions on land use. Resettlement is considered involuntary when affected persons or communities do not have the right to refuse land acquisition or restrictions on land use that result in physical or economic displacement. This occurs in cases of (i) lawful expropriation or temporary or permanent restrictions on land use and (ii) negotiated settlements in which the buyer can resort to expropriation or impose legal restrictions on land use if negotiations with the seller fail.

IFC Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources


• To protect and conserve biodiversity.

• To maintain the benefits from ecosystem services.

• To promote the sustainable management of living natural resources through the adoption of practices that integrates conservation needs and development priorities.

Performance Standard 6 recognizes that protecting and conserving biodiversity, maintaining ecosystem services, and sustainably managing living natural resources are fundamental to sustainable development. The requirements set out in this Performance Standard have been guided by the Convention on Biological Diversity, which defines biodiversity as “the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological

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complexes of which they are a part; this includes diversity within species, between species, and of ecosystems.

IFC Performance Standard 7 Indigenous Peoples


• To ensure that the development process fosters full respect for the human rights, dignity, aspirations, culture, and natural resource-based livelihoods of Indigenous Peoples.

• To anticipate and avoid adverse impacts of projects on communities of Indigenous Peoples, or when avoidance is not possible, to minimize and/or compensate for such impacts.

• To promote sustainable development benefits and opportunities for Indigenous Peoples in a culturally appropriate manner.

• To establish and maintain an ongoing relationship based on informed consultation and participation with the Indigenous Peoples affected by a project throughout the project’s life-cycle.

• To ensure the Free, Prior, and Informed Consent of the Affected Communities of Indigenous Peoples when the circumstances described in this Performance Standard are present.

• To respect and preserve the culture, knowledge, and practices of Indigenous Peoples.

Performance Standard 7 recognizes that Indigenous Peoples, as social groups with identities that are distinct from mainstream groups in national societies, are often among the most marginalized and vulnerable segments of the population. In many cases, their economic, social, and legal status limits their capacity to defend their rights to, and interests in, lands and natural and cultural resources, and may restrict their ability to participate in and benefit from development. Indigenous Peoples are particularly vulnerable if their lands and resources are transformed, encroached upon, or significantly degraded. Their languages, cultures, religions, spiritual beliefs, and institutions may also come under threat. As a consequence, Indigenous Peoples may be more vulnerable to the adverse impacts associated with project development than non-indigenous communities. This vulnerability may include loss of identity, culture, and natural resource-based livelihoods, as well as exposure to impoverishment and diseases.

IFC Performance Standard 8: Cultural Heritage


• To protect cultural heritage from the adverse impacts of project activities and support its preservation.

• To promote the equitable sharing of benefits from the use of cultural heritage.

For the purposes of this Performance Standard, cultural heritage refers to (i) tangible forms of cultural heritage, such as tangible moveable or immovable objects, property, sites, structures, or groups of structures, having archaeological (prehistoric), paleontological, historical, cultural, artistic, and religious values; (ii) unique natural features or tangible objects that embody cultural values, such as sacred groves, rocks, lakes, and waterfalls; and (iii) certain instances of intangible forms of culture that are proposed to be used for commercial purposes, such as cultural knowledge, innovations, and practices of communities embodying traditional lifestyles.

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It is important to note that not all of the IFC PS will necessarily apply to a development. During the environmental and social impact identification and assessment process required by PS1, identified site-specific issues will determine which of PS2-PS8 are triggered. Supporting Documentation

The following key documents are amongst a suite of additional material provided by the IFC to support the interpretation and implementation of the requirements of the IFC PS:

• International Finance Corporation’s Guidance Notes: Performance Standards on Environmental and Social Sustainability, dated 1 January 2012.

• Handbook for Preparing a Resettlement Action Plan, published by the IFC Environmental and Social Development Department (undated).

• Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets, published by the IFC, dated May 2007.

• Doing Better Business Through Effective Public Consultation and Disclosure, A Good Practice Manual, published by the IFC (undated).

• Good Practice Notes (GPN) - The IFC has also issued a number of GPN, though not all will be relevant to every project.

The World Bank Group EHS Guidelines

The EHS Guidelines are technical reference documents with general and industry-specific examples of Good International Industry Practice (GIIP). The General EHS Guidelines (2007) are designed to be used together with the relevant Industry Sector EHS Guidelines which provide guidance to users on EHS issues in specific industry sectors. For complex projects such as chemicals projects, use of multiple industry-sector guidelines is necessary. The EHS Guidelines contain the performance levels and measures that are generally considered to be achievable in new facilities by existing technology at reasonable costs. Application of the EHS Guidelines to existing facilities may involve the establishment of site-specific targets, with an appropriate timetable for achieving them. The applicability of the EHS Guidelines should be tailored to the hazards and risks established for each project on the basis of the results of an environmental assessment in which site-specific variables, such as host country context, assimilative capacity of the environment, and other project factors, are taken into account. The applicability of specific technical recommendations should be based on the professional opinion of qualified and experienced persons. When host country regulations differ from the levels and measures presented in the EHS Guidelines, projects are expected to achieve whichever is more stringent. If less stringent levels or measures than those provided in these EHS Guidelines are appropriate, in view of specific project circumstances, a full and detailed justification for any proposed alternatives is needed as part of the site-specific environmental assessment. This justification should demonstrate that the choice for any alternate performance levels is protective of human health and the environment. The relevant sectoral EHS Guidelines applicable to this review in addition to the General EHS Guidelines are:

• IFC EHS Guidelines for Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation, 2007;

http://www.ifc.org/wps/wcm/connect/e280ef804a0256609709ffd1a5d13d27/GN_English_2012_Full-Document.pdf?MOD=AJPERES


http://www.ifc.org/wps/wcm/connect/22ad720048855b25880cda6a6515bb18/ResettlementHandbook.PDF?MOD=AJPERES


http://www.ifc.org/wps/wcm/connect/938f1a0048855805beacfe6a6515bb18/IFC_StakeholderEngagement.pdf?MOD=AJPERES


http://www.ifc.org/wps/wcm/connect/54c46b8048855702bb44fb6a6515bb18/PublicConsultation.pdf?MOD=AJPERES&CACHEID=54c46b8048855702bb44fb6a6515bb18


http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+Sustainability/Learning+and+Adapting/Knowledge+Products/Publications/Publications?contentQuery=IFC_EXT_Design%2FGood+Practice%2C&Topics=All&Industry=All&advSearchCls=advSearchCollapse&Region=All&Products=IFC_EXT_Design%2FGood+Practice&Donor=All&Language=All&Department=All


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• IFC EHS Guidelines for Large Volume Petroleum Based Organic Chemical Manufacturing, 2007;

• IFC EHS Guidelines for Natural Gas Processing, 2007;

• IFC EHS Guidelines for Nitrogenous Fertiliser Production, 2007;

• Petroleum based Polymers Manufacturing, 2007;

• Pharmaceuticals & Biotechnology Manufacturing, 2007; and,

• Phosphate Fertilizer Manufacturing 2007.

As well as the EHS Guidelines applicable to the chemical production processes, a number of other sector-specific EHS guidelines may apply to additional developments without which the chemical facilities could not be constructed or operate. These developments are known as Associated Facilities, which for a chemicals plant may include for example a power plant, gas pipeline or transmission line. These EHS guidelines are not within the scope of this review, but may need to be considered at the plant development stage and may include:

• Natural Gas Processing 2007;

• On-shore Oil and Gas Development 2007;

• Thermal Power Plants 2008;

• Electric Power Transmission and Distribution 2007;

• Mining 2007;

• Water and Sanitation 2007; and,

• Waste Management Facilities 2007.

International Conventions

Ethiopia has ratified or acceded to a large number of international treaties and conventions, which must be considered as appropriate during the planning and development of the chemicals sector, including in the ESIA process:

• ILO Conventions as discussed above;

• The Stockholm Convention on Persistent Organic Pollutants;

• Convention on Biological Diversity;

• Cartagena Protocol on Bio-safety;

• Montreal Protocol on Substances that Deplete the Ozone Layer;

• The Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade;

• The Basel Convention on the Control of Trans-boundary Movements of Hazardous Waste;

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• Bamako Convention on the ban on the Import into Africa and the Control of Trans-boundary Movement and Management of Hazardous Wastes within Africa;

• Libreville Declaration on Health and Environment in Africa;

• The United Nations Convention on International Trade in Endangered Species (CITES) of Wild Fauna and Flora 1973;

• The United Nations Framework Convention on Climate Change, 1992;

• The United Nations Convention to Combat Desertification in those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa;

• The United Nations Convention for the Safeguarding of the Intangible Cultural Heritage;

• The United Nations Convention on the Protection and Promotion of the Diversity of Cultural Expressions;

• The United Nations Convention Concerning the Protection of World Cultural and National Heritage;

• The Vienna Convention for the Protection of the Ozone Layer; and,

• The United Nations Convention on Biological Diversity (Rio Convention) 1992.

National and International Emissions Standards

The following sections present the identified national and international limits, guideline values or standards that are likely to be applicable to the processes associated with the identified priority chemicals. National limits are taken from the Standards for Industrial Pollution Control in Ethiopia (2003), prepared by the EPA and The United Nations Industrial Development Organization under the Ecologically Sustainable Industrial Development (ESID) Project (US/ETH/99/068/ETHIOPIA). National standards are provided for:

• specified industrial sectors;

• general standards for all other industrial effluents;

• general gaseous emissions; and,

• noise emissions.

The standards are for point source emissions, but there are no requirements regarding control of impacts of emissions on ambient concentrations. International guideline values are taken from the general and sector-specific WBG/IFC EHS Guidelines. The EHS Guidelines contain “performance levels and measures that are generally considered to be achievable in new facilities by existing technology at reasonable costs”. Guidelines are provided for point source emissions and, where relevant, with regard to impacts on ambient concentrations of pollutants. Where appropriate, the detailed notes on interpretation of the guidelines are repeated. The following tables combine relevant national and international standards and/or guideline levels:

F-29


• Table F-5: Emissions to the atmosphere: Industry-Specific Standards (including Annex);

• Table F-6: Emissions to the atmosphere: General Standards for all Other Gaseous Emissions;

• Table F-7: Emissions to the atmosphere - small combustion facilities emissions (3-50 Megawatt thermal, MWth)

• Table F-8: Ambient Air Quality Guidelines;

• Table F-9: Emissions to water: Industry-Specific Standards; and,

• Table F-10: Noise Limits.

Should there be a divergence between the national and international standard, the EHS Guidelines require that more stringent of the two standards is applied unless there is appropriate and scientifically justified argument for a deviation11. It should be noted that the emissions standards provided in the following tables are those identified at the time of writing and the design and project-specific ESIA for the ultimately proposed chemical facilities will need to review the relevant identified standards12 at that time.

11 The General EHS Guidelines state: “Application of the EHS Guidelines to existing facilities may involve the establishment of site-specific targets, with an appropriate timetable for achieving them. The applicability of the EHS Guidelines should be tailored to the hazards and risks established for each project on the basis of the results of an environmental assessment in which site-specific variables, such as host country context, assimilative capacity of the environment, and other project factors, are taken into account” 12 Where there are gaps (i.e. a standard is not available from either the national requirements or the EHS guideline), detailed review of other leading regulatory regimes (e.g. the EU) at design/ESIA stage should be completed to fill these gaps if possible.

F-30


Table F-5: Emissions to the Atmosphere: Industry-Specific Standards

Emissions to the atmosphere International standard

National standard * (Source: Environmental Standards for Industrial Pollution Control in Ethiopia)

Limit Unit Limit Unit

MANUFACTURE OF FERTILIZERS: PHOSPHATE FERTILIZER PLANTS

EHS Guideline: Phosphate Fertilizer Manufacturing

Fertilizer Plant

Total Particulates 50 mg/NM3 100 mg/NM3

Fluorides (as HF) 5 mg/NM3 10 mg/NM3

Ammonia 50 mg/NM3

HCl 30 mg/NM3

NOx 500 nitrophosphate unit 70 mix acid unit mg/NM3

Sulphuric Acid Plant Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation

Sulphur Dioxide (as SO2) 450

2 mg/NM3 kg/t acid

2 kg/t acid

Sulphur Trioxide (as SO3) 60

0.075 mg/NM3 kg/t acid

0.15 kg/t acid

Hydrogen sulphide 5 mg/NM3

NOx 200 mg/NM3

Phosphoric acid plant EHS Guideline: Phosphate Fertilizer Manufacturing and Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation



MANUFACTURE OF FERTILIZERS: NITROGENOUS FERTILIZERS

Ammonia Production EHS Guideline: Nitrogenous Fertilizer Production

Nitrous oxides (as NO2) 1.3 kg

NOx (in flue-gas from the primary reformer) Temp. 273K (0°C), pressure 101.3 kPa (1 atm), oxygen content 3% dry for flue gas.

300 mg/NM3

Sulphur oxides (as SO2) 0.1 kg

Carbon dioxide (as CO2) 500 kg

Carbon monoxide (as CO) 0.03 kg

Ammonia (NH3) (from process, prilling towers, etc.) 50 mg/NM3

Particulate matter (from process, prilling towers, etc.) 50 mg/NM3

Fertilizer Plant

Total particulates 100 mg/NM3

Ammonia 50 mg/NM3

F-31





Amines 5 mg/NM3

PETROCHEMICAL MANUFACTURING


Nitrous oxides (as NO2) 500 mg/NM3

Sulphur dioxide (as SO2) 800 mg/NM3

Hydrogen chloride (as HCl) 20 mg/NM3

Benzene 5 mg/NM3, 0.1 ppb at plant fence mg/NM3

1,2-Dichloroethane 5 mg/NM3, 1 ppb at plant fence mg/NM3

Vinyl chloride 5 mg/NM3, 0.4 ppb at plant fence mg/NM3

Chlorine 20 mg/NM3

Ammonia (as NH3) 15 mg/NM3

PESTICIDE MANUFACTURING


Volatile organic carbon compounds 50 mg/NM3


Chlorine (or chloride) 5 mg/NM3

PESTICIDE FORMULATION

Total Particulates 10 mg/NM3




PHARMACEUTICAL MANUFACTURING


Active ingredients 0.15 mg/NM3 (each) 0.2 mg/NM3

Organic compounds: (See Annex to Table F5 – following table)

Class I 20 mg/NM3

Class II 100 mg/NM3

Class III 300 mg/NM3

Particulate Matter 20 mg/NM3

Total Organic Carbon 50 mg/NM3

Hazardous Air Pollutants 900-1800 kg/year (Process-based annual mass limit. 900: Actual HAP emissions from the sum of all process vents within a process; 1,800: Actual HAP emissions from the sum of all process vents within processes.)

Total Class A (Applicable when total Class A compounds exceed 100 g/hr)

20 mg/NM3

F-32





Total Class B (Applicable when total Class B compounds, expressed as toluene, exceed the lower of 5 t/year or 2 kg/hr.)

80 mg/NM3

Benzene, Vinyl Chloride, Dichloroethane (each) 1 mg/NM3

VOC: (EU Directive 1999/13/EC. Facilities with solvent consumption > 50 tonnes/year. Higher value (150) to be applied for waste gases from any technique which allows the reuse of the recovered solvent. Fugitive emission values (not including solvent sold as part of products and preparations in a sealed container): 5 percent of solvent input for new facilities and 15 percent for existing facilities. Total solvent emission limit values: 5 percent of solvent input for new facilities and 15 percent for existing facilities.) VOC: (Waste gases from oxidation plants. As 15 minute mean for contained sources)

20-150

50

mg/NM3

Bromides (as HBr) 3 mg/Sm3

Chlorides (as HCl) 30 mg/Sm3

Ammonia 30 mg/Sm3

Arsenic 0.05 mg/Sm3

Ethylene Oxide 0.5 mg/Sm3

Mutagenic Substance 0.05 mg/Sm3

LARGE VOLUME INORGANIC COMPOUNDS MANUFACTURING AND COAL TAR DISTILLATION

Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation

* For Sulfuric Acid Plants and Phosphoric Acids Plants see ‘Sulphuric Acid Plant’ above *

Nitric acid plants

NOx 300 mg/NM3

N2O 800 mg/NM3

NH3 10 mg/NM3

NATURAL GAS PROCESSING (dry gas at 15% oxygen)

Natural Gas Processing

NOx (facilities with total heat input capacity ≤ 300 MWth) NOx (facilities with total heat input capacity > 300 MWth)

150 50

mg/NM3 mg/NM3

SO2 75 mg/NM3

PM10 10 mg/NM3

VOC 150 mg/NM3

CO 100 mg/NM3

F-33





PETROLEUM-BASED ORGANIC CHEMICALS MANUFACTURING

Petroleum-based Polymers Manufacturing

Particulate matter 20 mg/NM3

Nitrogen oxides 300 mg/NM3

Hydrogen chloride 10 mg/NM3

Sulphur oxides 500 mg/NM3

Vinyl chloride (VCM) 80

500 g/t s-PVC g/t e-PVC

Acrylonitrile 5 (15 from dryers) mg/NM3

Ammonia 15 mg/NM3

VOCs 20 mg/NM3

Heavy metals (total) 1.5 mg/NM3

Mercury 0.2 mg/NM3

Formaldehyde 0.15 mg/m3

Dioxins/Furans 0.1 ng TEQ/Nm3

LARGE VOLUME PETROLEUM-BASED ORGANIC CHEMICALS MANUFACTURING

(Dry, 273K (0°C), 101.3kPa (1 atm), 6% O2 for solid fuels; 3% O2 for liquid and gaseous fuels)





Benzene 5 mg/NM3

1,2-Dichloroethane 5 mg/NM3

Vinyl chloride (VCM) 5 mg/NM3

Acrylonitrile 0.5 (incineration)

2 (scrubbing) mg/NM3

Ammonia 15 mg/NM3

VOCs 20 mg/NM3


Mercury and compounds 0.2 mg/NM3


Ethylene 150 mg/NM3

Ethylene oxide 2 mg/m3

Hydrogen cyanide 2 mg/m3

Hydrogen sulphide 5 mg/m3

F-34





Nitrobenzene 5 mg/m3

Organic sulphide and mercaptans 2 mg/m3

Phenols, cresols and Xylols (as Phenol) 10 mg/m3

Caprolactam 0.1 mg/m3

Dioxins/Furans 0.1 mg/NM3

F-35


* Note on interpretation (from National Standards): During Continuous Monitoring: a) No 24 hour mean value shall exceed the emission limit value. b) 97% of all 30 minute mean values taken continuously over an annual period shall not exceed

1.2 times the emission limit value. c) No 30 minute mean value shall exceed twice the emission limit value. d) For Total Organic Carbon (as C) concentration limits, no hourly average value shall exceed 1.5

times the emission limit value. During Non-Continuous Monitoring: e) For flow, no hourly or daily mean value, calculated on the basis of appropriate spot readings,

shall exceed the relevant limit value. f) Mass flow threshold refers to a rate of discharge expressed in units of kg/h, above which

concentration the emission limit value applies. Mass flow threshold rates shall be determined on the basis of a single 30 minute measurement (i.e. the concentration determined as a 30-minute average shall be multiplied by an appropriate measurement of flow and the result shall be expressed in units of kg/h).

g) Mass flow limits shall be calculated on the basis of the concentration, determined as an average over the specified period, multiplied by an appropriate measurement of flow. No value, so determined, shall exceed the mass flow limit value.

h) For all Total Organic Carbon (as C) concentration limits, the average of all readings in one monitoring exercise shall not exceed the emission limit value and no hourly average value shall exceed 1.5 times the emission limit. At least three readings shall be obtained in each monitoring exercise.

i) For all other parameters, no 30 minute mean value shall exceed the emission limit value. The concentration and volume flow limits for emissions to the atmosphere shall be achieved without the introduction of dilution air and shall be based on gas volumes under standard conditions of : ̶ in the case of non-combustion gases, a temperature of 2730K, and a pressure of 101.3

KPa without any correction for oxygen or water content; and ̶ in the case of combustion gases, a temperature 2730K, and a pressure 101.3 KPa of dry

gas with 3% oxygen for liquid and gas fuels, 6% oxygen for solid fuels, and 10% oxygen for thermal oxidisers.

F-36


Annex 1 to Table F-5 – Classification of Organic Chemicals (from National Standards)

Substance Empirical formula

Class Substance

Empirical formula

Class Substance

Empirical formula

Class

Acetaldehyde C2H4O I Ethylamine C2H7N I Tetrahydrofuran

C4H8O II

Acetone C3H6O III Ethylbenzene C8H10 II Thioalcohols n/a I

Acrylic acid C3H4O2 I Ethylene glycol

C2H6O2 III Thioether n/a I

Alkyl alcohols n/a III Formaldehyde CH2O I Toluene C7H8 II

Alkyl lead compounds n/a I

2-Furaldehyde

C5H4O2 I

1,1,1-Trichlorethane

C2H3Cl3 II

Formic Acid CH2O2 I Furfuryl alcohol

C5H6O6 II


C2H3Cl3 I

Aniline C6H7N I

4-Hydroxy-4-methyl-2-pentanone

C6H12O2 III

Trichlorethylene

C2HCl3 II

Biphenyl C12H10 I

2,2-Iminodiethanol

C4H11NO2 II

Trichlormethane CHCl3 I

2-Butanon C4H8O III Isopropenylbenzene C9H10 II

Trichlorphenols

C6H3OCl3 I

2-Butoxyethanol C6H14O2 II Isopropylbenzene C9H12 II

Triethylamine

C6H15N I

Butyl acetate C6H12O2 III Carbon disulphide CS2 II

Trichlorfluormethane CCl3F III

Butyric aldehyde C4H8O II Cresols C7H8O I Trimethylbenzenes C9H12 II

Chloracetaldehyde C2H3ClO I

Maleic anhydride

C4H2O3 I Vinyl acetate

C4H6O2 II

Chlorbenzene C6H5Cl II

2-Methoxyethanol

C3H8O2 II

Xylenols (except 2,4-Xylenol)

C8H10O I

2-Chlor-1,3-Butadiene C4H5C1 II

Methyl acetate

C3H6O2 II 2,4-Xylenol

C8H10O II

Chloroacetic acid C2H3C1O2 I

Methyl acrylate

C4H6O2 I Xylenes C8H10 II

Chloroethane C2H5Cl III Methylamine CH5N I

Chloromethane CH3Cl I Methyl benzoate

C8H8O2 III

2-Chlorpropane C3H7Cl II Methylcyclohexanons

C7H12O II

α - Chlorotoluene C7H7Cl I

Methyl formate

C2H4O2 II

Cyclohexanone C6H10O II Methyl C5H8O II

F-37



Class Substance

Empirical formula

Class Substance

Empirical formula

Class

methacrylate 2

Dibutylether C8H18O III 4-Methyl-2-pentanone

C6H12O III

1,2-Dichlorbenzene C6H4Cl2 I

4-Methyl-m-phenylendiisocyanate

C9H6N2O2 I

1,4-Dichlorbenzne C6H4Cl2 II

N-Methylpyrrolidone

C5H9NO III

Dichlorodifluoromethane CCl2F2 III Naphthalene C10H8 II

1,1-Dichlorethane C2H4Cl2 II Nitrobenzene

C6H5NO2 I

1,1-Dichlorethylene C2H2Cl2 I Nitrocresols

C7H7NO3 I

1,2-Dichlorethylene C2H2Cl2 III Nitrophenols

C6H5NO3 I

Dichloromethane CH2Cl2 III Nitrotoluene C7H7NO2 I

Dichlorophenol C6H4Cl2O I Olefin hydrocarbons n/a III

Diethylamine C4H11N I Paraffin hydrocarbons n/a III

Diethylether C4H10O III Phenol C6H6O I Di-(2-ethylhexyl)-phthalate C24H38O4 II Pinenes

C10H16 III

Diisopropyl ether C6H14O III 2-Propenal C3H4O I

Dimethylamine C2H7N I Propionaldehyde C3H6O II

Dimethyl ether C2H6O III Propionic acid C3H6O2 II

N,N-Dimethylformamide C3H7NO II Pyridine C5H5N I

2,6-Dimethylheptan-4-on C7H14O II Styrene C8H8 II

1,4-Dioxan C4H8O2 I

1,1,2,2-Tetrachlorethane

C2H2Cl4 I

Acetic Acid C2H4O2 II Tetrachloroethylene C2Cl4 II

2-Ethoxyethanol C4H10O2 II Tetrachloromethane CCl4 I

Ethyl acetate C4H8O2 III Tetrahydrofur C4H8O II

F-38



Class Substance

Empirical formula

Class Substance

Empirical formula

Class

an

F-39


Table F-6: Emissions to the atmosphere: General Standards for all Other Gaseous Emissions

Emissions to the atmosphere

International standard (Source: WBG/IFC General EHS

Guidelines)

National standard * (Source: Environmental Standards for Industrial Pollution Control in

Ethiopia)


General EHS: Air Emissions and Ambient Air Quality (WHO Ambient Air Quality Guidelines)

GENERAL STANDARDS FOR ALL OTHER GASEOUS EMISSION Applicability: these emission limits from stationary sources represent the maximum allowable levels of pollutant from a site, process, stack, vent, etc.

PARTICULATE MATTER

Total dust

mass flow 2 kg/h

mass concentration 100 mg/NM3

Inorganic particulate matter

Class I:

Mercury and its compounds, as Hg

0.5 mg/NM3

Thallium and its compounds, as Tl

Class II:

Lead and its compounds, as Pb

10 mg/NM3

Cobalt and its compounds, as Co

Nickel and its compounds, as Ni

Selenium and its compounds, as Se

Tellurium and its compounds, as Te

Class III:

Antimony and its compounds, as Sb

20 mg/NM3

Chromium and its

F-40




Guidelines)


Ethiopia)


compounds, as Cr

Easily soluble cyanides (e.g. NaCN), as CN

Easily soluble fluorides (e.g. NaF), as F

Copper and its compounds, as Cu

Manganese and its compounds, as Mn

Vanadium and its compounds, as V

Tin and its compounds, as Sn

INORGANIC GASEOUS SUBSTANCES

Class I:

Arsine

5 mg/NM3 Cyanogen chloride

Phosgene

Phosphine

Class II:

Bromine and its gaseous compounds, as HBr

30 mg/NM3

Chlorine

Hydrocyanic acid

Fluorine and its gaseous compounds, as HF

Hydrogen sulphide

Class III:

Ammonia Not stated

mg/NM3 Gaseous inorganic compounds of chlorine, unless included in class I or

Not stated

F-41




Guidelines)


Ethiopia)


class II, as HCl

Class IV:

Sulphur oxides (sulphur dioxide and sulphur trioxide), as SO2

3500 mg/NM3 Nitrogen oxides (nitrogen monoxide and nitrogen dioxide), as NO2

ORGANIC GASEOUS SUBSTANCES

(See tab: Annex 1)

Class I: 50 mg/NM3

Class II: 200 mg/NM3

Class III: 300 mg/NM3

CARCINOGENIC SUBSTANCES

Carcinogenic Chemicals

Class I:

Arsenic and its compounds, as As

0.5 mg/NM3

Benzo(a)pyrene

Cadmium and its compounds, as Cd

Water-soluble compounds of cobalt, as Co

Chromium (VI) compounds, as Cr

Class II:

Acrylamide

5 mg/NM3

Acrylonitrile

Dinitrotoluenes

Ethylene oxide


F-42




Guidelines)


Ethiopia)


4-vinyl-1,2-cyclohexene-diepoxy

Class III:

Benzene

10 mg/NM3

Bromoethane

1,3-Butadiene

1,2-Dichloroethane

1,2-Propylene oxide (1,2-epoxy propane)

Styrene oxide

o-Toluidine

Trichloroethene

Carcinogenic Fibres (may not be exceeded in waste gas emissions)

Asbestos fibres (e.g. chrysotile, crocidolite, amosite)

1x104 fibres/m³

Biopersistent ceramic fibres (e.g. consisting of aluminium silicate, aluminium oxide, silicon carbide, potassium titanate)

1.5x104 fibres/m³

Biopersistent mineral fibres

5x104 fibres/m³

MUTAGENIC SUBSTANCES OR PREPARATIONS

mass concentration <0.5 mg/Nm³

EMISSION LIMITS FROM COMBUSTION SOURCES

Total particulates

Coal 500 mg/NM3

Fuel oil 250 mg/NM3

Gas 50 mg/NM3

Nitrogen oxides (as NO2)

Coal 700 mg/NM3

Fuel oil 1000 mg/NM3

Gas 400 mg/NM3

F-43




Guidelines)


Ethiopia)


Sulphur oxides (as SO2)

Coal 4300 mg/NM3

Fuel 5100 mg/NM3

Gas 100 mg/NM3

Carbon monoxide 150 mg/NM3

Smoke 2 units on the Ringleman scale

STANDARDS FOR MOTOR VEHICLE EXHAUST

General EHS: Air Emissions and Ambient Air Quality

Smoke (to be compared with Ringlemann Chart at a distance of 6 meters or more) Emissions from on-road and off-road

vehicles should comply with national or regional programs.

2

units on the Ringlemann Scale during engine acceleration mode

Carbon monoxide (under idling conditions: non dispersive infrared detection through gas analyser)

New Vehicles: 4.5 Used Vehicles: 6

% of the exhaust volume % of the exhaust volume

ODOUR

Highly odourous substances

Guidance to manage and minimise nuisance and noxious odours are provided in industry guidance. No limits are detailed.

No specific limits are detailed, but the following guidance is provided:

Where an installation is likely to emit highly odourous substances during normal operation or operational malfunctions, appropriate emission control measures shall be applied, e.g. enclosure of all or part of the installation, operation under negative pressure with off gasses directed to appropriate odour abatement technologies. Adequate provision shall be made for raw materials and products to ensure minimization of odorous emissions. Highly odourous waste gasses shall be fed to waste gas purification

F-44




Guidelines)


Ethiopia)


installations, which are appropriate for abatement of the odorous substance. When defining the abatement requirements for individual cases, particular consideration shall be given to waste gas volume and mass flow of highly odourous substances, local propagation conditions, the duration of emission, and the distance of the installations from the nearest existing or planned residential area. If it is not possible to identify or quantify the odorous properties of an emission based upon the amount or properties of substances contained in the emission, e.g. total quantity of amines or hydrogen sulphide, the odour characteristics of the off gas shall be established through olfactometry. For odour figures above 100,000 OU/Nm3 it is possible to reach odour reduction values of more than 99% through utilizing waste purification facilities such as biological or chemical scrubbers or biofilters.

F-45


Table F-7: Emissions to the atmosphere - small combustion facilities emissions (3-50 Megawatt thermal, MWth)

Air Emissions International standard (in mg/Nm3 or as indicated)

(Source: EHS General Guidelines)

Combustion Technology / Fuel Particulate Matter (PM) Sulphur Dioxide (SO2) Nitrogen Oxides (NOx) Dry Gas, Excess O2 Content (%)

Engine

Gas N/A N/A 200 (Spark Ignition) 400 (Dual Fuel) 1,600 (Compression Ignition)

15

Liquid

50 or up to 100 if justified by project-specific considerations (e.g. Economic feasibility of using lower ash content fuel, or adding secondary treatment to meet 50, and available environmental capacity of the site)

1.5 percent Sulphur or up to 3.0 percent Sulphur if justified by project specific considerations (e.g. Economic feasibility of using lower S content fuel, or adding secondary treatment to meet levels of using 1.5 percent Sulphur, and available environmental capacity of the site)

If bore size diameter [mm] < 400: 1460 (or up to 1,600 if justified to maintain high energy efficiency.) If bore size diameter [mm] > or = 400: 1,850

15

Turbine Natural Gas =3MWth to < 15MWth

N/A N/A 42 ppm (Electric generation) 100 ppm (Mechanical drive) 15

Natural Gas =15MWth to < 50MWth N/A N/A 25 ppm 15

Fuels other than Natural Gas =3MWth to < 15MWth N/A

0.5 percent Sulphur or lower percent Sulphur (e.g. 0.2 percent Sulphur) if commercially available without significant excess fuel cost

96 ppm (Electric generation) 150 ppm (Mechanical drive) 15


0.5% S or lower % S (0.2%S) if commercially available without significant excess fuel cost

74 ppm 15

Boiler Gas N/A N/A 320 3 Liquid 50 or up to 150 if justified by environmental assessment 2000 460 3 Solid 50 or up to 150 if justified by environmental assessment 2000 650 6 * Note on interpretation: N/A - no emissions guideline; Higher performance levels than these in the Table should be applicable to facilities located in urban / industrial areas with degraded airsheds or close to ecologically sensitive areas where more stringent emissions controls may be needed.; MWth is heat input on HHV basis; Solid fuels include biomass; Nm3 is at one atmosphere pressure, 0°C.; MWth category is to apply to the entire facility consisting of multiple units that are reasonably considered to be emitted from a common stack except for NOx and PM limits for turbines and boilers. Guidelines values apply to facilities operating more than 500 hours per year with an annual capacity utilization factor of more than 30 percent. Plants firing a mixture of fuels should compare emissions performance with these guidelines based on the sum of the relative contribution of each applied fuel.

F-46


Table F-8: Ambient Air Quality


International standard (Source: WHO Ambient Air Quality Guidelines13 – repeated from EHS General Guidelines*)

Limit Unit


24 hour Interim target 1: 125

Interim target 2: 50 Guideline: 20

10 minute Guideline: 500

µg/m3

Nitrogen oxides (nitrogen monoxide and nitrogen dioxide), as NO2

1 year: Guideline 40

1 hour: Guideline 200

µg/m3

PM10

1 year Interim target 1: 70 Interim target 2: 50 Interim target 3: 30

Guideline: 20 24 hour (PM 24-hr value is the 99th percentile)

Interim target 1: 150 Interim target 2: 100


µg/m3

PM2.5




Interim target 3: 37.5 Guideline: 25

µg/m3

Other: Ozone 8-hour daily maximum


µg/m3

13 World Health Organization (WHO). Air Quality Guidelines Global Update, 2005.

F-47


Notes on Ambient Air Quality Guidelines: Projects with significant sources14 of air emissions, and potential for significant impacts to ambient air quality, should prevent or minimize impacts by ensuring that: 1) Emissions do not result in pollutant concentrations that reach or exceed relevant ambient quality guidelines and standards by applying national legislated standards, or in their absence, the current WHO Air Quality Guidelines (as detailed in Table F6), or other internationally recognized sources*; and 2) Emissions do not contribute a significant portion to the attainment of relevant ambient air quality guidelines or standards. As a general rule, the EHS General Guideline suggests 25% of the applicable air quality standards to allow additional, future sustainable development in the same airshed. *The WBG General EHS Guidelines refer to the WHO guidelines (2005). However, it is important to note that the guidelines allow the application of other internationally recognized sources. This can in some circumstances permit the use of alternate guideline/limit values than those provided above.

14 Significant sources of point and fugitive emissions are defined as “general sources which can contribute a net emissions increase of one or more of the following pollutants within a given airshed”: PM10: 50 tons per year (tpy); NOx: 500tpy; SO2: 500tpy; and combustion sources with an equivalent heat input of 50 MWth or greater

F-48 This document, and the opinions, analysis, evaluations, or recommendations contained herein are for the sole use of the contracting parties. There

are no intended third party beneficiaries, and Jacobs Consultancy shall have no liability whatsoever to third parties for any defect, deficiency, error, omission in any statement contained in or in any way related to this document or the services provided.

Table F-9: Emissions to water: Industry-Specific Standards


International standard (Source: EHS General Guidelines)





Temperature 40 °C

pH 6 - 9 S.U. 6 - 9 S.U. Suspended solids 50 mg/l 50 mg/l

Total phosphorus (as P) 5 mg/l 5 mg/l

Fluorides (as F) 20

0.03 2

mg/l kg/ton NPK kg/ton phosphorus oxide (P2O5)

50 mg/l

Cadmium (as Cd) 1 mg/l


Ammonium Sulphate Plant Temperature 40 °C 40 °C pH 6 - 9 S.U. 6 - 9 S.U. Total nitrogen (as N) 150 mg/l BOD5 at 20°C 50 mg/l Suspended solids 50 mg/l Phosphorus (as P) 10 mg/l Phenols 1 mg/l Total heavy metals 1 mg/l All plants Temperature increase <3 °C pH 6 - 9 S.U. Ammonia plants NH3 5 mg/l Total nitrogen 15 mg/l TSS 30 mg/l Nitric Acid plants NH3 5 mg/l Total nitrogen 15 mg/l TSS 30 mg/l Urea plants Urea (prilling/granulation) 1 mg urea/l NH3 (prilling/granulation) 5 mg/l AN / CAN plants AN 100 mg/l NH3 5 mg/l Total nitrogen 15 mg/l







TSS 30 mg/l PETROCHEMICAL MANUFACTURING Temperature 40 °C pH 6 - 9 S.U. BOD5 at 20°C 90% removal or 50 mg/l, whichever is less COD 75% removal or 200 mg/l, whichever is less Total phosphorus (as P) 90% removal or 5 mg/l, whichever is less Total nitrogen (as N) 90% removal or 30 mg/l, whichever is less Suspended solids 50 mg/l Oils, Fats, and Greases 15 mg/l Chromium (as total Cr) 1 mg/l Chromium (as Cr VI) 0.1 mg/l Phenols 1 mg/l Copper (as Cu) 1 mg/l Benzene 0.1 mg/l Vinyl chloride 0.1 mg/l Sulphide 1 mg/l PESTICIDE MANUFACTURING Temperature 40 °C pH 6 - 9 S.U. BOD5 at 20°C 90% removal or 50 mg/l, whichever is less COD 75% removal or 200 mg/l, whichever is less Total phosphorus (as P) 90% removal or 5 mg/l, whichever is less Total nitrogen (as N) 90% removal or 30 mg/l, whichever is less Suspended solids 50 mg/l Oils, Fats, and Greases 15 mg/l Chromium (as total Cr) 1 mg/l Chromium (as Cr VI) 0.1 mg/l Phenols 1 mg/l Copper (as Cu) 1 mg/l Mercury (as Hg) 0.01 mg/l Active ingredient (each) 0.05 mg/l PESTICIDE FORMULATION Temperature 40 °C pH 6 - 9 S.U. COD 75% removal or 250 mg/l, whichever is less Total phosphorus (as P) 90% removal or 5 mg/l, whichever is less Total nitrogen (as N) 90% removal or 30 mg/l, whichever is less Suspended solids 30 mg/l Oils, fats, and greases 15 mg/l AOX 2 mg/l Organochlorines 0.1 mg/l Nitroorganics 0.1 mg/l







Pyrethroids 0.1 mg/l Phenoxy compounds 0.1 mg/l Active ingredient 0.05 mg/l Arsenic (as As) 0.2 mg/l Chromium (as total Cr) 1 mg/l Chromium (as Cr VI) 0.1 mg/l Phenols 1 mg/l Copper (as Cu) 2 mg/l Mercury (as Hg) 0.01 mg/l PHARMACEUTICAL MANUFACTURING Temperature 40 °C pH 6 - 9 S.U. 6 - 9 S.U. BOD5 at 20°C 30 mg/L 90% removal or 50 mg/l, whichever is less mg/l COD 150 mg/L 75% removal or 250 mg/l, whichever is less mg/l Total phosphorus (as P) 2 mg/L 90% removal or 5 mg/l, whichever is less mg/l Total nitrogen (as N) 10 mg/L 90% removal or 30 mg/l, whichever is less mg/l Suspended solids 10 mg/L 30 mg/l Oils, Fats, and Greases 10 mg/L 15 mg/l Absorbable organic halogen compounds (AOX) 1 mg/L 2 mg/l Organochlorines 0.1 mg/l Active ingredient (each) 0.05 mg/L 0.05 mg/l Arsenic (as As) 0.1 mg/L 0.2 mg/l Chromium (as total Cr) 1 mg/l Chromium (as Cr VI) 0.1 mg/L 0.1 mg/l Phenols 0.5 mg/L 1 mg/l Copper (as Cu) 2 mg/l Mercury (as Hg) 0.01 mg/L 0.01 mg/l Cadmium 0.1 mg/L Ammonia 30 mg/L Ketones (each) Including Acetone, Methyl Isobutyl Ketone (MIBK).

0.2 mg/L

Acetonitrile 10.2 mg/L Acetates (each) n-Amyl Acetate, n-Butyl Acetate, Ethyl acetate, Isopropyl Acetate, Methyl Formate.

0.5 mg/L

Benzene 0.02 mg/L Chlorobenzene 0.06 mg/L Chloroform 0.013 mg/L o-Dichlorobenzene 0.06 mg/L 1,2-Dichloroethane 0.1 mg/L Amines (each) including Diethylamine and Triethylamine

102 mg/L

Dimethyl sulfoxide 37.5 mg/L Methanol / ethanol (each) 4.1 mg/L







n-Heptane 0.02 mg/L n-Hexane 0.02 mg/L Isobutyraldehyde 0.5 mg/L Isopropanol 1.6 mg/L Isopropyl ether 2.6 mg/L Methyl cellosolve 40.6 mg/L Methylene chloride 0.3 mg/L Tetrahydrofuran 2.6 mg/L Toluene 0.02 mg/L Xylenes 0.01 mg/L Bioassays: Toxicity to fish 2 T.U. (TU = 100 / no effects dilution rate (%) of

waste water. The "no effect dilution rate" should be monitored with standard toxicity tests (e.g. CEN, ISO or OECD acute toxicity testing standards.)

Toxicity to Daphnia 8 Toxicity to algae 16

Toxicity to bacteria 8


Temperature increase =3 °C pH 6 - 9 S.U. BOD5 25 mg/l COD 150 mg/l Total phosphorus 2 mg/l Total nitrogen 10 mg/l Sulphide 1 mg/l Oil and Grease 10 mg/l TSS 30 mg/l Cadmium 0.1 mg/l Chromium (as total Cr) 0.5 mg/l Chromium (as Cr VI) 0.1 mg/l Copper 0.5 mg/l Zinc 2 mg/l Lead 0.5 mg/l Nickel 0.5 mg/l Mercury 0.01 mg/l Phenol 0.5 mg/l Benzene 0.05 mg/l VCM 0.05 mg/l 1,2-Dichloroethane 1 mg/l AOX 1 mg/l Toxicity Determined on a case-specific basis









Temperature increase <3 °C pH 6 - 9 S.U. Nitric acid plants NH3 10 mg/l Nitrates 25 g/t TSS 30 mg/l Sulphuric acid plants Phosphorus 5 mg/l Fluoride 20 mg/l TSS 30 mg/l Phosphoric acid plants Phosphorus 5 mg/l Fluoride 20 mg/l TSS 30 mg/l Hydrofluoric Acid Plants Fluorides 1 kg/tonne HF

Suspended Solids 1

30 kg/tonne HF mg/l



pH 6 - 9 S.U. BOD5 50 mg/l COD 150 mg/l TSS 50 mg/l Oil and Grease 10 mg/l Cadmium 0.1 mg/l Total Residual Chlorine 0.2 mg/l Chromium (as total Cr) 0.5 mg/l Copper 0.5 mg/l Iron 3 mg/l Zinc 1 mg/l Cyanide - Free - Total

0.1

1

mg/l mg/l

Lead 0.1 mg/l Nickel 1.5 mg/l Heavy metals total 5 mg/l Phenol 0.5 mg/l Nitrogen 40 mg/l Phosphorus 3 mg/l









pH 6 – 9 S.U. Temperature increase =3 °C BOD5 25 mg/l COD 150 mg/l Total nitrogen 10 mg/l Total phosphorus 2 mg/l Sulphide 1 mg/l Oil and Grease 10 mg/l TSS 30 mg/l Cadmium 0.1 mg/l Chromium (total) 0.5 mg/l Chromium (hexavalent) 0.1 mg/l Copper 0.5 mg/l Zinc 2 mg/l Lead 0.5 mg/l Nickel 0.5 mg/l Mercury 0.01 mg/l Phenol 0.5 mg/l Benzene 0.05 mg/l Vinyl chloride 0.05 mg/l Adsorbable organic halogens 0.3 mg/l Toxicity Determined on a case-specific basis AMBIENT WATER QUALITY ALL

Receiving Water Temperature

The General EHS Guidelines require that discharge temperatures do not result in in an increase of “greater than 3°C of ambient temperature at the edge of a scientifically established mixing zone which takes into account ambient water quality, receiving water use and assimilative capacity among other considerations”.

*Note on interpretation (National Standards): During Continuous Monitoring: No flow value, pH value or temperature value shall exceed the specified limit / deviate from the specified range. During Non-Continuous Monitoring: No pH value or temperature value shall deviate from the specified range / exceed the limit value. For parameters other than pH, temperature and discharge, 8 of 10 consecutive results, calculated as daily mean concentration or mass emission values on the basis of flow proportional composite sampling, shall not exceed the emission limit value. No individual result similarly calculated shall exceed 1.2 times the emission limit value. For parameters other than pH, temperature, and flow, no grab sample value shall exceed 1.2 times the emission limit value. The daily raw waste load is defined as the average daily mass arising for treatment over any 3-month period. Calculations of the removal rates should be based on the differences between the waste loads entering the treatment plant and those discharged following treatment to the receiving water.



The amounts removed by treatment (chemical, physical, biological) may be included in the calculation. Table F-10: Noise Limits

Noise Emissions




WHERE PEOPLE LIVE OR WORK Day (07:00 - 22:00) Day (06:00 - 21:00) Industrial area 70 1hr LAeq (dBA) 75 dB (A) Leq Commercial area 70 1hr LAeq (dBA) 65 dB (A) Leq Residential area 55 1hr LAeq (dBA) 55 dB (A) Leq Institutional / Educational as for residential 1hr LAeq (dBA) Night (22:00 - 07:00) Night (21:00 - 06:00) Industrial area 70 1hr LAeq (dBA) 70 dB (A) Leq Commercial area 70 1hr LAeq (dBA) 55 dB (A) Leq Residential area 45 1hr LAeq (dBA) 45 dB (A) Leq Institutional / Educational 45 1hr LAeq (dBA)

MOTOR VEHICLES Maximum permissible level at 7.5 m from the source

2-wheelers (petrol) 80 dB(A) 3-wheelers, all petrol passenger cars and 2-wheeler diesel cars

82 dB(A)

Passenger or light commercial vehicles with diesel engine (gross vehicle weight ≤4000 Kg)

85 dB(A)

Passenger or commercial vehicles (gross vehicle weight >12000 Kg)

91 dB(A)

* Note on interpretation: Noise from the source activity, measured at the specified noise sensitive location, shall not give rise to sound pressure levels (Leq, 15 minutes), which exceed the limit value by more than 2 dB(A).

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ESHS Impacts and Mitigation Framework Introduction This section presents a summary framework of typical ESHS impacts and potential mitigation and/or management measures associated with the production processes for the currently identified priority chemicals. As detailed in our proposal, detailed environmental impact analysis and socio-economic analysis are typically conducted at the full feasibility stage once the investment profile is known with a degree of certainty. At this stage, the intent is to draw attention to the major EHS issues, and charting a path forward. Operational safety is typically covered at the licensor/technology selection and finalisation decision point. Impacts and mitigation discussion is primarily taken from the WBG/IFC General and relevant Sector-specific EHS guidelines, which form the basis for environmental, social, health and safety risk management requirements of the Equator Principles.

Potential Environmental and Social Impacts and Mitigation General Considerations

As discussed in the site selection discussion above, potential sites have not yet been defined. Accordingly, a description of ‘baseline’ conditions and analysis of associated site-specific E&S risks has not been undertaken. The focus of this review is instead a summary of the key sector-specific risks and potential mitigation associated with each of the currently recommended priority chemicals (see following section). However, the following discussion of general considerations is also provided. The WBG/IFC General EHS Guidelines includes appropriate discussion of general impacts associated with construction, operation and decommissioning of new facilities and potential mitigation for the key aspects:

• Air Emissions and Ambient Air Quality;

• Energy Conservation;

• Wastewater and Ambient Water Quality;

• Water Conservation;

• Hazardous Materials Management;

• Waste Management;

• Noise; and,

• Contaminated Land.

For each of the above aspects, the General EHS Guidelines provides detailed guidance and potential mitigation options which are typically applied on projects which are designed and operated in line with good international industry practice. At this stage, it is not intended to repeat the detailed mitigation on

F-56


general issues from the EHS Guidelines as these will ultimately be developed as part of subsequent feasibility stages and if required the reader should refer to the guidelines for further information. Whilst detailed discussion of general impacts is not included at this stage, relevant information from the General EHS Guidelines has been included in the national and international emissions framework table and other relevant discussion (e.g. around permitting regimes for water abstraction and effluent discharge) is included in the legal framework section. In addition, the following comments are provided regarding key E&S aspects as follows:

• Air Emissions and Ambient Air Quality:

o Modelling of air emissions is likely to be required which will need to consider the impacts on site specific receptors (e.g. communities and biodiversity) in addition to occupational health.

o This will need to assess the performance of the proposed facility design at the relevant point source emissions standards from Tables F5 and F6, and in consideration of the ambient air quality guidelines presented in Table F8.

o Where required by the design, the assessment may also need to consider the EHS standards for small combustion plants as presented in Table F7 to address any on site requirements for power and/or heat generation amongst other processes

o In the event that significant external power generation is required which may be considered as ‘Associated Facilities’ (under IFC PS1), additional emissions standards and/or monitoring requirements may be applicable as specified for example under the EHS Guidelines for Thermal Power Plants or Geothermal Power Plants.

o Detailed sector-specific considerations for air quality are included in the following section.

• Waste Management:

• Results of the site visit consultations indicate that there are not yet any appropriately design and licenced hazardous waste handling or disposal facilities in Ethiopia. It is also understood that there are no engineered landfills of international standard yet available in Ethiopia.

• It is therefore likely that any hazardous waste that cannot be reused on site will be required to be stored on site and ultimately transported internationally for disposal;

• Noise emissions:

o As with air quality, modelling of noise emissions may be required depending on site specific conditions.

o This will need to assess the performance of the proposed facility design in line with the emissions standards from Table F-10; and,

• Land acquisition and lend tenure:

o The legal framework section indicates that Ethiopia has a well-developed land tenure and land use planning framework. However, it is respectfully noted that the historical land tenure context in Ethiopia is relative complex and that there may be associated residual tensions within certain communities associated with land use/ownership.

o As private sector development of the sector is proposed, any associated land tenure aspects (including land acquisition and potential physical or economic displacement) will

F-57


need to be very well understood and managed in line with both national and international standards (in this case, IFC PS5 on Land Acquisition and Involuntary Resettlement).

o The requirements of IFC PS5 are typically more involved than national requirements, particularly with regard to consideration of residents with no legal tenure.

o This will be required by financial institutions whether or not GoE oversees a land acquisition process or whether this is led by a private sector actor. If GoE undertakes a process that does not meet with international practice, the private sector developer will generally be required to undertake retroactive steps to address any gaps. This may well be identified by the potential developer during any diligence undertaken prior to moving forward with a proposed development.

• Wastewater effluent management, treatment and disposal:

o Waste water should be separated and treated in line with international best practice and appropriate national international guidelines for disposal as presented in Table F-9. Disposal should consider existing/proposed uses of the receiving environment as part of the detailed impact assessment process.

o With regard to ambient receiving water temperatures, the General EHS Guidelines require that discharge temperatures do not result in in an increase of” greater than 3°C of ambient temperature at the edge of a scientifically established mixing zone which takes into account ambient water quality, receiving water use and assimilative capacity among other considerations”.

o Examples of industrial wastewater treatment approaches taken from the General EHS Guidelines are represented in Table F-11. Additional sector specific approaches are presented in the following section.

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Table F-11: Examples of Industrial Wastewater Treatment Approaches

Sector Specific Considerations

This section presents the potential environmental and social issues and potential mitigation for the various sectors. The following tables are included:

• Table F-12: Industry-specific Environmental Impacts and Management: Nitrogenous Fertilizer Production;

• Table F-13: Industry-specific Environmental Impacts and Management: Large Volume Petroleum-Based Organic Chemicals Manufacturing;

• Table F-14: Industry-specific Environmental Impacts and Management: Natural Gas Processing;

• Table F-15: Industry-specific Environmental Impacts and Management: Large Volume Inorganic Chemicals (LVIC) and Coal Tar Distillation;

F-59


• Table F-16: Industry-specific Environmental Impacts and Management: Petroleum based Polymers Manufacturing;

• Table F-17: Industry-specific Environmental Impacts and Management: Pharmaceuticals & Biotechnology Manufacturing; and,

• Table F-18: Industry-specific Environmental Impacts and Management: Phosphate Fertilizer Manufacturing.

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Table F-12: Industry-specific Environmental Impacts and Management: Nitrogenous Fertilizer Production

Value chain Activities Main source of Risk Potential Mitigation Measures

Nitr

ogen

ous

Ferti

lizer

Pro

duct

ion

Air emissions

Process emission from ammonia production

Process emissions from ammonia plants consist mainly of natural gas, hydrogen (H2), carbon dioxide (CO2), ammonia (NH3), and carbon monoxide (CO). Hydrogen sulphide (H2S) may be present depending on the fuel used. Fugitive emissions from storage tanks valves, flanges, and tubing may also occur, especially during transportation or transfer. Non-routine emissions associated with process upsets/accidents may contain natural gas, carbon monoxide (CO), hydrogen (H2), carbon dioxide (CO2), volatile organic compounds (VOCs), nitrogen oxide (NOX), and NH3.

1. Use synthesis NH3 purge gas treatment to recover NH3 and H2 before combustion of the remainder in the primary reformer; 2. Increase the residence time for off-gas in the high temperature zone of the primary reformer, utilising the energy content of the off gas and reducing fuel requirement; 3. Ammonia emissions from relief valves or pressure control devices from vessels or storages should be collected and sent to a flare or to wet scrubber; 4. Install leak detection methods to detect fugitive emissions of ammonia from process and storage; 5. Implement maintenance programs, particularly in stuffing boxes on valve stems and seals on relief valves, to reduce or eliminate releases.

Process emissions from urea production

These comprise mainly ammonia and dust. Fugitive emissions of NH3 from tanks, valves, flanges, and tubing may also occur. Prilling towers and granulators are a major source of emission of urea dust.

1. Reduction of dust emissions by producing granular rather than prilled product; 2. Consider installation of prilling towers with natural draft cooling instead of towers with forced/induced draft air cooling; 3. Scrubbing of off-gases with process condensate prior to discharge to atmosphere, and reprocessing the recovered urea solution; 4. Use of baghouse filters to prevent the emission of dust laden air from transfer points, screens, bagging machines, etc., coupled with an urea dust dissolving system which allows recycling of urea to the process; 5. Flash melting of solid urea over-size product which allows urea recycling to the process; 6. Collection of solid urea spillages on a dry basis, avoiding washing of surfaces; and 7. Connection of both safety relief valves/seals of the ammonia/urea pumps, and tank vents to a flare.

Process emissions from nitric acid manufacturing

These comprise primarily nitric oxide (NO), nitrogen dioxide (NO2), and nitrogen oxide (NOx) from the tail gas of the acid absorption tower, nitrous oxide (N2O) and trace amounts of nitric acid (HNO3) mist from the filling of acid storage tanks, and ammonia (NH3).

NOx 1. Ensure sufficient air supply to the oxidizer and absorber; 2. Ensure high pressure conditions are maintained, especially in nitric acid production absorption columns; 3. Prevent high temperatures in the cooler-condenser and absorber; 4. Develop a maintenance program to prevent operation with faulty equipment that may lead to lower pressures and leaks; 5. Reduce NOX emissions by increasing the efficiency of an existing absorption tower or incorporating an additional absorption tower; 6. Apply a catalytic reduction process to treat tail gases from the absorption tower. 7. Install active molecular sieves to catalytically oxidize NO to NO2 and selectively adsorb NO2, returning the thermally stripped NO2 to the absorber; 8. Install wet scrubbers with an aqueous solution of alkali hydroxides or carbonates, ammonia, urea, potassium permanganate, or caustic chemicals (e.g. caustic scrubbers with sodium hydroxide, sodium carbonate, or other strong bases), recovering NO and NO2 as nitrate or nitrate salts. N2O 1. Install selective catalytic reduction (SCR) units operating around 200°C with various catalysts (platinum, vanadium pentoxide, zeolites, etc.) or, less frequently, non-selective catalytic reduction (NSCR) units; 2. Integrate a decomposition chamber in the burner to reduce the production of N2O by increasing the residence time in the oxidation reactor; 3. Use a selective de-N2O catalyst in the high temperature zone (between 800 and 950 °C) of the oxidation reactor; 4. Install a combined N2O and NOX abatement reactor between the final tail gas heater and the tail gas turbine.

F-61



The reactor consists of two catalyst layers (Fe zeolite) and an intermediate injection of NH3.

Process emissions from ammonium nitrate

Process emissions consist mainly of ammonia and dust from neutralizers, evaporators, prill towers, granulators, driers and coolers. Fugitive emissions of ammonia arise from storage tanks and process equipment.

1. Installation of steam droplet separation techniques (e.g., knitted wire, mesh demister pads, wave plate separators and fibre pad separators using, for example, polytetrafluoroethylene (PTFE) fibre's) or scrubbing devices (e.g., packed columns, venturi scrubbers and irrigated sieve plates) to reduce emissions of ammonia and ammonium nitrate in the steam from neutralizers and evaporators. A combination of droplet separators and scrubbers should be used to remove ammonium nitrate particulate emissions. Nitric acid should be used to neutralize any free ammonia; 2. Treat and re-use contaminated condensate using techniques including stripping with air or steam with the addition of alkali to liberate ionized ammonia if required, or use distillation and membrane separation processes such as reverse osmosis; and 3. Adoption of the lowest practical melt temperature to reduce emissions of ammonia and ammonium nitrate from prilling and granulation emissions.

Wastewater

Industrial Process Wastewater

Effluent from ammonia plants During normal operations, plant discharges may include releases of process condensates or scrubbing effluents of waste gases containing ammonia and other by-products. Process condensates typically arise from condensation between shift reactors and absorption of carbon dioxide, and from carbon dioxide overheads. Such condensates may contain ammonia, methanol, and amines. In partial oxidation, soot and ash removal may impact water discharges if not handled adequately.

1. Condensates should be steam-stripped to reduce the ammonia content, and re-used as boiler make-up water after an ion exchange treatment or sent to a wastewater treatment plant for treatment with other ammoniacal streams. Steam-stripper emissions may require additional ammoniac emissions controls; 2. Ammonia absorbed from purge and flash gases should be recovered in a closed loop to avoid the occurrence of aqueous ammonia emissions; 3. Soot from gasification in partial oxidation processes should be recovered as a carbon slurry via water scrubbing and recycled to the process.

Effluents from urea plants A urea plant generates a significant stream of process water containing NH3, CO2 and urea. Other sources are ejector steam, flush, and seal water.

1. Improve evaporation heater/separator design to minimize urea entrainment; 2. Remove NH3, CO2, and urea from the process water in a process water treatment unit, and recycle the gases to the synthesis to optimize raw material utilization and reduce effluents; 3. Provide adequate storage capacity for plant inventory to prepare for plant accident/upset and/or shutdown conditions, i.e. bunded tanks of appropriate capacity. 4. Install below ground interceptor tanks to collect plant washings and other contaminated streams from drains for recycling to process or conveying to the process water treatment unit. 5. Treatment must ensure that emissions meet requirements of the more stringent of Ethiopian and international requirements.

Effluents from nitric acid plants Liquid effluents from a nitric acid plant include: 1. Dilute ammonium nitrite/ nitrate solution from periodic washing (typically once per day) of the NOX compressor and from the cooler-condenser drain for a period after plant start-up; 2. Aqueous ammonia solution from evaporator blowdown; 3. Blow-down of water containing dissolved salts from the steam drum; 4. Occasional emissions from the purging and sampling of nitric acid solutions

1. Steam-inject the NOX compressor to avoid production of effluent from liquid cleaning; 2. Arrange for acidification during start-up to avoid the need to drain the cooler-condenser unnecessarily; 3. Conduct steam stripping to recover the ammonia back into the process and limit emissions of aqueous ammonia from the evaporator blowdown.

Effluents from ammonia nitrate (AN) plant

Ammonium nitrate (AN) plants produce a surplus of water to be treated for discharge or possibly recycled to other units in the nitrogenous fertilizers production complex.

1. Treat process water (condensate) by stripping with air or steam with the addition of alkali to liberate ionized ammonia as needed; ion exchange; distillation; or membrane separation processes. 2. Integrate AN plants with nitric acid production.

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Wastes

Hazardous Waste The most common hazardous wastes in nitrogenous fertilizer management are spent catalysts after their replacement in scheduled turnarounds of gas desulphurization, ammonia plants, and nitric acid plants. The most common non-hazardous wastes are nitrogen-containing dust particulates from prilling and granulators dust control systems.

Catalysts: 1. Proper on-site management, including submerging pyrophoric spent catalysts in water during temporary storage and transport until they can reach the final point of treatment to avoid uncontrolled exothermic reactions; 2. Return to the manufacturer for regeneration or recovery; 3. Off-site management by specialized companies that can recover the heavy or precious metals through recovery and recycling processes whenever possible, or who can otherwise manage spent catalysts or their non-recoverable materials according to hazardous and non-hazardous waste management recommendations presented in the General EHS Guidelines. Potential management strategies for recovered dust and off-spec products include: 1. Recycling to their specific production units or to fertilizer mixing units in the manufacturing plant; 2. Providing to third party users (merchants and farmers) for their subsequent utilization. It is important to note that if appropriate waste treatment facilities are not available in Ethiopia, hazardous waste must be shipped to the nearest appropriately equipped disposal or processing facility (even if this requires international transport)

Table F-13: Industry-specific Environmental Impacts and Management: Large Volume Petroleum-Based Organic Chemicals Manufacturing

Value chain

Activities Main source of Risk Potential Mitigation Measures

Larg

e Vo

lum

e Pe

trole

um-B

ased

Org

anic

Che

mic

als

Man

ufac

turin

g

Air emissions

Process Emissions from Lower Olefins Production

Process emissions are primarily: 1. Periodic decoking of cracking furnaces to remove carbon build-up on the radiant coils, producing significant particulate emissions and carbon monoxide. 2. Flare gas systems to allow safe disposal of any hydrocarbons or hydrogen that cannot be recovered in the process (i.e., during unplanned shutdowns and during start-ups). Crackers typically have at least one elevated flare as well as some ground flares; and 3. VOC emissions from pressure relief devices, venting of off specification materials or depressurizing and purging of equipment for maintenance.

1. Implementing advanced multi-variable control and on-line optimization, incorporating on-line analysers, performance controls, and constraint controls; 2· Recycling and/or re-using hydrocarbon waste streams for heat and steam generation where possible; 3· Minimizing the coke formation through process optimization; 4· Use of cyclones or wet scrubbing systems to abate particulate emissions; 5. Implementing process control, visual inspection of the emission point, and close supervision of the process parameters (e.g., temperatures) during the de-coking phase 6. Recycling the decoking effluent stream to the furnace firebox where sufficient residence time permits total combustion of any coke particles; 7. Flaring during start-up should be avoided as much as possible (use flareless start-up if possible); 8. Minimizing flaring during operation; 9. Collecting emissions from process vents and other point sources in a closed system and routing to a suitable purge gas system for recovery into fuel gas or to flare; 10. Adopting closed loop systems for sampling; 11. Hydrogen sulphide generated in sour gas treatment should be burnt to sulphur dioxide or converted to sulphur by Claus unit; 12. Install permanent gas monitors, video surveillance and equipment monitoring (such as on-line vibration monitoring) to provide early detection and warning of abnormal conditions; and, 13. Implementing regular inspection and instrument monitoring to detect leaks and fugitive emissions to atmosphere (Leak Detection and Repair (LDAR) programs).

Process Emissions from Aromatics Production

1. Vents from hydrogenations (pygas hydrostabilization, cyclohexane reaction) may contain hydrogen sulphide (from the feedstock desulphurization), methane, and hydrogen;

1. Routine process vents and safety valve discharges should preferably be conveyed to gas recovery systems to minimize flaring; 2. Off-gas from hydrogenations should be discharged to a fuel gas network and burnt in a furnace to recover

F-63



2. Dealkylation off-gases; 3. VOC emissions from vacuum systems, from fugitive sources (e.g., valve, flange and pump seal leaks), and from non-routine operations (maintenance, inspection). Due to lower operating temperatures and pressures, the fugitive emissions from aromatics processes are often less than in other less VOC manufacturing processes where higher temperatures and pressures are needed; 4. VOC emissions from leaks in the cooling unit when ethylene, propylene, and/or propane are used as coolant fluids in the p-xylene crystallization unit; and 5. VOC emissions from storage tank breathing losses and displacement of empty tanks when filled with raw materials, intermediates, and final products

calorific value; 3.Dealkylation off-gases should be separated in a hydrogen purification unit to produce hydrogen (for recycle) and methane (for use as a fuel gas); 4. Adopting closed loop sample systems to minimize operator exposure and to minimize emissions during the purging step prior to taking a sample; 5. Adopting ‘heat-off’ control systems to stop the heat input and shut down plants quickly and safely in order to minimize venting during plant upsets; 6· Where the process stream contains more than 1 weight percent (wt%) benzene or more than 25 wt% aromatics, use closed piping systems for draining and venting hydrocarbon containing equipment prior to maintenance; and use canned pumps or, where they are not applicable, single seals with gas purge or double mechanical seals or magnetically driven pumps; 7. Minimizing fugitive leaks from rising stem manual or control valve fittings with bellows and stuffing box, or using high integrity packing materials (e.g., carbon fibre); 8.Using compressors with double mechanical seals, or a process-compatible sealing liquid, or a gas seal; 9. Using double seal floating roof tanks or fixed roof tanks incorporating an internal floating roof with high integrity seals; and 10. Loading or discharging of aromatics (or aromatics-rich streams) from road tankers, rail tankers, ships and barges should be provided with a closed vent systems connected to a vapour recovery unit, to a burner, or to a flare system.

Process Emissions from Oxygenated Compounds

Formaldehyde 1. Purged gases from the secondary absorber and the product fractionator in the silver process; 2. Vented gases from the product absorber in the oxide process; 3. A continuous waste gas stream for both the silver and oxide processes from the formaldehyde absorption column; and, 4. Fugitive emissions and emissions arising from breathing of storage tanks. MTBE (methyl t-butyl ether) Fugitive emissions from MTBE storage tanks. MTBE has a vapour pressure of 61 kPa at 40 ºC, and an odour threshold of 0.19 mg/m3.

Formaldehyde Typically, waste gases from the silver process should be treated thermally. Waste gases from the oxide process and from materials transfer and breathing of storage tanks should be treated catalytically. 1. Connection of vent streams from absorber, storage and loading/unloading systems to a recovery system (e.g., condensation, water scrubber) and/or to a vent gas treatment (e.g., thermal/catalytic oxidizer, central boiler plant); 2. Abatement of the absorber off-gases in the silver process with gas engines and dedicated thermal oxidation with steam generation; 3. Treatment of reaction off-gas from the oxide process with a dedicated catalytic oxidation system; and 4. Minimization of vent streams from storage tanks by backventing on loading/unloading and treating the polluted streams MTBE (methyl t-butyl ether) Fugitive emissions from storage facilities should be controlled and prevented by adopting appropriate design measures for storage tanks.

Flaring Flaring is an important operational and safety measure to ensure that vapours and gases are safely disposed of.

1. Implementation of source gas reduction measures to the maximum extent possible; 2. Use of efficient flare tips, and optimization of the size and number of burning nozzles; 3. Maximizing flare combustion efficiency by controlling and optimizing flare fuel / air / steam flow rates to ensure the correct ratio of assist stream to flare stream; 4. Minimizing flaring from purges and pilots, without compromising safety, through measures including installation of purge gas reduction devices, flare gas recovery units, inert purge gas, soft seat valve technology where appropriate, and installation of conservation pilots; 5. Minimizing risk of pilot blow-out by ensuring sufficient exit velocity and providing wind guards; 6. Use of a reliable pilot ignition system; 7. Installation of high-integrity instrument pressure protection systems, where appropriate, to reduce over pressure events and avoid or reduce flaring situations; 8. Installation of knock-out drums to prevent condensate emissions, where appropriate; 9. Minimizing liquid carry-over and entrainment in the gas flare stream with a suitable liquid separation system; 10. Minimizing flame lift off and / or flame lick;

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11. Optimizing flare operating conditions to control door and visible smoke emissions (no visible black smoke); 12. Locating flare at a safe distance from local communities and the workforce including workforce accommodation units; 13. Implementation of burner maintenance and replacement programs to ensure continuous maximum flare efficiency; 14. Metering flare gas.

Wastewater


Effluents from Lower Olefins Production

Effluents from steam crackers. 1. Steam flow purges should be neutralized by pH adjustment and treated via an oil/water separator and air-flotation before discharge to the facility’s wastewater treatment system; 2. Spent caustic solution, if not reused for its sodium sulphide content or for cresol recovery, should be treated using a combination of the following steps: - Solvent washing or liquid-liquid extraction for polymers and polymer precursors; - Liquid-liquid settler and/or coalescer for removing and recycling the free liquid gasoline phase to the process; - Stripping with steam or methane for hydrocarbon removal; - Neutralization with a strong acid - Neutralization with acid gas or flue gas (which will partition the phenols into a buoyant oily phase for further treatment); - Oxidation (wet air or catalytic wet air or ozone) to oxidize carbon and sulphides/mercaptans before neutralization (to reduce or eliminate H2S generation). 3. Spent amine solution, used to remove hydrogen sulphide from heavy feedstock in order to reduce the amount of caustic solution needed for final process gas treatment. The used amine solution should be regenerated by steam stripping to remove hydrogen sulphide. A portion of the amine wash is bled off to control the concentration of accumulating salts; and 4. A stream of C2 polymerization product known as ‘green oil’ produced during acetylene catalytic hydrogenation to ethylene and ethane, containing multi-ring aromatics (e.g. anthracene, chrysene, carbazole). It should be recycled into the process (e.g., into the primary fractionator for recovery as a component of fuel oil) or should be burnt for heat recovery.

Effluents from Aromatics Production The main wastewater sources are process water recovered from condensates of the steam jet vacuum pumps and overhead accumulators of some distillation towers. These streams contain small quantities of dissolved hydrocarbons. Wastewater containing sulphide and COD may also be generated from caustic scrubbers. Other potential sources are unintentional spillages, purge of cooling water, rainwater, equipment wash-water, which may contain extraction solvents and aromatics and water generated by tank drainage and process upsets.

Wastewater containing hydrocarbons from aromatics production should be collected separately, settled and steam stripped prior to appropriate (e.g. biological) treatment in the facility’s wastewater treatment plant in line with the relevant national and international limit requirements.

Hazardous Material

Wastes and Co-products The most significant solid wastes are spent catalysts, from their replacement in scheduled turnarounds of plants and by-products.

1. Proper on-site management, including submerging pyrophoric spent catalysts in water during temporary storage and transport to avoid uncontrolled exothermic reactions; and 2. Off-site management by specialized companies that can either recover heavy metals (or precious metals), through recovery and recycling processes whenever possible, or manage spent catalysts according to industrial waste management recommendations in line with national and international requirements.

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Lower Olefins Production Limited quantities of solid waste are produced by the steam cracking process, mainly organic sludge, spent catalysts, spent desiccants, and coke.

1. Each waste should be treated on a case by case basis, and should be recycled after treatment. 2. They may be incinerated or landfilled to suitably licensed facilities (which may require shipping overseas). If they are incinerated, the facility must ensure that the operation of the incinerator is in line with good international industry practice to avoid the potential for production of hazardous emissions. Any residue from the incinerator must be tested for determination as hazardous waste and treated accordingly. 3. Molecular sieve desiccants and acetylene hydrogenation catalysts may be regenerated and reused.

Table F-14: Industry-specific Environmental Impacts and Management: Natural Gas Processing

Value chain


Nat

ural

Gas

Pro

cess

ing

Air emissions

Fugitive Emissions Fugitive emissions in natural gas processing facilities are associated with leaks in tubing; valves; connections; flanges; packings; open-ended lines; floating roof storage tank, pump, and compressor seals; gas conveyance systems, pressure relief valves, tanks or open pits / containments, and loading and unloading operations of hydrocarbons. The main sources and pollutants of concern include Volatile Organic Compound (VOC) emissions from storage tanks during filling and due to tank breathing; floating roof seals in case of floating roof storage tanks; wastewater treatment units; Fischer-Tropsch (F-T) synthesis units; methanol synthesis units; and product up-grading units. Additional sources of fugitive emissions include nitrogen gas contaminated with methanol vapour from methanol storage facilities; methane (CH4), carbon monoxide (CO), and hydrogen from Syn-gas production units, and Fischer-Tropsch (F-T) or methanol synthesis units.

1. Regularly monitor fugitive emissions from pipes, valves, seals, tanks, and other infrastructure components with vapour detection equipment, and maintenance or replacement of components as needed in a prioritized manner. 2. Maintain stable tank pressure and vapour space by: - Coordinating filling and withdrawal schedules, and implementing vapour balancing between tanks; - Using white or other colour paints with low heat absorption properties on exteriors of storage tanks for lighter distillates. 3. Selecting and designing storage tanks in accordance with internationally accepted standards to minimize storage and working losses considering for example, storage capacity and the vapour pressure of materials being stored. 4. Use supply and return systems, vapour recovery hoses, and vapour-tight trucks / railcars / vessels during loading and unloading of transport vehicles; 5. Use bottom-loading truck / rail car filling systems; and, 6. In the event that vapour emissions contribute to or result in ambient air quality levels in excess of national and/or international standards, install secondary emissions controls, such as vapour condensing and recovery units, catalytic oxidizers, vapour combustion units, or gas adsorption media.

Greenhouse Gases (GHGs) Significant amounts of carbon dioxide (CO2) may be emitted from Syn-gas manufacturing, mainly from CO2 washing, and from all combustion processes.

General recommendations for energy conservation and the management of greenhouse gas emissions are discussed in General EHS Guidelines. At integrated facilities, operators should explore an overall facility approach in the selection of process and utility technologies.

Venting and Flaring Venting and flaring are an important operational and safety measure to ensure gas is safely disposed of in the event of an emergency, power or equipment failure, or other plant upset conditions. Unreacted raw materials and by-product combustible gases are also disposed of through venting and flaring. Excess gas should not be vented but instead sent to an efficient flare gas system for disposal.

1. Optimize plant controls to increase the reaction conversion rates; 2. Recycle unreacted raw materials and by-product combustible gases in the process or utilize these gases for power generation or heat recovery, if possible; 3. Provide back-up systems to achieve as high a plant reliability as practical; and 4. Locate the flaring system at a safe distance from residential areas or other potential receptors, and maintain the system to achieve high efficiency.

Wastewater

Industrial Process Wastewater Process wastewater and other wastewaters (including accidental emissions) from natural gas processing may be contain dissolved hydrocarbons, oxygenated compounds, and other contaminants.

Treatment should be at the onsite wastewater treatment unit. Recommended management practices include: 1. Prevent/control accidental releases of liquids through inspections and maintenance of storage and conveyance systems; 2. Provide sufficient process fluids let-down capacity to maximize recovery into the process; and 3. Design and construct wastewater and hazardous materials storage containment basins with impervious surfaces.

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Specific provisions for individual wastewater streams include: 1. Amines spills resulting from the carbon dioxide alkaline removal system downstream of the Gasification Unit should be collected into a dedicated closed drain system and, after filtration, recycled back into the process provided the amine did not become contaminated as a consequence of being spilled and/or collected; 2. The water effluent from the stripping column of the Fischer-Tropsch (F-T) Synthesis Unit, which contains dissolved hydrocarbons and oxygenated compounds including alcohols, organic acids and minor amounts of ketones, should be re-circulated inside the F-T Synthesis Unit in order to recover the hydrocarbons and oxygenated compounds; 3. Acidic and caustic effluents from demineralized water preparation, the generation of which depends on the quality of the raw water supply to the process, should be neutralized prior to discharge into the facility’s wastewater treatment system; 4. Blow-down from the steam generation systems and cooling towers should be cooled prior to discharge. Cooling water containing biocides or other additives may also require dose adjustments or treatment in the facility’s wastewater treatment plant prior to discharge; and 5. Hydrocarbon-contaminated water from scheduled cleaning activities during facility turn-around (typically performed annually and may last for a few weeks), hydrocarbon-containing effluents from process leaks, and heavy-metals containing effluents from fixed and fluidized beds should be treated via the facility’s wastewater treatment plant in line with national and international requirements. Techniques for treating industrial process wastewater include source segregation and pre-treatment of concentrated wastewater streams. Typical wastewater treatment steps include: grease traps, skimmers, dissolved air floatation, or oil / water separators for separation of oils and floatable solids; filtration for separation of filterable solids; flow and load equalization; sedimentation for suspended solids reduction using clarifiers; biological treatment, typically aerobic treatment, for reduction of soluble organic matter (BOD); chemical or biological nutrient removal for reduction in nitrogen and phosphorus; chlorination of effluent when disinfection is required; and dewatering and disposal of residuals in designated hazardous waste landfills. Additional engineering controls may be required for: (i) containment and treatment of volatile organics stripped from various unit operations in the wastewater treatment system, (ii) advanced metals removal using membrane filtration or other physical/chemical treatment technologies, (iii) removal of recalcitrant organics, cyanide, and non-biodegradable COD using activated carbon or advanced chemical oxidation, (iv) reduction in effluent toxicity using technology such as reverse osmosis, ion exchange, activated carbon, etc., and (v) containment and neutralization of nuisance odours. Facilities should meet the Guideline Values for wastewater discharge as indicated in the emissions framework in this study.

Other Wastewater Streams & Water Consumption

Sources include stormwater, cooling water and hydrostatic testing water. Hydrostatic testing of equipment and pipelines involves pressure testing with water (generally filtered raw water) to verify their integrity and to detect possible leaks. Chemical additives (typically a corrosion inhibitor, an oxygen scavenger, and a dye) may be added.

Guidance on the management of non-contaminated wastewater from utility operations, non-contaminated stormwater, and sanitary sewage is provided in General EHS Guidelines. Contaminated streams should be routed to the treatment system for industrial process wastewater. Additional specific guidance is: Stormwater Natural gas processing facilities should provide secondary containment where liquids are handled, segregate contaminated and non-contaminated stormwater, implement spill control plans, and route stormwater from process areas into the wastewater treatment unit.

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Cooling water 1. Adoption of water conservation opportunities for facility cooling systems 2. Use of heat recovery methods (also energy efficiency improvements) or other cooling methods to reduce the temperature of heated water prior to discharge 3. Minimise use of antifouling and corrosion-inhibiting chemicals through proper selection of depth for placement of water intake and use of screens; selection of the least hazardous alternative in terms of toxicity, biodegradability, bioavailability, and bioaccumulation potential; and dosing according to local regulatory requirements and manufacturer recommendations; and 4. Testing for the presence of residual biocides and other pollutants of concern to determine the need for dose adjustments or treatment of cooling water prior to discharge. Hydrostatic testing water In managing hydro-test waters, the following pollution prevention and control measures should be implemented: - Using the same water for multiple tests to conserve water and minimize discharges of potentially contaminated effluent; - Reducing the use of corrosion inhibiting or other chemicals by minimizing the time that test water remains in the equipment or pipeline; and - Selecting the least hazardous alternative with regards to toxicity, biodegradability, bioavailability, and bioaccumulation potential, and dosing according to local regulatory requirements and manufacturer recommendations. If discharge of hydro-test waters to the sea or to surface water is the only feasible alternative for disposal, a hydro-test water disposal plan should be prepared considering location and rate of discharge, chemical use (if any), dispersion, environmental risk, and required monitoring. Hydro-test water disposal into shallow coastal waters should be avoided.

Wastes

Spent Catalysts Spent catalysts are generated from scheduled replacements in natural gas desulphurization reactors, reforming reactors and furnaces, Fischer-Tropsch synthesis reactors, and reactors for mild hydrocracking. They may contain zinc, nickel, iron, cobalt, platinum, palladium, and copper, depending on the particular process.

1. Proper on-site management, including submerging pyrophoric spent catalysts in water during temporary storage 2. Return to the manufacturer for regeneration 3. Off-site management by specialized companies that can recover the heavy or precious metals, through recovery and recycling processes whenever possible, or who can otherwise manage spent catalysts or their non-recoverable materials according to hazardous and non-hazardous waste management requirements of General EHS Guidelines of this report. Catalysts that contain platinum or palladium should be sent to a noble metal recovery facility.

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Table F-15: Industry-specific Environmental Impacts and Management: Large Volume Inorganic Chemicals (LVIC) and Coal Tar Distillation


Larg

e Vo

lum

e In

orga

nic

Che

mic

als

(LVI

C) a

nd C

oal T

ar D

istil

latio

n

Air emissions

Greenhouse Gases (GHGs) The LVIC manufacturing industry is a significant emitter of greenhouse gases, especially carbon dioxide (CO2). GHGs are generated from the process as well as during the production of energy for its processes.

Measures to increase energy efficiency and installation of Low NOX burners should be adopted as this will contribute to reduction in CO2 generation. Attempts should be made to maximize energy efficiency and design facilities for lowest energy use. Recommendations on energy efficiency are addressed in the General EHS Guidelines.

Fugitive Emissions Fugitive emissions are associated with leaks from pipes, valves, connections, flanges, packings, open-ended lines, floating roof storage tank and pump seals, gas conveyance systems, compressor seals, pressure relief valves, tanks or open pits/containments, and loading and unloading operations of products.

1. Rigorous maintenance programs, particularly in stuffing boxes on valve stems and seats on relief valves, to reduce or eliminate accidental releases; 2. Selection of appropriate valves, flanges, fittings; 3. Well designed, constructed, operated and maintained installations; 4. Implementation of leak detection and repair programs; and 5. Installation of continuous monitoring in all sensitive areas.

Venting and Flaring Venting and flaring are important safety measures to ensure gas is safely disposed of during process start up and shut down or in the event of an emergency, power or equipment failure, or other plant upset conditions.

1. Use best practices and new technologies to minimize releases and potential impacts from venting and flaring (e.g., efficient flare tips, reliable pilot ignition system, minimization of liquid carry over, control of door and visible smoke emissions, and locating flare at a safe distance from potential human and environmental receptors); 2. Estimate flaring volumes and develop flaring targets for new facilities, and record volumes of gas flared for all flaring events; 3. Divert gas emissions from emergency or upset conditions to an efficient flare gas system.

Process Air Emissions – Acid Manufacturing

Process emissions from acid plants include: - Nitrous oxide (N2O) and NOX from nitric acid manufacturing plants, particularly from tail gas emissions - SO2 resulting from incomplete oxidation and SO3 resulting from incomplete absorption and droplets of sulfuric acid (H2SO4) from sulfuric acid manufacturing plants; - Gaseous fluorides and dust from phosphoric / hydrofluoric acid plants; - Hydrochloric acid (HCl) gas, chlorine, and chlorinated organic compounds resulting primarily from gases exiting the HCl purification system in HCl production; and - Fluorine, hydrofluoric acid (HF), and silicon tetrafluoride (SiF4) from digestion of phosphate rock and dust from handling of phosphate rock in HF production. Particulate matter is emitted during handling and drying of the fluorspar. In hydrofluoric acid facilities fluorine emissions present in the final vents are typically very low following the required treatment.

1. The plant should be equipped with pre-condensers that remove water vapour and sulfuric acid mist, and with condensers, acid scrubbers, and water scrubbers that minimize the release of SO2, and CO2 from the tail-gas; 2.Use high-pressure adsorption process for nitric acid production to minimize the concentration of NOX in the tail gas; 3. Treat the off-gases from nitric acid plants using catalytic NOX removal; 4. Consider using double absorption process for H2SO4 plants. Plants operating on a single absorption process should consider implementation of the following: - Caesium catalyst in the last bed - SO2 abatement by scrubbing with a neutralizing compound - SO2 abatement with hydrogen peroxide (H2O2). 5. Control dust emissions from the flue-gases of directly heated dryers and/or from pneumatic conveying gases using cyclones and filters; 6. Recover the fluorine as fluosilicic acid; a dilute solution of fluosilicic acid should be used as the scrubbing liquid. Fluorine, released during the digestion of phosphate rock and during the concentration of phosphoric acid, should be removed by scrubbing systems; 7. Control emissions of HF by the condensing, scrubbing, and absorption equipment used in the recovery and purification of the hydrofluoric and hexafluorosilicic acid products; 8. Minimize HF emissions, maintaining a slight negative pressure in the kiln during normal operations; 9. Install caustic scrubbers to reduce the levels of pollutants in the HF tail-gas, as needed; 10. Control dust emissions by bag filters at the fluorspar silos and drying kilns. Collect dust from the gas streams exiting the kiln in HF production and return the dust to the kiln for further processing; 11. Control dust emissions from fluorspar handling and storage with flexible coverings and chemical additives, and 12. Control dust emissions from phosphate rock during transport, handling and storage, using enclosed systems and bag filters.

Liquid effluents

Effluents – Acids Manufacturing Effluents from hydrochloric acid plants can vary depending on manufacturing processes from traces of HCl when reacting H2

Recommended measures to prevent, minimize, and control effluents from acid plants include:

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with Cl, to mineral salt (Na2SO4) when the acid is produced by reacting sodium chloride with sulfuric acid. Liquid releases from phosphoric acid plants mainly consist of the liquid effluents originating from vacuum cooler condensers and gas scrubbing systems used for condensation and cleaning of the vapours that evolve in the various process stages. These condensed acidic vapours contain mainly fluorine and small amounts of phosphoric acid.

1. Use closed-loop reactors and evaporators to eliminate process wastewater; 2. Recirculate the water used for the transport of phosphogypsum into the process after settling; 3. Treat scrubber effluent with lime or limestone or use seawater as a scrubbing liquid to precipitate fluorine as calcium fluoride; 4. Install a separator to remove phosphoric acid droplets from vacuum flash coolers and vacuum evaporators emissions before scrubbing to minimize contamination of the scrubber effluent with phosphorous pentoxide (P2O5); 5. Recover fluorosilicic acid (H2SiF6) from treatment of tail gases from hydrofluoric units for use as a feed material or for the manufacture of fluorides or silicofluorides. H2SiF6 can also be chemically combined to produce CaF2 and silica.

Wastes

Wastes - Acid manufacturing Phosphogypsum is the most significant by-product in wet phosphoric acid production. It contains a wide range of impurities, some of which are considered a potential hazard to the environment and public health, including being weakly radioactive. Calcium sulphate (anhydrite) is produced as a by-product of hydrofluoric acid (HF) manufacturing, containing between 0.2 to 2.0 % of unreacted CaF2 and less than 1.0 % H2SO4. It also contains the majority of the trace impurities contained in the fluorspar. The impurities contained in phosphate rock are distributed between the phosphoric acid produced and the calcium sulphate (gypsum). Mercury, lead and radioactive components, where present, end up mainly in the gypsum, while arsenic and the other heavy metals such as cadmium end up mainly in the acid.

1. Disposal of phosphogypsum in land facilities designed to prevent leaching to groundwater or surface water. Any effort should be made in order to reduce the impact of phosphogypsum disposal and possibly improve the quality of the gypsum, for its reuse. Disposal to sea is considered non acceptable; 2. Refinement and sale of calcium sulphate anhydrite from HF production for use in other products (e.g. cement), if possible. Phosphate rock, phosphogypsum, and the effluents produced from a phosphoric acid plant have generally a lower radioactivity than the exemption values given in the relevant international regulations and guidelines (for example, EU Directive 96/26/EURATOM)

Odours

Odours Odours from fugitive vapour releases or from wastewater treatment plants may be generated in the LVIC manufacturing processes.

Adequate controls to eliminate leaks should be implemented to minimize fugitive releases and prevent door nuisances.

Decommissioning

Decommissioning Chemical manufacturing facilities may have important quantities of solid and liquid hazardous materials such as CO2 removal solutions, liquid ammonia, chlorine, soda, acids and products in process and storage systems, off spec products, spent catalysts, and mercury from mercury cell chlor-alkali plants.

1. Collect CO2 removal solutions in the ammonia plants and all dangerous products for further handling and disposal as a hazardous waste material; 2.Remove spent catalysts from NH3 and HNO3 plants for further management as described in the solid waste section above; 3.Recover and further manage NH3, Cl2, acids, and all other products from the synthesis section and storage tanks as well as all products and intermediates from the storage tanks according to hazardous materials management guidance from General EHS Guidelines. General guidance on decommissioning and contaminated land remediation is provided in General EHS Guidelines of this report.

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Table F-16: Industry-specific Environmental Impacts and Management: Petroleum based Polymers Manufacturing


Petro

leum

bas

ed P

olym

ers

Man

ufac

turin

g

Air emissions

Volatile Organic Compounds (VOCs) from Drying and Finishing

The most typical air emissions from polymer plants are volatile organic compound (VOC) emissions from drying and finishing, and purging.

1. Separation and purification of the polymer downstream to the reactor; 2. Flash separation of solvents and monomers; 3. Steam or hot nitrogen stripping; 4. Degassing stages in extruders, possibly under vacuum; 5. Condensing VOCs at low temperature or in adsorption beds, before venting exhaust air; 6. Use of closed-loop nitrogen purge systems, use of degassing extruders, and collection of off-gases from extrusion in polyolefin plants; 7. Vent gases emitted from reactors, blow-down tanks, and strippers containing significant levels of VCM should be collected and purified prior to emission to atmosphere. Water that has significant levels of VCM should be passed through a stripping column to remove VCM in polyvinyl chloride manufacturing. 8. Use of stripping columns specifically designed to strip suspensions in polyvinyl chloride manufacturing using the suspension process; 9. Production of stable latexes and use of appropriate stripping technologies in emulsion polyvinyl chloride plants, which combine emulsion polymerization and open cycle spray drying; 10. Multistage vacuum devolatilization of molten polymer to reduce the residual monomer at low levels in polystyrene and generally in styrenic polymers manufacturing; 11 Spill and leak prevention in acrylic monomer emulsion polymerization; 12. Treatment of waste gases by catalytic oxidation or equivalent techniques in polyethylene terephthalate manufacturing; 13. Wet scrubbing of vents in polyamide manufacturing; 14. Catalytic or thermal treatment of gaseous and liquid wastes in all thermoset polymer manufacturing; 15. Installation of closed systems, with vapour condensation and vent purification, in phenol-formaldehyde resins manufacturing, due to the high toxicity of both main monomers; and 16. VOCs from the finishing sections and reactor vents should be treated through thermal and catalytic incineration techniques before being discharged to the atmosphere. For chlorinated VOCs, incineration technology should ensure the emission levels of dioxins / furans meet the more stringent of the limit national and/or international limits/guidelines stated in the emissions framework within this report .

VOCs from Process Purges Process purges are associated with: purification of raw materials; filling and emptying of reactors and other equipment; removal of reaction by-products in polycondensation; vacuum pumps; and depressurization of vessels.

1. Process vapours purges should be recovered by compression or refrigeration and condensation of liquefiable components or sent to a high efficiency flare system that can ensure efficient destruction; 2. The incondensable gases should be fed to a waste-gas burning system specifically designed to ensure a complete combustion with low emissions and prevention of dioxins and furans formation; 3. In polyvinyl chloride (PVC) plants, VCM-polluted gases (air and nitrogen) coming from VCM recovery section should be collected and treated by VCM absorption or adsorption, by incineration techniques following internationally accepted standards, or by thermic/catalytic oxidation, prior to emission to the atmosphere; 4. In High Impact Polystyrene Sheets (HIPS) manufacture, air emissions from polybutadiene dissolution systems should be minimized by use of continuous systems, vapour balance lines, and vent treatment; 5. In unsaturated polyester and alkyd resins units, waste gas streams generated from process equipment should be treated by thermal oxidation or, if emissions concentrations permit, by activated carbon adsorption; 6. Use glycol scrubbers or sublimation boxes for anhydride vapour recovery from unsaturated polyester and alkyd resins storage tank vents; 7. In phenolic resins production, VOC contaminated process emissions, especially from reactor vents, should be recovered or incinerated; 8. In aliphatic polyamide manufacturing, use wet scrubbers, condensers, activated carbon adsorbers, together with thermal oxidation.

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VOCs from Fugitive Emissions Fugitive VOC emissions in polymer manufacturing facilities are mainly associated with the release of VOCs from leaking piping, valves, connections, flanges, packings, open-ended lines, floating roof storage tanks and seals, pump seals, gas conveyance systems, compressor seals (e.g. ethylene and propylene compressors), pressure relief valves, loading and unloading operations of raw materials and chemicals (e.g. cone roof tanks), preparing and blending of chemicals (e.g. preparation of solutions of polymerization aids and polymer additives), and waste water treatment units (WWTUs).

General VOC and fugitive emissions guidance is provided in the General EHS Guidelines. In addition: 1. The process system should be designed to minimize fugitive emissions of toxic and hydrocarbon gases. 2. In polyethylene manufacturing, monomer leakages from reciprocating compressors used in high-pressure polyethylene plants should be recovered and recycled to the low pressure suction stage; 3 In polyvinyl chloride manufacture, opening of reactors for maintenance should be minimized and automatic cleaning systems should be adopted.

Particulate Matter Emissions of particulate matter (i.e. polymer fines and/or additives as antistick agents, etc.) are associated with polymer drying and packaging operations. Other sources of particulate matter include pellet conveyance, transfer, and dedusting.

1. Optimization of dryer design; 2. Use of gas closed loop; 3. Reduction at source (e.g. granulation transfer systems) and capture via elutriation facilities; 4. Installation of electrostatic precipitators, bag filters or wet scrubbing (depending on scale of facility and impacts); 5. Installation of automatic bagging systems and efficient ventilation in packaging operations; and 6. Good housekeeping.

Venting and Flaring Venting and flaring are important safety measures to ensure all process gases (from both storage and process units) are safely disposed of in the event of power or equipment failure, or other plant upset / emergency conditions. Emergency discharges from reactors and other critical process equipment should be conveyed to blow-down tanks, where the reactants are recovered (e.g. by steam or vacuum stripping) before discharging the treated wastes, or through scrubbing and high-efficiency flaring.

1. Ethylene vented from high-pressure low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) plants, should be vented to the atmosphere through a stack, after having been diluted with steam and cooled by water scrubbing to minimize risks of explosive clouds. Specifically designed systems operated by detonation sensors should be used. [it is noted that this is generally in emergency shutdown or for general shut down/start up situations as, in normal running, ethylene in the off gas from the reaction section is recovered and recycled via a separation column] 2. Pressure Safety Valves (PSV) should be used in polymerization plants to reduce the amount of chemicals released from an overpressure/relief device activation, where release is directly to the atmosphere; 3. Because of the possibility of pipe plugging by polymer formation, redundant safety systems are recommended, with frequent and proper inspection. PSV lines should be protected upstream by PSDs, to avoid losses and plugging. Fittings should be provided to enable check of safety systems during plant operation; 4. In polyvinyl chloride manufacturing, the occurrence of emergency venting from the polymerization reactors to atmosphere due to runaway reaction should be minimized by one or more of the following techniques: o Specific control instrumentation for reactor feed and operational conditions, o Chemical inhibitor system to stop the reaction, o Emergency reactor cooling capacity, o Emergency power for reactor stirring, and o Controlled emergency venting to VCM recovery system. 5. Where foaming occurs during emergency venting, it should be reduced by antifoam addition, to avoid plugging of venting system; 6. During emergency venting, the reactor content should be discharged to a blow-down tank and steam stripped before disposal; 7. In acrylic latexes manufacturing, emergency venting to flare system from reactors due to runaway polymerization should be prevented by one or more of the following: o Continuous computer controlled addition of reactants to the reactor, based on actual polymerization kinetics, o Chemical inhibitor system to stop the reaction, o Emergency reactor cooling capacity, o Emergency power for reactor stirring, and o Discharge of reactor content to a blow-down tank.

Combustion Sources and Energy Efficiency

Polymerization plants consume large quantities of energy and steam, which are typically produced on site in cogeneration

Emissions should be minimized through the adoption of a combined strategy which includes: - a reduction in energy demand;

F-72



facilities. - use of cleaner fuels; and - application of emissions controls where required. Recommendations on energy efficiency are addressed in General EHS Guidelines. It is usually possible and useful to include a temperature or energy cascade in the design of polymerization plants to recover heat (e.g. low pressure steam for stripping or heating purposes) and compression energy. The correct choice and design of the purification operations according to their thermodynamic efficiency is a major component in reduction of energy requirements. Drying and finishing of polymers are important aspects to consider, because of their energy demand and because polymers are sensitive to heat and mechanical stress. Additional areas with potential opportunities for reduction in energy consumption include dewatering systems, closed loop cooling water systems, inert gas close loop drying, use of low shear extruders for compounding, increase of polymer concentration, and gear pumps for pelletizing.

Acid Gases Hydrogen chloride (HCl) traces, originated from the hydrolysis of chlorinated organic compounds by the catalyst, can be present in exhaust air from drying of polymers produced by ionic catalysis.

Although acid is usually present at low level, gas stream testing is recommended and pollution control measures, such as wet scrubbing, should be considered if levels become significant.

Dioxins and Furans Gaseous, liquid, and solid waste incineration plants are typically present as one of the auxiliary facilities in polymer manufacturing plants. The incineration of chlorinated organic compounds (e.g. chlorophenols) could generate dioxins and furans. Certain catalysts in the form of transition metal compounds (e.g. copper) also facilitate the formations of dioxins and furans.

Recommended prevention and control strategies include: - Operation of incineration facilities according to internationally recognized technical standards; - Maintaining proper operational conditions, such as sufficiently high incineration and flue gas temperatures, to prevent the formation of dioxins and furans; - Ensuring emissions levels meet the national and international guideline values as detailed in the emissions framework within this report.

Wastewater

Industrial Process Wastewater Process wastewater from polymer plants may contain hydrocarbons, monomers and other chemicals, polymers and other solids (either suspended or emulsified), surfactants and emulsifiers, oxygenated compounds, acids, inorganic salts, and heavy metals.

1. Wastewater containing volatile monomers (e.g., VCM, styrene, acrylonitrile, acrylic esters, vinyl acetate) and/or polymerization solvents (e.g., condensate from steam stripping of suspensions or latexes, condensate from solvent elimination, or wastewater from equipment maintenance) should be recycled to the process where possible, or otherwise treated by flash distillation or equivalent separation to remove VOC, prior to conveying it to the facility’s wastewater treatment system; 2. Organics should be separated and recycled to the process, when possible, or incinerated; 3. Spent reactant solutions should be sent to specialized treatment for disposal; 4. Acidic and caustic effluents from demineralized water preparation should be treated by neutralization prior to discharge to the facility’s wastewater treatment system; 5. Contaminated water from periodic cleaning activities during facility turn-arounds should be tested and treated in the facility’s wastewater treatment system; 6. Oily effluents, such as process leakages, should be collected in closed drains, decanted and discharged to the facility’s wastewater treatment system; 7. Spent reactant solutions should be sent to specialized treatment for disposal; 8. Acidic and caustic effluents from demineralized water preparation should be treated by neutralization prior to discharge to the facility’s wastewater treatment system; 9 Contaminated water from periodic cleaning activities during facility turn-arounds should be tested and treated in the facility’s wastewater treatment system; 10 Oily effluents, such as process leakages, should be collected in closed drains, decanted and discharged to the facility’s wastewater treatment system; 11 Facilities should prepare and implement hazardous materials management program, including specific spill prevention and control plans, according to national requirements and/or the recommendations provided in General EHS Guidelines;

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12 Sufficient process fluids let-down capacity should be provided to avoid process liquid discharge into the oily water drain system and to maximize recovery into the process.

Process Wastewater Treatment Relevant techniques for treating industrial process wastewater include source segregation and pre-treatment of concentrated wastewater streams. Typical wastewater treatment steps include: grease traps, skimmers, dissolved air floatation or oil water separators for separation of oils and floatable solids; filtration for separation of filterable solids; flow and load equalization; sedimentation for suspended solids reduction using clarifiers; biological treatment, typically aerobic treatment, for reduction of soluble organic matter (BOD); chlorination of effluent when disinfection is required; dewatering and disposal of residuals in designated hazardous waste landfills. Additional engineering controls may be required for: (i) containment and treatment of volatile organics stripped from various unit operations in the wastewater treatment system, (ii)advanced metals removal using membrane filtration or other physical/chemical treatment technologies, (iii) removal of recalcitrant organics and non-biodegradable COD using activated carbon or advanced chemical oxidation, (iv) reduction in effluent toxicity using appropriate technology (e.g. reverse osmosis, ion exchange, activated carbon, etc.), and (v) containment and neutralization of nuisance odours. Discharge from wastewater treatment facilities should meet national limits and international guideline values as indicated in the emissions framework within this report.

Wastes

Spent Catalysts Spent catalysts can contain nickel, platinum, palladium, and copper, depending on the process.

1. Appropriate on-site management, including submerging pyrophoric spent catalysts in water during temporary storage and transport until they reach the final point of treatment; 2. Return to the manufacturer for regeneration, or off-site management by specialized companies. These can either recover the heavy or precious metals, through recovery and recycling processes whenever possible, or manage spent catalysts according to national requirements or the hazardous and non-hazardous waste management recommendations presented in General EHS Guidelines. Catalysts that contain platinum or palladium should be sent to a noble metals recovery facility.

Saturated Filtering Beds Saturated filtering beds originate from solution polymerization processes, for example, from removal of spent polymerization catalysts from the polymer solution or in a number of deodorization or clarification operations.

Minimize purification agents through online regeneration and extended lifetime, proper containment during temporary storage and transport, and off-site management by specialized (and appropriately licensed) companies, even if this means transportation internationally.

Solid Polymer Wastes Polymer wastes are produced during: - normal plant operation (e.g., latex filtering and sieving, powder screening and granule grinding); - campaign changes; - start-up; and - maintenance and emergency shutdowns of polymer processing equipment.

Recommended management measures include the following: 1. Recycling or re-use of waste streams where possible instead of disposal. Possible recycling options include sale of waxes to wax industry; 2. Treatment as necessary to remove and separately recover VOCs (e.g. by steam stripping); 3. Segregation and storage in a safe location. Some polymer wastes (e.g. heat or shear stressed polymers produced during start or stop operations of drying and finishing equipment, oxidized polymer recovered during dryer maintenance, process plant crusts without antioxidants, and aged polymer wastes) might be unstable and prone to self-heating and self-ignition. Such waste should be stored in a safe manner and disposed of (e.g., incinerated) as soon as practical in line with national and international requirements.

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Table F-17: Industry-specific Environmental Impacts and Management: Pharmaceuticals & Biotechnology Manufacturing


Phar

mac

eutic

als

& Bi

otec

hnol

ogy

Man

ufac

turin

g

Air emissions

Volatile Organic Compounds (VOCs) VOCs are produced during the chemical synthesis and extraction phases. Primary pharmaceutical manufacturing Emissions from reactor vents, filtering systems in the separation process, solvent vapours from purification tanks and dryers (including loading and unloading operations), fugitive emissions from valves, tanks, pumps, and other equipment (e.g., centrifuges), solvents and other VOCs related to extraction chemicals in natural product extraction, prefermentation and fermentation solvents, and wastewater collection and treatment units. Secondary pharmaceutical manufacturing Emissions from mixing, compounding, granulation, and formulation (e.g. use of ethanol or isopropyl alcohol), from operations involving the use of solvents (e.g. granulation) or alcoholic solutions (e.g. tablet coating), and from aerosol manufacturing processes.

Solvent and VOC emission prevention and minimization: 1. Reducing use of solvents and other materials with high VOC content, and substitution for products with lower volatilities. Switching to aqueous-based coating films and aqueous-based cleaning solutions; 2. Implementation of VOC leak prevention and control strategies from operating equipment; 3. Implementation of VOC loss prevention and control strategies in open vats and mixing processes, including installation of process condensers after the process equipment to support a vapour-to-liquid phase change and to recover solvents. Process condensers include distillation and reflux condensers, condensers before vacuum sources, and condensers used in stripping and flashing operations; 4. Reduction of equipment operating temperatures, where possible; 5. For drying operations, adoption of closed circuits under a nitrogen atmosphere; 6. Use of closed-loop liquid and gas collection equipment for cleaning of reactors and other equipment. VOC emissions control: - Collect in local exhaust ventilation hoods for subsequent control of point and fugitive emissions; - Venting of emissions from sterilization chambers into control devices such as carbon adsorption or catalytic converters; - Condensation and distillation of solvents emitted from reactors or distillation units. Possible installation of cryogenic condensers, reducing the gas stream temperature below dew point to achieve higher VOC recovery efficiencies; - Installation of wet scrubbers (or gas absorbers), which may remove VOCs as well as other gaseous pollutants from a gas stream, and addition of hypochlorite to the scrubber in order to reduce emissions of nuisance odours; - Installation of activated carbon adsorption or destructive control devises such as thermal oxidation / incineration, catalytic incinerators, enclosed oxidizing flares, or other methods described in further detail in General EHS Guidelines. VOC emissions extraction and controls, especially from fermentation processes, may also reduce nuisance odours.

Particulate Matter Particulates consisting of manufactured or in-process product can be emitted from bulk (e.g. fermentation) and secondary manufacturing. Common sources include milling, mixing, compounding, formulation, tableting, and packaging.

1. Collection with air filtration units and recycling of particulate matter into the formulation process (e.g. tablet dust), depending on batch record requirements and on process characteristics; 2. Installation of dedicated filtration systems (sometimes double stages of filtration) in granulation equipment. An abatement room should be also provided where the particulate is removed from the air, decreasing flow speed; 3. Installation of high efficiency particulate air (HEPA) filters in the heating, ventilating and air conditioning (HVAC) systems to control particulate matter emissions internally and externally as well as to prevent indoor cross contamination. Air ducts should be segregated to prevent air cross-contamination from different processes and to ease the air stream treatment; 4. Collection of particulates through air filtration units, typically baghouse / fabric filters; 5. Depending on the volume of emissions and prevailing size of particulate matter, additional particulate emissions control methods should be considered, such as wet scrubbing and wet electrostatic precipitators, especially after combustion / thermal oxidation treatments.

Odours The main source of door emissions is typically associated with fermentation activities.

1. Consider the location of new facilities, taking into account distances to neighbours and propagation of odours; 2. Post-combustion of venting gases; 3. Use of exhaust stack heights consistent with General EHS Guidelines; 4. Use of wet scrubbers to remove odours with a high affinity to water; and 5. Condensation of vapours combined with scrubbers.

Wastewater

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Industrial Process Wastewater Process-specific but may include: - chemical reactions streams; - product wash water; - spent acid and caustic streams; - condensed steam from sterilization and strippers; - air pollution control scrubber blowdowns; - equipment and facility wash water; and - clean-in-place wastewater. The main conventional pollutants of concern from primary manufacturing are parameters such as: - biochemical oxygen demand (BOD); - chemical oxygen demand (COD); - total suspended solids (TSS); - ammonia; - toxicity; - biodegradability; and - pH. Other chemical compounds may include solvents, organic acids, organic halides, inorganic acids, ammonia, cyanide, toluene, active pharmaceutical ingredients (API), and others.

Source reduction measures include: 1. Material substitution, especially adoption of biodegradable water-based materials for organic solvent based materials (e.g. in tablet coating); 2. Condensation and separation processes to recover used solvents and aqueous ammonia, including: - Low-boiling compounds from wastewater stream by fractioned distillation - Volatile compounds from wastewater stream by inert gas stripping and condensation - Solvent extraction of organic compounds (e.g. high or refractory halogenated compounds and high COD loads) 3. Combination of solvent waste streams to optimize treatment.

Process Wastewater Treatment Relevant techniques for treating industrial process wastewater include source segregation and pre-treatment of concentrated wastewater streams, especially those associated with active ingredients. Typical wastewater treatment steps include: grease traps, skimmers, dissolved air floatation or oil water separators for separation of oils and floatable solids; filtration for separation of filterable solids; flow and load equalization; sedimentation for suspended solids reduction using clarifiers; biological treatment, typically aerobic treatment, for reduction of soluble organic matter (BOD); chlorination of effluent when disinfection is required; dewatering and disposal of residuals in designated hazardous waste landfills. Additional engineering controls may be required for: (i) containment and treatment of volatile organics stripped from various unit operations in the wastewater treatment system, (ii)advanced metals removal using membrane filtration or other physical/chemical treatment technologies, (iii) removal of recalcitrant organics and active ingredients using activated carbon or advanced chemical oxidation (iii) residual colour removal using adsorption or chemical oxidation, (iv) reduction in effluent toxicity using appropriate technology (such as reverse osmosis, ion exchange, activated carbon, etc.), (v) reduction in TDS in the effluent using reverse osmosis or evaporation, and (vi) containment and neutralization of nuisance odours.

Solid and hazardous wastes

Hazardous Waste Bulk manufacturing processes in the pharmaceutical industry are typically characterized by a low ratio of finished products to raw material, resulting in significant quantities of residual waste, especially during fermentation and natural product extraction. Chemical synthesis processing generates wastes containing spent solvents, reactants, spent acids, bases, aqueous or

· Waste reduction by material substitution (e.g. use of water based solvents, etc.); · Process modifications (e.g. continuous rather than batch operations to reduce spillage and other material losses); · Spent solvent recycling and reuse, through distillation, evaporation, decantation, centrifugation and filtration; · Other potential recovery options should be investigated, including inorganic salts recovery from chemical liquors produced during organic synthesis operations, high organic matter materials from biological extraction, and filter cakes from fermentation; · Potentially pathogenic waste from biotechnology manufacturing should be inactivated through sterilization or

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solvent liquors, still bottoms, cyanides and metal wastes in liquid or slurry form, as well as filter cakes which may contain inorganic salts, organic by-products and metal complexes. Fermentation processes may generate spent solids, intermediates, residual products and filter cakes containing mycelia, filter media, and small amounts of nutrients. Other sources of hazardous or potentially hazardous wastes may include raw materials packaging waste, used air filter media, offspec and expired products, laboratory wastes, sludge from the wastewater treatment process, and collected particulate from air pollution control systems.

chemical treatment before final disposal. Hazardous and non-hazardous industrial wastes should be stored, transported, and managed as described in the relevant sections of General EHS Guidelines.

Threats to biodiversity

Impacts on flora and fauna from development of sugar plantations

- Land clearance; - Habitat alteration; - Building roads, resulting in fragmentation of habitats; - Increased human presence; - Mono-cropping, resulting in damage to soil ecology (e.g. depletion of soil nutrients or reduction in diversity), and increased potential for pests and pathogens (and associated increased crop vulnerability).

1. Avoid or minimizing harm to biodiversity in compliance with applicable national and international requirements; 2. Develop and apply habitat management procedures consistent with internationally recognized standards and guidelines, including consideration of: - Whether any critical natural habitats will be adversely impacted or critically endangered or endangered species reduced; - Whether the project is likely to impact any protected areas; - The potential for biodiversity offset projects (e.g. proactive management of alternative high biodiversity areas in cases where losses have occurred on the main site due to the development) or other mitigative measures; - Whether the project will encourage in-migration, which could adversely impact biodiversity and local communities; - Consideration of partnerships with internationally accredited scientific organizations to, for example, undertake biodiversity assessments, conduct ongoing monitoring, and manage biodiversity programs; - Consultation with key stakeholders to understand any conflicting land use demands and the communities dependency on natural resources and / or conservation requirements that may exist in the area. 3. Siting access routes and facilities in locations that avoid impacts to critical terrestrial habitat, and plan activities to avoid sensitive times of the year; 4. Minimizing disturbance to vegetation and soils; 5. Avoiding or minimizing the creation of barriers to wildlife movement; 6. Planning and avoiding sensitive areas and implementing buffer zones; 7. Implementing soil conservation measures (e.g. segregation, proper placement and stockpiling of clean soils and overburden material for existing site remediation); 8. Consider the potential for introduction of invasive non-native species. Remove invasive plant species and replant native species. Vegetation control should employ biological, mechanical and thermal vegetation control measures and avoid the use of chemical herbicides as much as possible. 9. Make appropriate provision for the safeguarding of wetlands and aquatic habitats (e.g. watercourses).

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Table F-18: Industry-specific Environmental Impacts and Management: Phosphate Fertilizer Manufacturing


Phos

phat

e Fe

rtiliz

er M

anuf

actu

ring

Air emissions

Process Emissions – Phosphoric Acid Production

Two production processes can be used in the manufacture of phosphoric acid: the wet process, and the thermal process. Process emissions from the wet process include gaseous fluorides in the form of hydrofluoric acid (HF) and silicon tetrafluoride (SiF4). Process emissions typically associated with the thermal production include phosphate, fluoride, dust, cadmium (Cd), lead (Pb), zinc (Zn), and radionuclides (Po-210 and Pb-210). Dust emissions, containing water-insoluble fluoride, may occur during the unloading, storage, handling and grinding of the phosphate rock, which is transferred to storage and grinding sections by conveyor belts or trucks.

Emission prevention and control measures: · Properly select the phosphate rock to minimize the amount of acid required in the wet production process, reduce emissions into the environment and increase the possibility of phosphogypsum reuse where possible; · Select proper size of screens and mills (e.g. roller or chain mills); · Use covered conveyor belts and indoor storage; · Apply good housekeeping; · Recover dust from phosphate rock grinding; · Treat gaseous fluoride emissions using scrubbing systems. Fluorine is recovered as fluosilicic acid, from which silica is removed through filtration. A diluted solution of fluosilicic acid (H2SiF6) may be used as the scrubbing liquid. Recovering of H2SiF6 is an additional possibility for fluoride emission reduction.

Process Emissions – Superphosphate Phosphate Fertilizer Production

Dust emissions may be generated during unloading, handling, grinding, and curing of phosphate rock, in addition to granulation and crushing of superphosphates. Emissions of gaseous hydrofluoric acid (HF), silicon tetrafluoride (SiF4), and chlorides may also generated from acidulation, granulation and drying. Ammonia (NH3) and nitrogen oxides (NOx) may be generated during the drying and neutralization phases of ammonium nitrate fertilizers. During the reaction of phosphate rock with acid, limited amounts of organic compounds (including mercaptans) present in the phosphate rock are released and may cause door.

In addition to measures listed under phosphoric acid production above, phosphate rock dust emissions should be prevented and controlled through: · Use of direct granulation which may reduce the levels of fugitive emissions compared with curing emissions from indirect granulation. If indirect granulation is used, the curing section should be an indoor system with vents connected to a scrubbing system or to the granulation section; · Use of plate bank product cooling systems to reduce air flow requirements (e.g. instead of rotary drums or fluid bed coolers); · Consider use of fabric filters or high efficiency cyclones and/or fabric filters rather than a wet scrubbing system to treat exhaust air from neutralization, granulation, drying, coating and product coolers and equipment vents, in order to avoid creation of additional wastewater. Filtered air should be recycled as dilution air to the dryer combustion system; · Emissions from granulation should be minimized through application of surge hoppers to product size distribution measurement systems for granulation recycle control.

Process Emissions – Compound Fertilizer Production

NPK fertilizers produced from mixed acids: Air emissions include: - ammonia from the ammonization reactors; - nitrogen oxides (NOX), mainly NO and NO2 with some nitric acid, from phosphate rock digestion in nitric acid; - fluorides from the phosphate rock reactions; - aerosol emissions, including ammonium nitrate (NH4NO3), ammonium fluoride (NH4F), and ammonium chloride (NH4Cl); and - fertilizer dust. NPK fertilizers produced from nitrophosphate: Similar to above but also include aerosol emissions of ammonium chloride (NH4Cl) and ammonia from the neutralization of nitrophosphoric acid. Ammonia emissions may also be generated from the calcium nitrate tetrahydrate conversion section, the ammonium nitrate evaporation section,

1. Reduce NOX emission from nitric acid use in phosphate rock digestion by controlling the reactor temperature, optimizing the rock / acid ratio, and adding urea solution; 2. Treat gases from the digestion reactor in a spray tower scrubber to recover NOX and fluorine compounds. The pH may be adjusted by the addition of ammonia; 3. Reduce NOx and door emissions by selecting high grade phosphate rock with low contents of organic compounds and ferrous salts; 4. Control particulate matter emissions, as discussed in phosphoric acid production, above; 5. Prevent and / or control emissions from granulation and product cooling by: o Scrubbing of gases from the granulator and the dryer in venturi scrubbers with recirculating ammonium phosphate or ammonium sulfo-phosphate solution; o Discharge of scrubbed gases through cyclonic columns irrigated with an acidic solution; o Use of high efficiency cyclones to remove particulates from dryer gases prior to scrubbing; o Recycling of the air coming from the cooling equipment as secondary air to the dryer after dedusting; o Treating ammonia emissions by scrubbing with acidic solutions. 6. Fluoride emissions should be controlled through scrubbing systems, as discussed under phosphoric acid production; 7. Emissions to air from phosphate rock digestion, sand washing and CNTH filtration should be reduced by applying

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ili z e r M Air emissions

and the granulation or prilling sections. Aerosols of ammonium nitrate may also be formed during the different production steps, and emissions of hydrogen chloride (HCl) may be present in some exhaust gases.

appropriate controls (e.g. multistage scrubbing, conversion into cyanides); 8. Ammonia in off-gases from the nitrophosphoric neutralization steps should be removed through countercurrent scrubbers, with pH adjustment to most efficient scrubbing condition (pH 3-4), with a mixture of HNO3 and/or H2SO4; 9. Ammonia emissions from the granulation / drying sections should be treated by scrubbing with acidic solutions; 10. Minimize contact between wastes containing NOX and NH3 to prevent aerosol formation in NPK nitrophosphate route; 11. Reduce aerosol emission by installing cyclones and scrubbers; and 12. Reduce fluorides emissions by recycling of warm air.

Wastewater

Effluents – Phosphoric Acid Production

Effluents consist of discharges from the vacuum cooler condensers and the gas scrubbing systems used for condensation and cleaning of vapours from process operations. Condensed acidic vapours may contain fluorine and small amounts of phosphoric acid. Water from the slurry used to transport phosphogypsum (the by-product from wet phosphoric acid production) may be released as effluent if it is not recirculated back into the process. Emissions to water for the disposal of gypsum may contain a considerable amount of impurities, such as phosphorus and fluorine compounds, cadmium and other heavy metals, and radionuclides. Drainage from material stockpiles may contain heavy metals (e.g. Cd, mercury [Hg], and Pb),fluorides, and phosphoric acid. Specific emissions to water from the thermal process of phosphoric acid production may include phosphorus and fluorine compounds, dust, heavy metals, and radionuclides (e.g., Po-210 and Pb-210).

1. Select phosphate rock with low levels of impurities to produce clean gypsum and reduce potential impacts from disposal of gypsum; 2. Consider dry systems for air pollution abatement (versus wet scrubbing) to reduce wastewater generation. To reduce fluoride emissions, the installation of scrubbers with suitable scrubber liquids may be necessary; 3. Recover fluorine released from the reactor and evaporators as a commercial by-product (fluosilicic acid); 4. Scrubber liquors should be disposed of after neutralization with lime or limestone to precipitate fluorine as solid calcium fluoride, if the fluorine is not to be recovered; 5. Recycle water used for the transport of phosphogypsum back into the process following a settling step; 6. Where available, consideration should be given to use seawater as scrubbing liquid, to facilitate reaction of fluorine to harmless calcium fluoride; 7. Minimize contamination of the scrubber effluent with phosphorus pentoxide (P2O5) by conveying vapours from vacuum flash coolers and vacuum evaporators to a separator to remove phosphoric acid droplets; 8. Minimize contamination of the scrubber effluent with phosphorus pentoxide P2O5 using entrainment separators. Additional phosphate removal can be achieved by applying magnesium ammonium phosphate (struvite) or by calcium phosphate precipitation; 9. Consider decadmation of H3PO4 up to 95% by reactive extraction with an organic solvent.

Effluents - Superphosphate Fertilizer Production

The main source of wastewater is the wet scrubbing systems to treat off-gases. Contaminants may include filterable solids, total phosphorus, ammonia, fluorides, heavy metals (e.g. Cd, Hg, Pb), and chemical oxygen demand (COD).

Recycling of scrubber liquids back into the process should be maximized. Production of acidulated phosphate rock (PAPR), a fertilizer product consisting of a mixture of superphosphate and phosphate rock, in addition to superphosphate (SSP), and triplesuperphosphate (TSP) products can reduce wastewater volumes.

Effluents - Compound Fertilizer Production

Effluents are usually limited from NPK mixed acids route facilities, mainly consisting of wastewater from granulation and exhaust gas scrubbing. At facilities where the nitrophosphate route is used, effluent may contain ammonia, nitrate, fluoride and phosphate. Ammonia is found in the effluents of the condensates of the ammonium nitrate evaporation or the neutralization of the nitrophosphoric acid solution. Solutions containing ammonium nitrate must be pumped with care to limit the risks of explosions. The main sources of nitrate and fluoride levels in effluent are the scrubber liquors from phosphate digestion and sand (removed from the process slurry) washing. Washing of sand also generates phosphate content in the effluent.

1. Recycle the sand washing liquor to reduce phosphate levels in wastewater effluents; 2. Avoid co-condensation of vapours from ammonium nitrate evaporation; 3. Recycle NOX scrubber liquor to reduce ammonia, nitrate, fluoride and phosphate levels; 4. Recycle liquors resulting from scrubbing of exhaust gases from neutralization; 5. Consider reusing effluents as scrubber medium; 6. Treat multi-stage scrubbing liquors, after circulation, through settling, and recycle the thickened portion back to the reactors; 7. Consider combined treatment of exhaust gases from neutralization, evaporation and granulation. This enables a recycling of all scrubber liquids to the production process and reduce waste water generation; 8. Treat waste water through a biological treatment with nitrification/denitrification and precipitation of phosphorous compounds.

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Wastes

Quartz sand May be generated from NPK production via the nitrophosphate route.

Quartz sand should be separated, washed, and recycled as a building material.

Phosphogypsum The most significant by-product in wet phosphoric acid production (c.4 - 5 tons per ton of phosphoric acid produced). Phosphogypsum contains a wide range of impurities (residual acidity, fluorine compounds, trace elements such as mercury, lead and radioactive components). These impurities and considerable amounts of phosphate might be released to the environment (soil, groundwater and surface water).

1. Depending on its potential hazardousness (e.g. whether it emits radon) phosphogypsum may be processed to improve its quality and reused (e.g. as building material). Possible options include: o Production of cleaner phosphogypsum from raw materials (phosphate rock) with low levels of impurities; and o Use of repulping. 2. Use of di-hemihydrate recrystallization process with double stage filtration. 3. If phosphogypsum cannot be recycled due to unavailability of commercially and technically viable alternatives, it should be managed as a hazardous or non-hazardous industrial waste, as appropriate, according to the guidance in General EHS Guidelines. Additional management alternatives may include backfilling in mine pits, dry stacking, and wet stacking. Phosphate rock, phosphogypsum and the effluents produced from a phosphoric acid plant have generally a lower radioactivity than the exemption values given in the relevant international regulations and guidelines (for example, EU Directive 96/26/EURATOM).

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Potential OHS and Community Health and Safety Impacts and Mitigation

General Considerations

The summary of the existing national OHS framework presented in the legal framework discussion above indicates that Ethiopia is progressing well towards an overall framework which will be in line with good international industry practice. However; the identified information indicates that there are still likely to be gaps which will require the proposed developments to implement an integrated environmental, social, health and safety management system per good international industry practice, in line with the requirements of IFC Performance Standards 1 and 2, ILO requirements and relevant EHS guidelines. In the establishment of an effective OHS Management System, it is imperative that:

• Design, process, constructability and operational safety have been taken into account at all the relevant stages of a project;

• The same taken into account at the site master planning for the location of the asset, along with the impact on and from neighbouring activities/assets; and,

• That the principles of risk elimination, reduction or mitigation are taken into account.

The above are a general requirement of international accepted OHS risk management systems, apply to all industries including construction, and provide a framework to identify and implement measures to control risks on a project. The general principles of prevention can be summarised as:

• Avoid risks;

• Evaluate the risks which cannot be avoided;

• Combat the risks at source;

• Adapt the work to the individual, especially regarding the design of workplaces, the choice of work equipment and the choice of working and production methods, with a view, in particular, to alleviating monotonous work, work at a predetermined work rate and to reducing their effect on health;

• Adapt to technical progress;

• Replace the dangerous by the non-dangerous or the less dangerous;

• Develop a coherent overall prevention policy which covers technology, organisation of work, working conditions, social relationships and the influence of factors relating to the working environment;

• Give collective protective measures priority over individual protective measures; and,

• Give appropriate instructions to employees.

In the absence of an internationally recognised national OHS Framework, Section 2 of the WBG/IFC General EHS Guidelines provides the key framework for management of operational OHS risks on private sector projects.

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The following aspects are discussed/defined under operational OHS requirements:

• General Facility Design and Operation (including fire hazards, water supply and first aid);

• Communication and Training;

• Physical hazards;

• Chemical hazards (including worker injury or fire / explosion hazard due to exposure to chemicals or hazardous substances including asbestos containing materials);

• Biological hazards; and,

• Radiological hazards;

• Requirements for PPE;

• Special hazards, including confined space and lone/isolated working; and,

• Monitoring of the effectiveness of the OHS system (including accidents and disease).

The General EHS Guidelines also include OHS requirements associated with the construction phase of a project, with recommendations/requirements around the following:

• Over-exertion of staff (e.g. manual handling or other ergonomic risks);

• Trips, slips and falls;

• Working at height;

• Falling objects;

• Moving machinery;

• Dust; and,

• Confined space entry and excavations.

In addition to the requirements for operational and construction-related OHS, the General EHS Guidelines include requirements for operational and construction-related community health and safety (CHS) issues:

• Operational:

o Water quality and availability;

o Structural safety of project infrastructure;

o Life and Fire Safety (where the facility is accessible to the public);

o Traffic Safety (involving the community and operational traffic movements, e.g. staff or deliveries);

o Transport of hazardous materials (which may include feedstock or products);

o Disease prevention (associated with operational workers); and,

o Emergency preparedness and response.

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• Construction:

o General site hazards (measures for protection of the community from physical, chemical, or other hazards on site associated with construction – e.g. restricting site access or controlling potential contamination sources);

o Disease prevention (associated with influx of construction workers to a community); and,

o Traffic safety (accidents involving community members and construction traffic to and from the site).

For each of the above aspects, the General EHS Guidelines provides detailed guidance and potential mitigation options which are typically applied on projects designed and operated in line with good international industry practice. At this stage, it is not intended to repeat the detailed OHS framework and mitigation measures presented in the General EHS Guidelines as these will ultimately be developed as part of subsequent feasibility stages. If required, the reader should refer to the guidelines for further information at this stage. Examples of Best Practice Regulatory Frameworks

In addition to national requirements and the requirements of the ILO, IFC Performance Standards and General EHS Guidelines, when developing an integrated environmental, social and OHS management system for the proposed chemicals developments, other relevant examples of best practice regulatory frameworks, design and processes/techniques should also be considered where appropriate. Examples of leading internationally recognised OHS frameworks are:

• USA:

o Occupational Safety and Health Administration (OSHA) – e.g. Process Safety Management (PSM) Standard;

o Environmental Protection Agency (EPA) – e.g. Risk Management Programme Regulation; and,

o Various state specific requirements – e.g. New Jersey Catastrophe Prevention Act.

• European Union:

o Seveso III Directive; and,

o UK Health and Safety Executive (HSE) – e.g. Health and safety at work act (HASAWA).

• Australia - National Standard for Control of Major Hazard Facilities

Each of these frameworks is supported by significant additional legislation and guidance. For example, in the UK, the following are just some of the relevant legislation:

• Health and safety at work act (HASAWA);

• Control of Major Accident Hazards (COMAH) (related to EU Seveso Directive);

• Control of Substances Hazardous to Health (COSHH);

• Dangerous Substances and Explosive Atmospheres Regulations (DSEAR) (ATEX);

• Pollution Prevention and Control (PPC) Regulations; and,

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• Construction Design and Management (CDM).

Continuing this example, the UK HSE provides significant chemicals sector-specific guidance and supporting guidance note documents to support the above framework. This is presented on the relevant page of the HSE website: http://www.hse.gov.uk/chemicals/index.htm Sector Specific Considerations for OHS and CHS

This section presents risks and potential mitigation for sector-specific EHS guidelines regarding potential OHS and CHS issues. The following tables are included:

• Table F-19: Industry-specific OHS Impacts and Management: Nitrogenous Fertilizer Production;

• Table F-20: Industry-specific OHS Impacts and Management: Large Volume Petroleum-Based Organic Chemicals Manufacturing;

• Table F-21: Industry-specific OHS Impacts and Management: Natural Gas Processing;

• Table F-22: Industry-specific OHS Impacts and Management: Large Volume Inorganic Chemicals and Coal Tar Distillation;

• Table F-23: Industry-specific OHS Impacts and Management: Petroleum based Polymers Manufacturing;

• Table F-24: Industry-specific OHS Impacts and Management: Pharmaceuticals & Biotechnology Manufacturing; and,

• Table F-25: Industry-specific OHS Impacts and Management: Phosphate Fertilizer Manufacturing.

http://www.hse.gov.uk/chemicals/index.htm

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Table F-19: Industry-specific Impacts and Management: Nitrogenous Fertilizer Production

Value chain Components Justification Safety Management Measures

Nitr

ogen

ous

Ferti

lizer

Pro

duct

ion

Chemical Hazards Toxic chemicals in the nitrogenous fertilizer facilities include ammonia, nitric acid vapour, gaseous formaldehyde, and urea or AN dust. Threshold values associated with specific health effects can be found in internationally published exposure guidelines.

1. Installation of gas detectors in hazard areas, wherever possible; 2. Avoid nitric acid spills or take precautions to control and minimize them. Nitric acid is highly corrosive and any

form of dermal contact should be avoided; 3. Provide adequate ventilation in all areas where ammonia, nitric acid and aqueous formaldehyde is handled; 4. Provide air extraction and filtration in all indoor areas where urea and AN dust can be generated.

Fire and Explosions Fires and explosions due to accidental release of synthetic gas in ammonia plants:

2. Formation of explosive gas mixture in the inert gas scrubbers and ammonia release in urea facilities;

3. Explosions of air/ammonia mixture and nitrite/nitrate salts in nitric acid plants;

4. Initiation of fire and explosion by ammonium nitrate, an oxidizing agent in the AN plants;

5. Fires of fertilizer products or dust contaminated with oil or other combustible materials in the presence of a heat source.

1. Install leak detection units and other devices (alarm detection systems, such as automatic pH monitoring in nitric acid plants) to detect releases early;

2. Segregate process areas, storage areas, utility areas, and safe areas, and adopt safety distances. 3. Limit the inventory which may be released through isolation of large inventories from facility operations, and

isolation and blowdown of pressurized flammable gases inventories; 4. Remove potential ignition sources; 5. Implement procedures to avoid and control hazardous gas mixtures, for instance reducing below 10 parts per

million (ppm) hydrogen content in CO2 feed in urea plants; 6. Control the ammonia-to-air ratio with automatic shut-off valves in nitric acid plants; 7. Avoid pressurizing large quantities of nitric acid for loading/unloading; 8. Use carbon austenitic stainless steel for nitric acid tanks, vessels and accessories; 9. Design AN storage according to internationally recognized guidance and requirements. These requirements

generally cover the storage areas with respect to their structural and operational requirements. An adequate fire detection and fighting system should be installed;

10. Remove or dilute the release and limiting the area affected by the loss of containment.

Ammonia Storage Potential for toxic releases in handling and storage of liquid ammonia.

1. Avoid siting ammonia storage tanks close to installations where there is a risk of fire or explosion; 2. Use refrigerated storage for large quantities of liquid ammonia since the initial release of ammonia in the case of

line or tank failure is slower than in pressurized ammonia storage systems; 3. Implement and maintain a specific Emergency Management Plan providing guidance on emergency measures

to protect both operators and local communities in the event of toxic ammonia releases.

Community Health and Safety The most significant CHS hazards during the operation of nitrogenous fertilizers facilities relate to: • Management, storage and shipping of hazardous products

(ammonia, nitric acid, ammonium nitrate), with potential for accidental leaks/releases of toxic and flammable gases;

• Disposal of wastes (off-spec products, sludge).

Identify reasonable design leak cases: • Assess the effects of potential leaks on surrounding areas, including groundwater and soil pollution; • Assess potential risks arising from hazardous material transportation and select the most appropriate transport

routes to minimize risks to communities and third parties; • Select plant location with respect to the inhabited areas, meteorological conditions (e.g. prevailing wind

directions), and water resources (e.g., groundwater vulnerability). Identify safe distances between the plant area, especially the storage tank farms, and the community areas;

• Identify prevention and mitigation measures required to avoid or minimize community hazards; • Develop an Emergency Management Plan with the participation of local authorities and potentially affected

communities.

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Table F-20: Industry-specific Impacts and Management: Large Volume Petroleum-Based Organic Chemicals Manufacturing

Value chain

Components Justification Safety Management Measures

Larg

e Vo

lum

e Pe

trole

um-

Base

d O

rgan

ic C

hem

ical

s M

anuf

actu

ring

Chemical Hazards Toxic and carcinogenic compounds are present in the process and stored on site. In the event of LVOC release, personnel could potentially be exposed to concentrations dangerous for health and life. Such substances include: aromatics, formaldehyde, ethylene oxide, acrylonitrile, hydrogen cyanide, nitrobenzene, toluene diisocyanate, vinyl chloride, 1,2 dichloroethane, carbon tetrachloride, and dioxin related components.

1. Installation of gas detectors in hazard areas, wherever possible; 2. Provide adequate ventilation in all areas where hazardous and toxic products are handled; 3. Provide air extraction and filtration in all indoor areas where emissions and dust can be generated 4. All spills should be avoided and precautions should be taken to control and minimize them.

Potential for toxic releases of pressurized, refrigerated, and liquid hazardous products can be minimised by:

1. Storage tanks not being located close to installations where there is a risk of fire or explosion; 2. Refrigerated storage is preferred for storage of large quantities of products, because the initial release in the

case of a line or tank failure is slower than with pressurized storage systems.

Community Health and Safety The most significant CHS hazards associated with this industry occur during the operation phase: • major accidents related to fires and explosions in

manufacturing processes; and • during product handling and transport outside the processing

facility

Design of facilities should include safeguards including: • Identifying reasonable design accident cases; • Assessing the effects of the potential accidents on the surrounding areas; • Properly selecting the plant location in respect to the local receptors, meteorological conditions (e.g., prevailing

wind directions), and water resources (e.g., groundwater vulnerability) and identifying safe distances between the facilities and residential or commercial or other industrial areas;

• Identifying the prevention and mitigation measures required to avoid or minimize the hazards; and • Providing information and involving the communities in emergency preparedness and response plans and

relevant drills in case of major accident. See also relevant sections of WBG General EHS Guidelines, including: Traffic Safety, Transport of Hazardous Materials, and Emergency Preparedness and Response.

F-85


Table F-21: Industry-specific Impacts and Management: Natural Gas Processing

Value chain

Components Justification Safety Management Measures N

atur

al G

as P

roce

ssin

g

Oxygen-Enriched Gas Releases Leaks of oxygen-enriched from air separation units can create a fire risk. Oxygen-enriched atmospheres may potentially result in the saturation of materials, hair, and clothing with oxygen, which may burn violently if ignited.

• Installation of an automatic Emergency Shutdown System that detects uncontrolled release of oxygen (including the presence of oxygen-enriched atmospheres in working areas) and initiates shutdown actions;

• Design of facilities and components according to applicable industry safety standards, avoiding the placement of oxygen-carrying piping in confined spaces, using intrinsically safe electrical installations, and using facility wide oxygen venting systems that properly consider the potential impact of the vented gas;

• Implementation of hot work and permit-required confined space entry procedures that specifically take into account the potential release of oxygen;

• Implementation of good housekeeping practices to avoid accumulation of combustible materials; • Planning and implementation of emergency preparedness and response plans that incorporate procedures for

managing uncontrolled releases of oxygen; and • Provision of appropriate fire prevention and control equipment as described below (Fire and Explosion Hazards).

Oxygen-Deficient Atmosphere Potential release and accumulation of nitrogen gas into work areas can result asphyxiating conditions due to displacement of oxygen.

• Design and placement of nitrogen venting systems according to recognized industry standards; • Installation of an automatic Emergency Shutdown System that can detect and warn of the uncontrolled release

of nitrogen (including the presence of oxygen deficient atmospheres in working areas), initiate forced ventilation, and minimize the duration of releases; and

• Implementation of confined space entry procedures with consideration of facility-specific hazards.

Chemical Hazards Chemical exposures this industry are mainly related to carbon monoxide and methanol releases. Potential inhalation exposures to chemicals emissions during routine plant operations should be managed based on the results of a job safety analysis and industrial hygiene survey and according to the occupational health and safety guidance provided in WBG General EHS Guidelines.

1. toxic gas detection systems with alarms. 2. worker training, 3. work permit systems, 4. use of personal protective equipment (PPE).

Fire and Explosions Fire and explosion hazards generated by process operations include the accidental release of Syn-gas (containing carbon monoxide and hydrogen), oxygen, and methanol. High pressure Syn-gas releases may cause “Jet Fires” or give rise to a Vapour Cloud Explosion (VCE), “Fireball,” or “Flash Fire,” depending on the quantity of flammable material involved and the degree of confinement of the cloud. Hydrogen, methane, and carbon monoxide gases may ignite even in the absence of ignition sources if their temperatures exceed their auto-ignition points of 500°C, 580°C, and 609°C, respectively. Flammable liquid spills may cause “Pool Fires".

1. Providing early release detection, such as pressure monitoring of gas and liquid conveyance systems, in addition to smoke and heat detection for fires;

2. Limiting the inventory that may be released by isolation of the process operations in the facility from large storage inventories;

3. Avoiding potential sources of ignition (e.g., by configuring the layout of piping to avoid spills over high temperature piping, equipment, and / or rotating machines);

4. Controlling the potential effect of fires or explosions by segregation of process, storage, utility, and safe areas by designing, constructing, and operating them according to international standards for the prevention and control of fire and explosion hazards including provisions for distances between tanks in the facility and between the facility and adjacent buildings, provision of additional cooling water capacity for adjacent tanks, or other risk based management approaches; and

5. Limiting the areas that may be potentially affected by accidental releases by: - Defining fire zones and equipping them with a drainage system to collect and convey accidental releases of

flammable liquids to a safe containment area including secondary containment of storage tanks; - Installing fire / blast partition walls in areas where appropriate separation distances cannot be achieved; and - Designing the oily sewage system to avoid propagation of fire.

Community Health and Safety The most significant CHS hazards associated with this industry occur during the operation phase: • major accidents related to fires and explosions at the facility; and • potential accidental release of raw materials or finished products

during their transport outside of the processing facility.

Guidance for the management of these issues is presented under the major hazards above and in relevant sections of the General EHS Guidelines including the sections on: Traffic Safety, Transport of Hazardous Materials, and Emergency Preparedness and Response.

F-86


Table F-22: Industry-specific Impacts and Management: Large Volume Inorganic Chemicals and Coal Tar Distillation

Value chain

Components Justification Safety Management Measures La

rge

Volu

me

Inor

gani

c C

hem

ical

s an

d C

oal T

ar D

istil

latio

n

Chemical Hazards The industry is characterized by the presence of toxic compounds, including chlorine gas, ammonia, acids, caustic soda, amines, components of coal tar (e.g. mononuclear and polycyclic aromatic hydrocarbons, phenols, and pyridine bases), which can be toxic when ingested, inhaled, or absorbed through the skin. The main health hazard usually associated with coal tar and its products is carcinogenicity due to long-term, continued exposure of the skin to finely divided solid pitch (dust).

1. Assess and minimize the concentrations of toxic substances in working areas in both normal and emergency conditions. 2. Rigorous workplace monitoring protocols ought to be in place as part of the overall OHS management system. 3. Protective clothing, including eye protection and PVC gloves, should be worn, suitable respirators be available, and regular medical check-ups be carried out on all personnel, as needed; 4. Install gas detectors (e.g. chlorine detectors) in hazard areas, wherever possible; 5. Ensure effective ventilation, where the lower boiling products are handled; and 6. Provide and use barrier creams formulated against aromatic hydrocarbons.

Major Hazards The most significant safety impacts are related to the handling and storage of NH3, chlorine, caustic soda, nitric, hydrochloric, sulfuric, hydrofluoric, phosphoric acids and organic compounds and combustible gases such as natural gas, CO, and H2 and other process chemicals. Impacts may include significant acute exposures to workers and, potentially, to surrounding communities, depending on the quantities and types of accidentally released chemicals and the conditions for reactive or catastrophic events, such as fire and explosion. Synthetic Gas (SynGas; containing H2 and CO25) generated at ammonia plants may cause “Jet Fires” if ignited in the release section, or give rise to Vapour Cloud Explosion, “Fireballs,” or “Flash Fires”.

1. Minimize the liquid chlorine inventory and the length of pipeline containing liquid chlorine; 2. Design atmospheric ammonia storage tanks (- 33°C) with dual walls and an external concrete wall with the roof resting on the outer wall, and using an adequate margin between operating and relief pressure. Refrigerated storage should be preferred for storage of large quantities of liquid ammonia, since the initial release of ammonia in the case of a line or tank failure is slower than with pressurized ammonia storage systems; 3. Design chlorine storage tanks based on a specific analysis of major failure or accident risks and consequences, and accounting on the possibility to safely recover and handle any product spills—consider low- temperature storage (- 34°C) for large storage capacities, and provision of at least one empty tank equal in capacity to the largest chlorine storage tank as an emergency spare; 4. Given their highly corrosive and toxic nature, special attention should be given to the handling and storage of acids including prevention of leaks or spills to effluent waters by provision of secondary containment; separation from critical drainage channels; and continuous monitoring and alarm detection systems (such as automatic pH monitoring) of at-risk containment and drainage networks; 5. Avoid pressurizing for unloading large quantities of nitric acid. The recommended material for tanks, vessels and accessories is low carbon austenitic stainless steel; 6. Only use specially trained and certified staff or contractors for deliveries and transfer of all process chemicals, including chemicals used in the CO2 removal unit of the ammonia plant.

Community Health and Safety The most significant community health and safety hazards during the operation of chemical facilities are related to: · Handling and storage of hazardous materials including raw materials, intermediaries, products and wastes near populated areas; · Shipping of hazardous products (ammonia, chlorine, acids, carbon black), with possibility of accidental leak of toxic and flammable gases; · Disposal of solid waste (phosphogypsum, sludge).

The design should include safeguards to minimize and control hazards to the community, through the following: · Identifying reasonable design leak cases; · Assessing the effects of the potential leaks on the surrounding areas, including groundwater and soil pollution; · Properly selecting the plant location in respect to the inhabited areas, meteorological conditions (e.g. prevailing wind directions), and water resources (e.g., groundwater vulnerability) and identifying safe distances between the plant area and the community areas; and · Identifying the prevention and mitigation measures required to avoid or minimize the hazards. If facilities are located on the shore, the ship traffic associated with the facilities should be considered in the assessment, analysing the potential impact of the traffic on the local marine traffic and activities and the potential impacts of liquids leaks from the unloading or offloading operations. Measures to avoid accidental impacts and minimize disturbance to other marine activities in the area should be assessed. Risk analysis and emergency planning should include, at a minimum, the preparation of an Emergency Management Plan, prepared with the participation of local authorities and potentially affected communities.

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Table F-23: Industry-specific Impacts and Management: Petroleum based Polymers Manufacturing

Value chain

Components Justification Safety Management Measures Pe

trole

um b

ased

Pol

ymer

s M

anuf

actu

ring

Process Safety (process-specific)

· Polyethylene Manufacturing A specific process hazard is related to the possible release of large amounts of hot ethylene to the atmosphere and subsequent cloud explosion. Accidental events are mainly related to leaks from gaskets or during maintenance operations. For LDPE production units in particular, accidental events can include opening of the safety disk of the reactor and explosion of the high pressure separator.

· Ethylene vented due to opening of the reactor safety disks at high pressure cannot be conveyed to the flare, but should be vented to the atmosphere by a short stack, after dilution with steam and cooling with water scrubbing to minimize risks of explosive clouds; · Product decomposition in tubular reactors should be prevented through heat transfer, temperature profile control, high speed flow and good pressure control; · Explosion of high pressure separators should be prevented by vessel reactors design measures, careful dosing of peroxides, control of polymerization temperature, rapid detection of uncontrolled exothermic reactions and rapid isolation / depressurizing, and good maintenance of reactors and separators. · The prevention of spills and explosive clouds should be based on the application of internationally recognized engineering standards for equipment and piping design, maintenance, plant lay-out, and location / frequency of emergency shut-off valves.

· PVC Manufacturing Accidental venting to the atmosphere of VCM with a subsequent formation of an explosive and toxic cloud can be caused by opening of Pressure Safety Valves (PSVs) of a reactor due to runaway polymerization.

Management actions include degassing and steam flushing of reactor before opening. Normally any polyperoxide formed is kept dissolved in VCM, where it reacts slowly and safely to form PVC. However, if liquid VCM containing polyperoxides is evaporated, polyperoxides may precipitate and decompose exothermically with the risk of explosion and consequent toxic cloud.

· Batch Polymerization Process Batch polymerization can generate a hazard of runaway polymerization and reactor explosion in the event of improper dosing of reactants or failure in the stirring or heat exchange systems.

· Limit the practice of batch polymerization; · Apply process controls, including the provision of backup emergency power, cooling, inhibitor addition systems, and blow-down tanks.

· Compounding, Finishing and Packaging Processes

These operations present risks of fire in blenders and in extruders (if the polymer is overheated), and in equipment involving mixtures of polymer powders and air, such as dryers, pneumatic conveyors, and grinding equipment.

Use of internationally recognized electric installation standards, including grounding of all equipment, and installation of specific firefighting systems.

Fires and Explosions

· Vinyl Chloride Monomer (VCM) VCM is classified as a toxic and carcinogen (IARC group 1)12. It is gas under normal conditions (boiling point = -13.9°C), and is potentially explosive when in contact with air. VCM is stored as a liquid in pressurized or refrigerated tanks.

Transportation of VCM, including pipeline transportation, should be conducted in a manner consistent with good international practice for transport of hazardous materials. Evaluations for the location of new PVC facilities should include consideration of distances to monomer plants, in order to minimize storage times and to reduce potential hazards from monomer transport.

· Styrene Styrene polymerizes readily. Should be stored at cool temperatures, with adequate levels of 4-tert-butylcatechol (TBC) used as an inhibitor, in tanks designed and built according to international standards.

· Acrylic Acid and Esters Acrylic acid is a liquid freezing at 13 °C, and is extremely reactive by runaway polymerization if uninhibited. Accidents originated in acrylic acid storages are relatively frequent.

It is sold inhibited with hydroquinone mono methyl ether, which is active in the presence of air. It is easy flammable when overheated and it should be stored in stainless steel tanks. Overheating or freezing should be avoided because thawing of frozen acrylic acid is an operation involving runaway polymerization risks. Acrylic esters behave in a similar way, but they don’t present risks related to freezing.

· Phenol Phenol melts at 40.7°C and it is usually received, stored and handled in molten state.

1. Tanks should be fitted with a vapour recovery system and fitted with heating coils; nitrogen blanket is also recommended. 2. Lines and fittings should be steam-traced and should be purged with nitrogen before and after product transfer.

· Formaldehyde Formaldehyde is used as an aqueous solution at concentrations of 37 – 50 percent, usually stabilized with low amounts of methanol (<1 percent).

Formaldehyde is a confirmed carcinogenic for humans (IARC Group 1)16 Formaldehyde releases flammable vapours to air, so it should be kept under an inert gas blanket during storage.

F-88


Value chain


· Metal alkyls (Al, Li, Zn, Na, K, etc.)

The most widely used metal alkyls are aluminium and magnesium alkyls in Z-N polymerization of olefins, and lithium alkyls in anionic polymerization of styrene and dienes.

· Preparation of a specific fire prevention and control plan to address the fire and other hazards associated with metal alkyls; · Respecting safety distances within and outside of the facility; · Shipping in tank cars, tank trailers, portable tanks, or ISO tanks according to internationally recognized standards; · Transfer should be made to bunkerized storage facilities through specially designed valves, fittings, and pumps; · Storage tanks should be kept under a nitrogen blanket and connected to the atmosphere by one or more oil hydraulic seals. The product levels and flows should be monitored with high reliability instrumentation and alarms; · Metal alkyl storage facilities should be equipped with containment walls, and the area within the containment should be sloped to facilitate drainage to an emergency burning pit.

· Peroxides Organic and inorganic peroxides, as well as diazo compounds, are widely used as radical polymerization initiators. Inorganic peroxides, like hydrogen peroxide and peroxydisulphates, are capable of violent reaction with organic substrates. Inorganic peroxides are classified as oxidizers. Oxidizer hazards include: - increase in the burning rate of combustible materials; - spontaneous ignition of combustible materials; - rapid and self-sustained decomposition, which can result in explosion; - generation of hazardous gases; and - explosion hazards if mixed with incompatible compounds or exposure to fires.

· Peroxide formulations should be transported and handled according to manufacturer recommendations and applicable international standards. · Storage should be segregated facilities designed and built according to internationally accepted standards (e.g. NFPA Codes). Organic peroxides should be stored in dedicated refrigerated or air conditioned explosion proof buildings; · Preparation of a specific fire prevention and control plan to address the peculiarities of strong inorganic oxidizers.

· Polymers Fires in polymer storage warehouses may be difficult to control due to the very high combustion heat of most polymers. Polymers combustion in fires also produces toxic clouds.

· Storage buildings should be designed in accordance with internationally accepted standards including, for example, appropriate ventilation, air temperature control, and protection from direct sunlight; · Effective fire prevention and control systems should be adopted, including for example, smoke detectors, IR hot spot detectors, and distributed water sprinklers designed for the very high thermal load of a polymer fire; · Because most polymers are subjected to slow oxidative aging by heat or light, they should be kept in closed packaging; · “First In First Out” (FIFO) management procedure for the products together with frequent inspections and good housekeeping. Aged materials should be traced, evaluated for safety, and separated for disposal.

Community Health and Safety The most significant CHS hazards associated with this industry occur during operation, and include: - the threat from major accidents related to potential fires and explosions; and - accidental releases of finished products within the facility or during transportation outside the processing facility.

- Major hazards should be managed according to international regulations and best practices (e.g., OECD Recommendations, EU Seveso II Directive, and USA EPA Risk Management Program Rule). - See also relevant sections of the General EHS Guidelines including: Hazardous Materials Management (including Major Hazards); Traffic Safety; Transport of Hazardous Materials; and Emergency Preparedness and Response.

F-89


Table F-24: Industry-specific Impacts and Management: Pharmaceuticals & Biotechnology Manufacturing

Value chain

Components Justification Safety Management Measures Ph

arm

aceu

tical

s &

Biot

echn

olog

y M

anuf

actu

ring

Heat hazards The use of large volumes of pressurized steam and hot water are typically associated with fermentation and with compounding operations representing potential for burns due to exposure to steam or direct contact with hot surfaces as well as heat exhaustion.

· Steam and thermal fluid pipelines should be insulated, marked, and regularly inspected; · Steam vents and pressure release valves should be directed away from areas where workers have access; · High temperature areas of presses should be screened to prevent ingress of body parts.

Chemical hazards including fire and explosions

Among the most common types of chemicals and exposure routes is the inhalation of volatile organic compounds (VOCs) from recovery, isolation, and extraction activities; from handling of wet cakes in drying operations; during wet granulation, compounding, and coating operations; from uncontained filtration equipment; and from fugitive emissions for leaking pumps, valves, and manifold stations (e.g. during extraction and purification steps). Additional sources of inhalation exposures include chemical synthesis and extraction operations and sterilization activities (e.g. germicides such as formaldehyde and glutaraldehyde, and sterilization gases such as ethylene oxide) as well as exposure to synthetic hormones and other endocrine disrupters. In secondary pharmaceuticals manufacturing, workers may be exposed to airborne dusts during dispensing, drying, milling, and mixing operations. Fire and explosions: Fire and explosion hazards may arise during solvent extractions. Organic synthesis reactions may also create major process safety risks from highly hazardous materials, fire, explosion, or uncontrolled chemical reactions, which should be controlled through process safety engineering and control. Secondary pharmaceuticals manufacturing operations (e.g. granulation, mixing, compounding and drying) also use flammable liquids, with the potential to create flammable or explosive atmospheres. In addition, some pharmaceutical dusts are highly explosive.

· Potential inhalation exposures to chemicals emissions during routine plant operations should be managed based on the results of a job safety analysis and industrial hygiene survey and according to the occupational health and safety guidance provided in WBG General EHS Guidelines. · Protection measures include worker training, work permit systems, use of personal protective equipment (PPE), and toxic gas detection systems with alarms. · Use of partitioned workplace areas with good dilution ventilation and / or differential air pressures; · When toxic materials are handled, laminar ventilation hoods or isolation devices should be installed; · Manufacturing areas should be equipped with suitable heating ventilation and air conditioning (HVAC) systems designed according to current Good Manufacturing Practice (cGMP) protocols, including use of high efficiency particulate air (HEPA) filters in ventilation systems, particularly in sterile product manufacturing areas; · Use of gravity charging from enclosed containers and vacuum, pressure, and pumping systems during charging and discharging operations to minimize fugitive emissions; · Use of local exhaust ventilation (LEV) with flanged inlets to capture fugitive dusts and vapours released at open transfer points; · Conducting liquid transfer, liquid separation, solid and liquid filtration, granulation, drying, milling, blending, and compression in work areas with good dilution and LEV; · Enclosing of granulators, dryers, mills, and blenders, and venting to air-control devices; · Use of dust and solvent containment systems in tablet presses, tablet-coating equipment, and capsule-filling machines. Tablet-coating equipment should be vented to VOC emission control devices; · Whenever possible, less hazardous agents should be selected in all processes (e.g. alcohols and ammonium compounds in sterilization processes); · Sterilization vessels should be located in separate areas with remote instrument and control systems, non-recirculated air, and LEV to extract toxic gas emissions. Gas sterilization chambers should be evacuated under vacuum and purged with air to minimize fugitive workplace emissions before sterilized goods are removed; · Use vacuuming equipment with HEPA filters and wet mopping instead of dry sweeping and blowing of solids with compressed air. Fire and explosions: Recommended management practices are presented in WBG General EHS Guidelines.

Community Health and Safety The most significant CHS hazards in this industry occur during the operation phase and may include: - major accidents related to fires and explosions at the facility; and - potential accidental releases of finished products during their transport outside of the processing facility. Major hazards: Significant safety impacts may occur in relation to the handling and storage of solid, liquid, and gaseous substances. Impacts may include significant exposures to workers and, potentially, to surrounding communities, depending on the

See General EHS Guidelines (Traffic Safety; Transport of Hazardous Materials; and Emergency Preparedness and Response). Major hazards should be prevented through the implementation of a Process Safety Management Program that includes all of the minimum elements outlined in the respective section of the General EHS Guidelines including: · Facility-wide risk analysis, including a detailed consequence analysis for events with a likelihood above 10-6/year (e.g. HAZOP, HAZID, or QRA); · Employee training on operational hazards; · Procedures for management of change in operations, process hazard analysis, maintenance of mechanical integrity, pre-start review, hot work permits, and other essential aspects of process safety included in the General EHS Guidelines;

F-90


Table F-25: Industry-specific Impacts and Management: Phosphate Fertilizer Manufacturing

quantities and types of accidentally released chemicals and the conditions for reactive or catastrophic events, such as fire and explosion.

· Safety Transportation Management System as noted in the General EHS Guidelines, if the project includes a transportation component for raw or processed materials; · Procedures for handling and storage of hazardous materials; · Emergency planning, which should include, at a minimum, the preparation and implementation of an Emergency Management Plan prepared with the participation of local authorities and potentially affected communities.

Value chain


Phos

phat

e Fe

rtiliz

er M

anuf

actu

ring

Chemical hazards Ammonia and acids vapours, especially HF, are common toxic chemicals in phosphate fertilizer plants. Threshold values associated with specific health effects can be found in internationally published exposure guidelines.

· Avoid contact of acids with strong caustic substances. The resulting reaction is exothermic and may cause splashes; · Control fluoride gas build up in phosphoric acid storage tanks; · Install gas detectors in hazard areas; · Provide adequate ventilation (e.g. air extraction and filtration systems) in all areas where products are produced, stored, and handled; and, · Provide appropriate training and personal protection equipment for personnel as described.

Decomposition, fires and explosions Decomposition, fire and explosion hazards may be generated from slurry pump explosions due to insufficient flow through the pump or incorrect design; slurry decompositions due to low pH, high temperature and contaminated raw materials; and hydrogen gas generation due to phosphoric acid contact with ferrous metals.

· Inventory of ammonia, nitric and sulfuric acids should be kept as low as possible. Supply by pipeline is recommended in integrated chemical complexes; · NPK fertilizer decomposition hazard should be prevented through temperature control during production, adjustment of formulations, and reduction of impurities. Compound build–up on the inlet vanes in the dryer should be avoided and uniform temperature profile of the air inlet should be ensured; · Segregate process areas, storage areas, utility areas, and safe areas, and adopt safety distances. · Implement well-controlled operation and procedures in avoiding hazardous gas and slurry mixtures; · NPK storage should be designed according to internationally recognized guidance and requirements. Adequate fire detection and fighting system should be installed. · Storage areas should be cleaned before any fertilizer is introduced. Spillage should be cleared up as soon as practicable. Fertilizer contamination with organic substances during storage should be prevented; · Fertilizers should not be stored in proximity of sources of heat, or in direct sunlight or in conditions where temperature cycling can occur; and, · Contact of phosphoric acid with ferrous metal component should be prevented. Stainless steel should be used for components possibly in contact with the acid.

Community Health and Safety The most significant CHS during the operation of phosphate fertilizers facilities relate to the management, storage and shipping of hazardous materials and products, with potential for accidental leaks / releases of toxic and flammable gases, and the disposal of wastes (e.g. phosphogypsum, off-spec products, sludge).

· Identify reasonable design leak scenarios; · Assess the effects of potential leaks on surrounding areas, including groundwater and soil pollution; · Assess potential risks arising from hazardous material transportation and select the most appropriate transport routes to minimize risks to communities and third parties; · Select plant location with respect to the inhabited areas, meteorological conditions (e.g. prevailing wind directions), and water resources (e.g., groundwater vulnerability). Identify safe distances between the plant area, especially the storage tank farms, and the community areas; · Identify prevention and mitigation measures required to avoid or minimize community hazards; · Develop an Emergency Management Plan with the participation of local authorities and potentially affected communities.

F-91


Summary and Recommendations

At the current stage of the main study, it is not possible yet to consider detailed impacts associated with site selection as the potential sites under consideration by MoI are not yet fully identified. This ESHS has therefore presented the following:

• A framework of key national and international ESHS legislation and guidance typically applicable to chemical and petrochemical facilities; and,

• A matrix of the key ESHS impacts commonly faced by chemicals facilities and a preliminary summary of commonly applied mitigation options.

As the sector development process proceeds into further feasibility stages and ultimately design and construction, detailed assessments of ESHS aspects will be completed as required. At this stage, the main recommendation of this review at the draft report stage is that a chemicals/petrochemicals sector-specific Strategic Environmental Assessment (SEA) should be undertaken to support the development of the sector and the forthcoming detailed feasibility stage activities. At the national level, the legal framework section of this review identified that, whilst the Ethiopian environmental framework does not specifically mention the term ‘SEA’, it does require an EIA for government programmes and plans, which is effectively SEA. This is consistent with other East African regulatory regimes. At the donor and IFI level, the World Bank states that the Bank: “recognizes SEA as a key means of integrating environmental and social considerations into policies, plans and programs, particularly in sector decision-making and reform. The Bank is committed to promoting the use of SEA as a tool for sustainable development. “SEA is a family of approaches that lie on a continuum. At one end, the focus is on impact analysis, at the other end, on institutional assessment. SEA incorporates environmental considerations across different levels of strategic decision-making: plan, program, and policy.” The African Development Bank (AfDB)’s Environmental and Social Assessment Procedures15 indicate that SEA is an “instrument that assesses environmental and social influences associated with a proposed policy, strategy, plan, or program, particularly those targeting a specific region (regional ESA) or a sector (sector specific ESA)”. The AfDB Integrated Safeguards System – Policy Statement and Operational Safeguards (2013) states that it is: “mandatory to apply [SEA] to address the environmental and social issues arising from “upstream” operations, such as budget support and investment programmes”. In applying its own safeguards to its investment portfolio, it also recognises the need for appropriate type and level of environmental and social assessment: “In addition to the Environmental and Social Impact Assessment (ESIA) for investment projects, the Bank applies [SEA] for its own regional, country and sector strategies”. For a relatively small cost, undertaking an international standard SEA for the development of a chemicals sector in Ethiopia is likely to achieve the following:

15http://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/ENVIRONMENTAL%20AND%20SOCIAL%20ASSESSMENT%20PROCEDURES.pdf

http://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/ENVIRONMENTAL%20AND%20SOCIAL%20ASSESSMENT%20PROCEDURES.pdf


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• Reduce the cost of downstream project level ESIA by removing the need for alternatives assessment; and,

• Provide additional assurance around a key area of reputational risk when the GoE is in discussions with potential DFI sources and development capitalists – a key risk identified in the Industrial Development Strategic Plan.

Whilst an SEA will not completely ‘de-risk’ the proposed sector development from an ESHS perspective (as there will generally be some ‘unknown’ site specific risks), it will allow prospective investors to conduct diligence on the SEA and take significant comfort that risks are well understood and factored in to GoE decisions around potential site selection. It will also demonstrate GoE commitment to achieving international standards in its approach to development and management of key reputational issues, such as social / community impacts and biodiversity protection. Accordingly, we recommend that an SEA is considered as part of the next stage of the GoE/MoI plans to develop the chemicals sector. The cost of an SEA could be reduced by drawing heavily on the legal framework and process-specific ESHS impacts and typical mitigation information provided in this review. Jacobs Consultancy would be pleased to provide a proposal to undertaken an SEA for the chemicals and petrochemicals sector in Ethiopia.

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Section F.

Environmental, Social, Health and Safety Considerations of the PCPMP

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Introduction Overview Jacobs Consultancy has been commissioned by the Government of Ethiopia (GoE), in collaboration with the UK Department for International Development (DFID), to carry out a pre-investment inception study of petrochemical and chemical product investment opportunities (‘the study’), with the ultimate aim of creating a sustainable and internationally competitive petrochemical and chemical product sub-sector in Ethiopia. It is intended by the GoE that the study will help in plans to stimulate private sector development of the market and attract associated foreign direct investment and technical skills. The findings of the study have identified that the following five domestically available raw materials as likely to be the most feasible in developing and sustaining a petrochemical and chemicals industry in Ethiopia:

• Natural Gas — rich in extractable hydrocarbons (ethane, propane, butanes and hexanes) which can be used as a feedstock for a gas fed steam cracker to produce ethylene and other co products. Other gas extracts can also be used to sustain ammonia/urea plants for the fertilizer industry, critical to support continued development of the agricultural sector;

• Potash — together with nitrogen based fertilisers from natural gas, potash could be used in an integrated fertiliser plant to provide a N-P-K (Nitrogen-Phosphate-Potassium) feedstock source;

• Salt — there are adequate reserves of salt available to develop chlor-alkali value chain products, including detergents;

• Soda Ash — soda ash is found in the sodic lake brine of Lake Abiyata and Lake Shala in the central main Ethiopian Rift (Oromia Region). A pilot plant (with 20 kta capacity) is mining soda ash from Lake Abiyata. It is presently used as raw material to manufacture caustic soda in Ziway for detergents, bottles and glass. It is estimated that current levels of soda ash production in Ethiopia is around 3kta and further projects are planned which should ensure abundant availability of soda ash to downstream industries in Ethiopia; and,

• Bioethanol from sugar — supply of bioethanol is likely to increase with the government drive to advance the industry with several new sugar mills under construction. There is likely to be adequate availability to sustain a minimum economic size ethylene production plant (250kt) based on ethanol dehydration process.

In addition to the above domestic sources, another possible consideration may be the import of Naphtha from Sudanese refineries. Table F-1 is a repeat of Table B-56 from the main study and presents the chemicals recommended by the PCPMP for priority and longer term investment in order to establish a sustainable chemicals industry in Ethiopia. It is noted that these represent the findings at the current stage of the study and that the recommended options for feedstocks will be further refined in final phase of the study. The current findings indicate that a petrochemicals industry based on domestic Ethiopian gas may ultimately be likely to be the most feasible option.

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Table F-1: Products Recommended for Investments in Ethiopia

Feedstock Value Chain

Products Recommended

Priority Long Term

Petrochemicals (hydro-carbon derived feedstock)

Ethylene HDPE, LLDPE EO/MEG/EODs, LDPE/EVA Propylene PP PO/ Polyols


Acetyls - Acetic Acid, VAM, PVA Inorganic mineral resource feedstock

Methanol - Methanol, Formaldehyde, MTBE




Other / Misc. Hydrochloric Acid Formic Acid

In order to manufacture these chemicals, it is planned to develop chemical and/or petrochemical plants at appropriately selected sites within the government’s planned industrial parks. The Ministry of Infrastructure (MoI) has indicated that current plans are for new facilities in (initially) up to four locations, as described below under the Project Location section.

Scope of ESHS Review One of the key siting considerations for any new facility is the potential environmental, social, health and safety (ESHS) impacts associated with the construction, operation and ultimately decommissioning of the facility. The study terms of reference were clear that “Safety, health and environmental excellence can be assumed to form part of an effective product stewardship”. Each of the different value chain options will have specific chemical processes with associated ESHS impacts and construction of the associated plants will have broadly similar ESHS impacts. In determining or advocating the ultimately recommended products for development, it is vital to obtain a clear understanding of the potential impacts of each option. As detailed in our proposal, detailed Environmental Impact Analysis and Socio-economic analysis are typically conducted at the full feasibility stage once the investment profile is known with a degree of certainty. At this stage, the intent is to draw attention to the major EHS issues, charting a path forward with recommendations for next steps. Operational safety is typically covered at the licensor/technology selection and finalisation decision point. A high level review of potential ESHS considerations has been undertaken. The review has comprised the following activities:

• Desk based review of processes associated with the production of the current Stage 1 recommended priority chemicals;

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• Site visit to meet with key stakeholders and obtain relevant data;

• Review of identified national ESHS legislation, regulations and guidance, and commonly applied international standards and guidance;

• Production of a matrix of general and sector-specific limits and guideline levels for emissions to air, land and water from national legislation and the above international standards; and,

• Production of this ESHS review in line with the objectives below.

The agreed approach for the review is to provide the following1:

1) A framework of key national and international ESHS legislation and guidance typically applicable to chemical and petrochemical facilities;

2) A matrix of the key ESHS impacts commonly faced by chemicals facilities and a preliminary summary of commonly applied mitigation options. This to include “air emissions, waste water discharge, recycling, solid waste discharge, noise and odour and the treatments for effective control including best practice regulatory frameworks”; and,

3) Recommendations for next steps in the sector development process regarding integration of ESH issues in the planning and associated government/proponent processes.

This EHSH review considers the production process associated with all the potential products in Table F-1.

Project Location and Site Selection Information provided by the MoI on the location and associated details of new industrial parks which are under consideration as potential sites for chemical/petrochemical production facilities is summarised in Table F-2. Table F-2: Information on Proposed Industrial Parks for Chemicals/Petrochemicals Production

Location Labour Consideration

Proximity to Addis Ababa

(km)

Proximity to Port of

Djibouti (km) Industrial Cluster

Land Area (million

m2)

Gelan /Klinto (Kilinto Industrial Park)

Access to high skill labour 6 700

Agro-processing, pharmaceuticals

3

Dire Dawa (Dire Dawa Industrial Park)


Multiple sectors including heavy industries


Adama (Adama Industrial Park)


Equipment manufacturing, textile


Kalub and Ella No information currently identified

1 Due to the delay in identification/provision of actual site location information, this approach was approved by with DFID/GoE by email 09/08/16.

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At the time of writing, information on the actual site locations for these parks and any chemical facilities have not been provided by MoI. Therefore, at this stage, a review of potential site-specific ESHS impacts is beyond the scope of this exercise and this study focusses on ESHS issues associated with the production processes of each of the Stage 1 recommended chemicals. In addition, the following are noted with regard to potential site selection:

• Depending upon the nature of the ultimately recommended priority chemicals developments, it is very possible that the location of the corresponding chemicals production facilities is likely to be tied to the location of the source domestic raw materials, rather than a location selected to fit with pre-existing plans for development of the industrial parks. For example, any gas based petrochemical facility would generally need to be located close to the gas fields. This can have significant implications for the nature of and potential ESHS impacts of relevant associated facilities (e.g. pipelines, power generation and transmission and water supply); and,

• In line with the requirements of the national environmental regulatory requirements and good international industry practice, the development of a new industrial sector should generally undergo Strategic Environmental Assessment (SEA) prior to confirming the potential development sites. This is discussed further in the recommendations of this review.

Legal Framework The Government of Ethiopia is looking to encourage private sector investment to fund the growth of the chemicals / petrochemicals sector. The ultimately proposed facilities must therefore be designed, constructed, operated and decommissioned in accordance with relevant national ESHS laws and guidance, and international standards, including the requirements of international financing institutions. In consideration of the above, this section therefore details the following:

• Identified national institutional and legislative framework for ESHS considerations;

• Typically applied international standards and guidelines2; namely:

o the Equator Principles (III);

o International Finance Corporation (IFC) Performance Standards for Environmental and Social Sustainability (the Performance Standards or PS); and,

o the World Bank Group (WBG) / IFC General and sector-specific Environmental, Health and Safety Guidelines (EHS Guidelines).

• A framework of national and international limits (from the WBG/IFC EHS Guidelines) and/or guideline values for emissions to air, water and land.

2 The WBG/IFC Performance Standards and EHS guidelines have been used as the generally accepted international standards framework. However, it should be noted that dependent upon the makeup of the financing syndicates selected by private sector developers, additional requirements of individual international finance institutions may be applied to a development.

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National ESHS Legal Framework

Institutional Framework

The Ethiopia governmental system is organized into a federal constitutional structure, with a federal government and nine National Regional States governed by the parliamentary system, including (in alphabetical order):

1. Afar National Regional State; 2. Amhara National Regional State; 3. Benshangul/Gumuz National Regional State; 4. Gambela People Regional State; 5. Harari People Regional State; 6. Oromia National Regional State; 7. Somalia National Regional State; 8. The Southern Nations, Nationalities and Peoples Regional State; and 9. Tigray National Regional State.

Regional state governments have line ‘Bureaus’ which reflect the federal ministries. States are divided into 800 Woreda administrative divisions / districts with corresponding local government. Woredas are further sub-divided into Zones and then the smallest unit of local government, known as Kebeles, of which there are approximately 15,000 in Ethiopia. Regional states are organized such that major decisions are made by the Woreda local government. In addition to the regional states, Addis Ababa and Dire Dawa are governed by ‘City Administrations’ under the Federal Government. Ethiopia is a federal parliamentary republic and executive power is exercised by the government. The Prime Minister is head of government and is designated by the winning party following legislative elections. The 1995 constitution provides that the House of People's Representatives determines a Council of Ministers, comprising the Prime Minister, Deputy Prime Minister and various other Ministers or members as required. Administrative Structure This section discusses summarises the national administrative structure relevant to the chemicals/petrochemicals sector and associated ESHS considerations. Key Federal Government ministries relevant to the proposed chemicals sector development are:

• Ministry of Environment and Forestry;

• Ministry of Industry;

• Ministry of Mines; and,

• Ministry of Water, Irrigation and Energy.

Other ministries which would be key stakeholders in the development of chemical production facilities, particularly with regard to ESHS issues are:

• Ethiopian Wildlife Conservation Authority (EWCA);

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• Ethiopian Roads Authority;

• Ministry of Agriculture;

• Ministry of Culture and Tourism;

• Ministry of Federal Affairs;

• Ministry of Finance and Economic Development;

• Ministry of Health;

• Ministry of Labour and Social Affairs;

• Ministry of Trade; and,

• Ministry of Women’s, Children and Youth Affairs.

At the regional state level, State ‘Bureaus’ mirror the federal ministries3 and will be important stakeholders for ESHS consultation as part of the site selection and associated impacts assessment process. These may include, but are not limited to the following:

• Bureau of Agriculture and Rural Development; Bureau of Mines and Energy;

• Bureau of Culture and Tourism;

• Bureau of Environmental Protection, Land Use and Administration;

• Bureau of Finance and Economic Development;

• Bureau of Health;

• Bureau of Labour and Social Affairs;

• Bureau of Trade, Industry;

• Bureau of Water Resources; and,

• Bureau of Women, Children and Youth Affairs.

3 Note that different states may have different Bureau names or Bureaus covering different areas.

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National Environmental Legislation, Regulations, Policies and Plans

Table F-3 summarises the national environmental legal and regulatory conditions identified as relevant for the development of the sector. Table F-3: Environmental and Social Legislation, Regulations, Policies and Plans


1994 Constitution of Ethiopia (adopted in 1995 as Proclamation No. 1/1995, 21 August 1995)

The following key Articles of the Constitution enshrine principles of sustainability and environmental protection: Article 41 (Economic, Social and Cultural Rights) – includes elements around economic rights, equal access to public services, rights for farmers and pastoralists, and freedom to choose livelihoods. It includes the government responsibility to protect and preserve cultural legacies, but does not include any requirements related to other aspects of social protection. Article 43 (Right to Development) – identifies rights to sustainable development and living standards; consultation and participation of affected communities in national developments, and policies/projects which impact specific communities; and, improved capacities for development to meet basic needs. Article 44 (Environmental Rights) – includes rights to a clean environment and for compensation for displacement impacts. Article 92 (Environmental Objectives) – programme design and implementation must not damage the environment; full community consultation must be undertaken for policy/project development; duty of both government and citizens to protect the environment. Article 51 (3) (Powers and responsibilities of the Federal Government and Regional States) – requires establishment of national standards/policy for public health, education, science, technology and protection of cultural heritage and archaeology. [Proclamations No. 33/1992, 41/1993, and No. 4/1995] The following Articles of the Constitution are relevant to land acquisition and potential physical or economic displacement: Article 40 (The Right to Property) (1-7) – provides for the state ownership of all land; free access to land for peasant farmers and for pastoralists, and protection against displacement; right for private investors to obtain land on payment of fees; and, the right to compensation for displacement. Article 40 (8) provides for expropriation. It provides powers for government to acquire land and buildings if beneficial to society, but only on the basis of prior compensation to the land ‘owner’ commensurate to the value of the property (at rates determined in relevant legislation).

Plan for Accelerated and Sustained Development to End Poverty (PASDEP)

PASDEP was the original GoE plan to help achieve the millennium development goals. PASDEP was effectively superseded by the National Growth and Transformation

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(2005/06 to 2009/10); And; National Growth and Transformation Plan (GTP)

Plan (GTP). The GTP sets out medium term growth and investment targets for Ethiopia to achieve the government’s long term development vision. Under GTP I (2010/11 to 2014/15), production of textile and garments, leather products, cement industry, metal and engineering, chemical, pharmaceuticals and agro processing were priority areas for investment. The ongoing second GTP II (2015/16 to 2020/21) strategy is focussed on agricultural-based, manufacturing sector-driven and export-led development. The key strategic directions are small and medium scale industrial development, and large scale industries with special emphasis — all geared to poverty elimination and development. Chemicals and petrochemicals are included in GTP II targets. GTP II also introduced the cluster (or value chain) concept and use of industrial parks to group downstream processing / use of primary chemicals products. Regional bureaus are required to align to national development strategies. The GTP has been a key driver of development in Ethiopia and has underpinned the initial planning for development of the chemicals sector in Ethiopia.

Ethiopian Industrial Development Strategic Plan (2013-2025)

Builds on the PASDEP and GTPs to provide the overall framework in terms of the vision, goal, strategies and programs that need to be implemented in the coming thirteen years in order to support the country’s progress towards becoming a middle-income country by the year 2025. The vision of the plan is given as “building an industrial sector with the highest manufacturing capability in Africa which is diversified, globally competitive, environmentally-friendly, and capable of significantly improving the living standards of the Ethiopian people by the year 2025.” Part 4 of the plan includes manufacturing programme and implementation plans including Priority Sector Expansion Plan and the Industrial Zone Development Plan. The plan highlights a number of risks and barriers to development including the need to attract Foreign Direct Investment, encourage participation of development capitalists (private sector developers) and environmental challenges of certain sectors (e.g. leather tanneries). The development of a petrochemicals industry sector is a key aspect of the Priority Sector Expansion Plan and is a major focus of the main study. Early planning and management of ESHS risks can assist in mitigating some of the risk identified in the plan.

National Environmental Policy of Ethiopia (1997)

Provides the initial framework for environmental protection in Ethiopia with various guiding principles to ensure that environmental and social issues are considered appropriately in the development of programmes and projects.

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The policy requires that project development be done in a way that does not compromise environmental integrity and includes basic requirements for environmental impact assessment including public consultation, and mitigation and monitoring requirements.

Establishment (No. 9/1995) and Re-establishment (No. 295/2002) of the Environmental Protection Authority Institutional Arrangement for Environmental protection (No. 295/2002)

Proclamations covering the establishment and modification of the institutional elements for environmental/social protection and enforcement. See further discussion of the national ESIA process in following sub-section.

Proclamation of Environmental Impact (EIA) Assessment (No. 299/2002)

The EIA Proclamation enshrines EIA as a mandatory requirement for all major projects and government programmes and plans. It defines the basis and procedure for EIA (including proportional studies and consideration of cumulative/transboundary impacts); list of projects subject to full/partial EIA and those which do not require EIA; the relevant EIA determining body; and, the contents of EIA report. An EIA (or ESIA) will be required for all new chemicals production facilities. Whilst the EIA Proclamation does not specifically mention Strategic Environmental Assessment (SEA), it does required EIA for government programmes and plans, which is effectively SEA.

Relevant National Directives and Guidelines for EIA/ESIA

The following national directives and guidelines are relevant to EIA: EIA Directive No. 1/ 2008, A Directive to Determine Projects Subject to Environmental Impact Assessment - lists the various activities that require the undertaking of an EIA. Draft Guideline for Environmental Management Plan for the Identified Sectorial Developments in the Ethiopian Sustainable Development & Poverty Reduction Programme (ESDPRP), May 2004 - outlines the necessary measures for the preparation of an Environmental Management Plan (EMP) for proposed developments in Ethiopia and the institutional arrangements for implementation of EMPs EIA Guideline, July 2000 – provides background to environmental impact assessments and environmental management in Ethiopia. The Federal Environmental Protection Authority, Environmental Assessment Reporting Guide, 2004, Addis Ababa - provides a standardised reporting framework for environmental assessments.

Public Health Proclamation (200/2000) Includes environmental requirements around discharge of untreated effluent and disposal of solid waste, and also occupational health requirements including around safe operation of machinery.

Proclamation on Environmental Pollution Control (No. 300/2002)

Allows the EPA or relevant devolved agency to fine identified polluters and/or shut down, move or enforce requirements for retrospective mitigation controls.

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Solid Waste Management Proclamation (513/2007)

Provides waste collection and management framework including disposal permitting through use of waste management plans written by and implemented throughout the administrative units and promotes community participation.

Prevention of Industrial Pollution Council of Ministries Regulation (159/2008)

Whilst directed at “factories” (which is not clearly defined), parts of this regulation would likely apply to the proposed chemical production plant(s), including requirements for pollution control and emergency response planning and monitoring plan requirements.

Ethiopian Water Sector Policy (2001) Promotes efficient, equitable utilisation of Ethiopian water resources and allows for socioeconomic considerations in development of resources.

Water Resource Management Proclamation (Proclamation No. 197/2000 and Regulation No. 115/2005)

Requires the incorporation of protection and conservation requirements in to planning and development of water resources. Establishes permitting regime for abstractions, discharges and associated construction works. Compliant permit applications are determined by the ‘Supervising Body’ (the Ministry of Energy, Water and Irrigation, or delegated body) in 60 days and are renewable annually with associated fees. Regulation 115/2005 provides further detail on permitting requirements, including process for determination of charges, and specifically includes requirements for permits for effluent discharges to surface and groundwater. Abstraction and discharge permits will be required by the proposed chemical production development(s).

River Basin Councils and Authorities Proclamation (No. 534/2007)

Establishes integrated water resources management for river basins. Designates federal government powers to Basin High Councils and Basin Authorities which ultimately determine permit applications and receive fees.

Cultural Policy of Ethiopia (1997) Determines policy objectives for recognition, protection and conservation of cultural heritage

Proclamation on Research and Conservation of Cultural Heritage (209/2000)

Proclamation 209/2000 provides the framework for application of the 1997 cultural policy through definition of tangible (moveable and immovable) and intangible cultural heritage. Allows for the gazetting of protected areas and a permitting / enforcement framework for activities within such areas, including the requirement to stop work and report any chance finds. Will apply to the proposed chemical facilities planning and construction activities. Also relevant is the Convention for the Safeguarding of the Intangible Cultural Heritage Ratification Proclamation (484/2006) which formalised Ethiopia’s ratification of the convention.

Payment of Compensation for Property Situated on Landholding Expropriated for Public Purposes Regulation (135/2007)

Provides a framework for compensation and livelihood restoration assistance for persons physically or economically displaced by government projects. Will apply to the project if acquisition of land for the

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proposed chemical plant(s) is undertaken by the GoE – e.g. for the formation of the various proposed industrial parks. [It is noted that if private sector developers will develop the chemical facilities as planned, resettlement or displacement activities undertaken by GoE should apply the requirements of IFC PS 5 in addition to national requirements]

Other land acquisition related legislation or regulations

In addition to the relevant articles of the Ethiopian Constitution, the following additional legislation / regulations are applicable: Land administration and Use Proclamation (Proc. 87/1997), replaced by Proclamation 456/2005, which delegates regional states with the power to “enact rural land administration and land use law” consistent with 456/2005. The Expropriation Proclamation 455/2005, articles 3 to 6, describes the process for government land expropriation. Urban Land Lease proclamation (Proc. 721/2011) In addition, many regional states (Tigray, Amhara, Afar, Oromia, Benishangul Gumz and SNNPRS) use regional Rural Land Administration and Use proclamations and urban lands holding lease regulations to implement federal rural and urban land related proclamations.

Labour Proclamation (377/2003), as amended (466/2005) and (494/2004)

Determines requirements on employers for workers’ occupational health and safety protection, working hours (including overtime), roles and responsibilities and penalties for typical offences. This is a key aspect of national health and safety legislation and is discussed further in the health and safety section below.

Additional relevant environmental and social national legislation, guidance or plans

The following may also be relevant to the development of the chemicals sector depending upon the ultimately selected sites: Wildlife Development, Conservation and Utilisation Council of Ministries Regulation (163/2008) - Provides the framework for administration of wildlife conservation areas (National Parks, Wildlife Sanctuaries and Wildlife Reserves) Policy for Rural Development (2003) – guides future development in rural areas, which may be relevant if facilities are located in remote areas close to natural resource development sites. Tourism Development Policy (2009) – bring together various government and private sector actors to policy designed to assist in the development of tourism. May be relevant if the proposed development area is located in an existing or proposed area of tourism interest. The Federal Democratic Republic of Ethiopia Rural Land Administration and Land Use Proclamation (456/2005) – promotes sustainable development of rural areas and natural resources through land use planning. Rights to Employment of Persons with Disability Proclamation (568/2008) – provides framework for equal

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opportunities considerations for disabled persons. Accession to African Human and People’s Rights Charter Proclamation (114/1998) – supports achievement of common basic standards for human rights in Africa. Ethiopia’s Climate-Resilient Green Economy Strategy – set up to identify green economy opportunities to support the Growth and Transformation Plan. Proc 716-2011 Ozone Proclamation – for control of ozone depleting substances. Proc No 542-2007 Forest Proclamation – for the management and conservation of forest resources.

Mining related legislation / guidance The following may be indirectly relevant to chemicals production facilities if these are ultimately tied to raw material extraction (e.g. mining of potash or oil and gas extraction): Mining Operations Proclamation (No. 678/2010), and amendment (802/2013) – including the requirements for EIA and rehabilitation of mining sites. Mining Operations Council of Ministers Regulation (182/1994) and amendments (27/1998) and (124/2006) – covering operational procedures for mines.

Environmental and Social Protection and Enforcement in Ethiopia

The following summary is taken primarily from information provided by the Netherlands Commission for Environmental Assessment4, supplemented by information obtained during stakeholder consultations in Addis Ababa in June 2016:

• In 1995, the Environmental Protection Agency of Ethiopia was established by proclamation No 9/1995. The 1997 environmental policy laid a foundation for environmental management in Ethiopia. It provided for the integration of environment and development at policy, planning and management levels for an improvement of decision-making.

• In 2000, the EPA developed an EIA guideline, which was given a legal basis with the adoption of the EIA Proclamation No. 299 of 2002 by the House of Peoples’ Representatives. EIA then became a legally required procedure. Further, the EPA was re-established through the EPA proclamation No 295/2002 which gave it a legal mandate in EIA. The EIA Proclamation enshrines EIA as a mandatory requirement for all major projects and government programmes and plans. It defines the basis and procedure for EIA (including proportional studies and consideration of cumulative/transboundary impacts).

• Since the EIA Proclamation was adopted, efforts have been made to implement the law by the EPA and the relevant regional environmental organisations, which were themselves established by the Proclamation. An EIA directive under article 5 of the EIA proclamation was issued in 2008. This directive gives a list of projects that require EIA. In 2013, the EPA transitioned into the Ministry for Environmental Protection and Forestry.

• The EIA system is decentralised vertically. The EPA is in charge of EIA at the federal level and decides on EIAs for projects that are likely to produce trans-regional impacts. Regionally, EIA

4 http://www.eia.nl/en/countries/af/ethiopia/eia

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administration is mainly by regional state environmental agencies. Above all, the Environmental Protection Council (EPC) is in place for overseeing and coordinating environmental matters. Powers to evaluate and review EIAs have been delegated to 6 sector institutions mainly; Ministry of Mines and Energy, Ministry of Health, Ministry of Communications and Transport, Ministry of water and energy, Ministry of Trade and Industry, and the Ministry of Agriculture and rural development.

• Ethiopia has developed General EIA guidelines (2000), EIA review guidelines (2003) and EIA procedural guidelines (2003) which elaborate the framework EIA proclamation and provide for the schedules of activities and the level of EIA required as well as roles of various stakeholders. A number of EIA sector based, review and procedural guidelines have also been developed. Examples include guidelines for dams and reservoirs construction, for preparation of EMPs5, for activities dealing with forestry, fertilizer, livestock, fisheries and range management among others.

• The EIA guidelines of 2003 state that the primary purpose of environmental assessment is to ensure that impacts of projects, policy and programs, etc. are adequately and appropriately considered and mitigation measures for adverse significant impacts incorporated when decisions are taken. The guidelines state that EA serves to bring about:

o administrative transparency and accountability;

o public participation in planning and decision taking on development that may affect the communities and their environment; and,

o sustainable development.

Ethiopian National ESIA Process

The ESIA process in Ethiopia is broadly consistent with generally accepted international practice for environmental assessment, following a screening, scoping and ESIA Terms of Reference stages followed by the main ESIA phase. Figure F-1 is taken from the Environmental Impact Assessment Guidelines (Federal Democratic Republic of Ethiopia EPA, 2000):

5 Draft Guideline for Environmental Management Plan for the Identified Sectorial Developments in the Ethiopian Sustainable Development & Poverty Reduction Programme (ESDPRP), May 2004

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Figure F-1: EIA Application Process

Following determination and approval of the ESIA by the Ministry (or relevant sector institution), a proponent will be awarded an EIA licence. There is no currently stipulated determination period for review of the ESIA, which may require public hearings dependent upon the project. However, for planning purposes, a potential project proponent may wish to allow up to twelve months as an indicative target for the ESIA programme6, to allow for the potential need for seasonal surveys and an arbitrary determination period.

6 The process will of course be project- and site-specific, therefore may ultimately require a greater or lesser time period.

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National Legislation, Regulations and Plans for Occupational Health and Safety

Table F-4 presents a summary of identified national legal requirements for occupational health and safety (OHS) in Ethiopia. The information is taken primarily from a 2013 report by the US Department of Labour (USDL)7 and the International Labour Organisation (ILO) OHS Profile for Ethiopia (2006) as the national OHS information obtained during stakeholder consultations in Addis Ababa in June 2016 were only available in Amharic at that time. It is noted that there may be additional national OHS-related requirements which have been implemented since 2011, though none were specifically highlighted to the team during the consultations. Table F-4: Identified National Legal Requirements for Occupational Health and Safety in Ethiopia


1994 Constitution of Ethiopia (1994 – adopted in 1995)

The following key Articles of the Constitution relate to OHS considerations Article 18 includes protection against servitude and compulsory labour. Article 25 covers equal rights and Article 35 addresses gender disparity. Article 36 (1e) Children are entitled to be protected from social or economic exploitation and shall not be employed in or required to perform work that is likely to be hazardous or to interfere with their education or to be harmful to their health or physical, Mental, spiritual, moral or social development. Article 42 (2) provides that workers have the right to reasonable limitation of working hours, to rest, leisure, to periodic leaves with pay, to remuneration for public holidays as well as healthy and safe work environment. Article 89 (8) in relation to economic objectives, it states that, government shall endeavour to protect and promote the health, welfare and living standards of the working population of the country.

The Labour proclamation NO 377/06. This is the main labour law in Ethiopia and includes various requirements around equal opportunities, working hours and fundamental labour conditions, young workers and child labour, and contract preparation. Article 92 covers employer obligations for occupational health and safety, including: The requirement to adhere to conditions in Article 92; Establishment of an OHS officer and safety committee; Provision of personal protective equipment (PPE); Medical examinations as appropriate for new employees; Review and improvement of all work processes to ensure that there will be no negative OHS impacts from undertaking working duties. Article 93 covers worker responsibilities for adhering to the OHS requirements including use of PPE and obey all OHS requirements of the company. Article 177 details the government’s labour inspection

7 Assessment of Ethiopia’s Labor Inspection System, U.S. Department of Labor (Bureau of International Labor Affairs), March 2013



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obligations, including: To ensure the implementation of the provision of the proclamation and other regulations and directives issued in accordance with the proclamation – this is done through the establishment of relevant inspection body and officers; Supervise and ensure that where undertaking are constructed, expanded, renovated or their appliances installed, are not dangerous to the safety and health of workers; and, Prepare training on occupational safety, health and working environment. Articles 178 to 182 provide procedural requirements (effectively a code of conduct) for inspectors and define activities which could be constituted as obstructions to inspections. Other articles cover aspects such as work place accidents and associated compensation (Articles 95-112) and provisions for collective bargaining.

The Occupational Health and Safety Directive (2008)

The OHS Directive is the key instrument supporting the Labour proclamation. It includes employers’ duties, workers duties/rights including organizational requirements such as safety and health policy and PPE. The directive includes provisions on ambient working conditions and certain hazards; specific risk management measures for hazardous materials/activities including chemicals, noise and machinery; and, requirements for recording and notifying occupational accidents and diseases. It provides mandatory conditions on overcrowding, sanitation, fire safety, and [emergency] preparedness.

Other directives supporting the Labour Proclamation

Other supporting directives include: Types of works that are Dangerous to Health and Reproductive Systems of Women Workers (1996/97); Lists of Activities Prohibited for Young Workers (1996/97); and, Safety and Health Committee’s Establishments Directive (2005/2006).

Other National OHS laws or laws with aspects relevant to OHS matters

Public Health Proclamation (200/2000) – provides the framework for public health and sanitation management and enforcement. This includes OHS considerations around operation of machinery and waste handling/disposal. The Pollution Control Proclamation (295/2005) – relevant OHS aspects include assigning appropriate management, control and remedial processes/actions to protect the health and safety of workers. The Environnemental important assessment proclamation (No299 / 2002) – includes the requirement to consider OHS issues. The Radiation protection proclamation (79/ 1993) – covers control of The Invest code proclamation (No 37/1996) – this provides a framework for a type of investment permit that includes the requirement to demonstrate compliance with all relevant laws including OHS requirements. It appears there may be the facility for a permit to be revoked in the absence of evidence of

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compliance. Further information should be sought on this. Pesticide registration and control Decree (No. 20/1990) – provides the framework for safe handling and management of pesticides. The Pension and Social Security for Civil Servants Proclamation No. (345/2003) – allows for invalidity pension for public workers who have occupational accidents.

OHS related policies No specific Ethiopian national OHS policies were identified. USLD report indicates that a draft National OHS policy was to be published in 2012. However, this was not provided during the site visit and could not be identified by web search. The ILO country summary indicates that the Economic Policy of 1992 and National Health Policy of 1993 include a small number of articles which promote workers’ health and safety and the development of OHS systems.

ILO Conventions The current ILO website data8 and information from the USDL report indicates that Ethiopia has ratified 22 ILO conventions to date (with 21 in force), including: all of the fundamental conventions (covering the right to organise and prohibit forced and child labour); A Governance (Priority) Convention on tripartite consultations; 13 of the technical conventions which includes the convention on occupational health and safety requirements. The OSH Convention (Convention No. 155) sets principles for national level government action. It provides definitions, establishes requirements for national policy and specifies the responsibilities of governments, employers and workers. It also provides guidance for developing a well-functioning labour inspectorate.

National OHS Institutional Framework and Implementation

The USDL report indicates that Ethiopia’s Labour Proclamation is partly modelled on the ILO’s Convention on Labour Inspections (No. 81). The competent Federal authority for OHS implementation is the Ministry of Labour and Social Affairs (MOLSA). This is to be achieved in cooperation with unions and workers’/employers’ organisations at national and local level. Also in co-ordination with other lead agencies including various ministries, the EPA, Radiation Protection Authority and the Quality and Standardization Authority. Engagement workers’/employers’ organisations covers regarding inspection visits, implementation of the ideal of the law, provision of training and information pertaining to occupational injuries. The departmental mandate is summarised in the ILO report as “to ensure the legal provisions pertaining Safety, Health and Minimum labour conditions are respected and put in to practices. With regard to OSH in particular the major objective is evaluating and controlling the physical, chemical, psychological, social and technical factors that affect a person at work and working environment. With respect to improvement of working conditions the department has the objective of ensuring the stipulated terms and conditions of labour are respected and maintained in order to bring about peaceful and harmonious labour relations at work places.”

8 http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:102950

http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:102950

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Within MOLSA, corresponding regional Bureaus of Labour and Social Affairs (BOLSA) and city departments in Addis Ababa and Dire Dawa, the inspection and enforcement functions are undertaken by the Department of Occupational Safety, Health and Working Environment which proposes policy and legislation related instruments. The following flow charts taken from the USLD report summarise the institutional organisation in Ethiopia with regard to labour and OHS inspectorates (as of 2013): Figure F-2: Organization at Federal Level within MOLSA

Figure F-3: City and Regional Inspectorates

Worker and Employer Organisations

The ILO report indicates that as of 2006, workers’ representation included the Confederation of Ethiopian Trade Union (consisting of 9 Industrial Federations representing 462 basic trade unions, with ~350,000 workers in total). It was indicated that there were only ‘a few employers’ organisations’ at that time, which formed part of the Ethiopian Employers Federation.

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The USLD report indicates the EEF had 14 member associations as of 2013 and that the Congress of Ethiopian Trade Unions (CETU) is a trade union alliance with over 200,000 members. CETU provides OHS training and co-ordination services. The report states [regarding the CETU] that: “they conduct OSH training, at times with labor inspectorate officials, on worksites for one day or half day sessions and three day sessions for leaders. They report that OSH hazards and violations are common in the private sector. They recently conducted a study that found a significant level of OSH deaths and injuries in construction”. Compliance and Enforcement

The USLD report indicates that compliance and enforcement success as of 2013 was still relatively low. City inspectors in Addis Ababa lacked resources and data and had tried only two cases (winning one) in 8 years, out of a total of 20 filed cases. Information provided for regional inspectorates (Oroma Region) showed greater activity (the Regional Labor Inspectorate had been trying three cases per year at that time), but that inspectors lacked training and equipment to keep up with the increasingly industrial (as opposed to agricultural) work environment, including skills to identify occupational diseases. It was also reported that court judges lacked sufficient awareness of labor laws and the role of inspectors. The report goes on to identify issues with lack of adequate resourcing (both number of inspectors and supporting administration), data management systems (including nature of reporting forms) of the inspection capability. It provides recommendations in the form of a summary of various challenges and associated actions to strengthen the inspection planning, education and outreach, and enforcement capability of the national and regional inspectorate(s). As of the writing it is not clear whether any of the recommendations are implemented. Summary of National OHS Context

The labour and OHS framework in Ethiopia is progressing towards an overall framework which will be in line with good international industry practice. However, as of 2013 there were a number of areas which were identified by the USLD report as requiring action to strengthen the relevant national and regional OHS institutional capacity and operational enforcement capability. The extent to which any of the USLD report’s recommendations have been implemented is not currently clear at the time of writing. For the purposes of this review, it is assumed a transitional implementation period is likely to be ongoing at the time of the proposed development of chemicals installations. It is therefore assumed that to satisfy requirements of international finance institutions and other drivers such as internal investor / shareholder expectations, the proposed private sector chemicals developments will need to apply good international industry practice in developing an integrated environmental, social, health and safety management system in line with the requirements of IFC Performance Standards 1 and 2, ILO requirements and relevant WBG/IFC EHS guidelines (as discussed in the International Standards sections below).

International Standards The Equator Principles III

If the project looks to seek international finance there may be a requirement to meet the requirements of the Equator Principles. The Equator Principles are a voluntary set of standards intended to ensure

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that projects financed by Equator Principle Finance Institutions are developed in a manner which is environmentally and socially responsible. The Equator Principles apply to all new project financings with a total project capital cost in excess of US$10 million or more. There are ten Equator Principles as follows:

• Principle 1: Review and Categorization.

• Principle 2: Social and Environmental Assessment.

• Principle 3: Applicable Social and Environmental Standards.

• Principle 4: Action Plan and Management System.

• Principle 5: Consultation and Disclosure.

• Principle 6: Grievance Mechanism.

• Principle 7: Independent Review.

• Principle 8: Covenants.

• Principle 9: Independent Monitoring and Reporting.

• Principle 10: EPFI Reporting.

For projects located in low income, non-OECD (Organization for Economic Co-operation and Development) countries, such as Ethiopia (according to the World Bank Development Indicators Database), Equator Principle III requires the project to be compliant with the IFC Performance Standards and the corresponding applicable industry-specific EHS Guidelines. The IFC Performance Standards

IFC PS 1: Assessment and Management of Social and Environmental Risks and Impacts


• To identify and evaluate E&S risks and impacts of the project;

• To adopt a mitigation hierarchy to anticipate and avoid, or where avoidance is not possible, minimize, and, where residual impacts remain, compensate/offset for risks and impacts to workers, Affected Communities, and the environment;

• To promote improved environmental and social performance of clients through the effective use of management systems;

• To ensure that grievances from Affected Communities and external communications from other stakeholders are responded to and managed appropriately; and,

• To promote and provide means for adequate engagement with Affected Communities throughout the project cycle on issues that could potentially affect them and to ensure that relevant environmental and social information is disclosed and disseminated.

PS 1 underscores the importance of managing environmental and social (including labour, health, safety, and security) performance throughout the life of the investment. The ESIA process forms the first step of the process to identify and assess the risks.

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Ongoing management of E&S risks through the lifetime of the project is achieved through the implementation of an effective Environmental and Social Management System (ESMS) which allows the project to “plan, do, check, act” regarding E&S risks and outcomes. The ESMS is informed by the findings of the ESIA and remains a live system with various live documents, including the E&S Risk Register and various detailed construction and operational management plans as identified within the Environmental and Social Management Plan (ESMP), which forms part of the ESIA.

The detailed requirements of PS1 are not repeated here, but key elements required as part of and/or that must be considered to inform the ESIA processes are summarised as follows:

• The extent of assessment required should be commensurate with the scale and potential impacts of the projects and the approach taken should be in line with Good International Industry Practice (GIIP);

• PS1 states that “the key process elements of an ESIA generally consist of (i) initial screening of the project and scoping of the assessment process; (ii) examination of alternatives; (iii) stakeholder identification (focusing on those directly affected) and gathering of environmental and social baseline data; (iv) impact identification, prediction, and analysis; (v) generation of mitigation or management measures and actions; (vi) significance of impacts and evaluation of residual impacts; and (vii) documentation of the assessment process (i.e., ESIA report).”

• ESIA should be based on recent environmental and social baseline data9 at an appropriate level of detail and consider all relevant E&S risks including the issues identified in PS2-PS8. It should consider climate change impacts and adaptation opportunities, and transboundary impacts;

• Define the ‘area of influence’ affected by direct or indirect effects of the project, which includes:

o The area directly affected by the project infrastructure and activities; predictable developments caused by the project;

o Indirect impacts on biodiversity/ecosystem services used by Affected Communities;

o Associated facilities10 (e.g. transmission lines); and,

o Cumulative impacts on areas or resources used or directly impacted by the project in addition to those from other existing, planned or reasonably defined developments at the time of the ESIA completion.

• Comply with local legal and planning requirements, including environmental policy, emissions limits, permitting requirements and any strategic environmental assessments. Consider existing (identified) technical studies;

• Implementation of an effective consultation, engagement and disclosure process with stakeholders affected communities. The outcomes of these activities should be considered as appropriate in all aspects of the risk identification and impact assessment process. Where

9 PS1 guidance note states: “Accurate and up-to-date baseline information is essential, as rapidly changing situations, such as in-migration of people in anticipation of a project or development, or lack of data on disadvantaged or vulnerable individuals and groups within an Affected Community, can seriously affect the efficacy of social mitigation measures.” Limitations on data should be clearly identified.” 10 Facilities that are not funded as part of the project and that would not have been constructed or expanded if the project did not exist and without which the project would not be viable

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potentially significant adverse impacts on affected communities are anticipated, a more in-depth process is required, known as Informed Consultation and Participation.

• Consider impacts associated with primary supply chains (including as part of ecosystem services);

• Consideration of business human rights issues;

• Impacts to indigenous peoples, disadvantaged or vulnerable groups, the disabled and gender-differentiated impacts;

• Address emergency preparedness and response, including project personnel, workers and community health and safety.

• Confirm requirements for how the project will establish procedures to monitor and measure the effectiveness of the various actions / mitigation measures defined by the ESIA/ESMP.

IFC Performance Standard 2: Labour and Working Conditions


• To promote the fair treatment, non-discrimination, and equal opportunity of workers.

• To establish, maintain, and improve the worker-management relationship.

• To promote compliance with national employment and labour laws.

• To protect workers, including vulnerable categories of workers such as children, migrant workers, workers engaged by third parties, and workers in the client’s supply chain.

• To promote safe and healthy working conditions, and the health of workers.

• To avoid the use of forced labour.

IFC Performance Standard 3: Resource Efficiency and Pollution Prevention


• To avoid or minimize adverse impacts on human health and the environment by avoiding or minimizing pollution from project activities.

• To promote more sustainable use of resources, including energy and water.

• To reduce project-related GHG emissions.

IFC Performance Standard 4: Community Health, Safety and Security


• To anticipate and avoid adverse impacts on the health and safety of the Affected Community during the project life from both routine and non-routine circumstances.

• To ensure that the safeguarding of personnel and property is carried out in accordance with relevant human rights principles and in a manner that avoids or minimizes risks to the Affected Communities.

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Performance Standard 4 recognizes that project activities, equipment, and infrastructure can increase community exposure to risks and impacts. In addition, communities that are already subjected to impacts from climate change may also experience an acceleration and/or intensification of impacts due to project activities. While acknowledging the public authorities’ role in promoting the health, safety, and security of the public, this Performance Standard addresses the client’s responsibility to avoid or minimize the risks and impacts to community health, safety, and security that may arise from project related-activities, with particular attention to vulnerable groups.

IFC Performance Standard 5: Land Acquisition and Involuntary Resettlement


• To avoid, and when avoidance is not possible, minimize displacement by exploring alternative project designs.

• To avoid forced eviction.

• To anticipate and avoid, or where avoidance is not possible, minimize adverse social and economic impacts from land acquisition or restrictions on land use by (i) providing compensation for loss of assets at replacement cost and (ii) ensuring that resettlement activities are implemented with appropriate disclosure of information, consultation, and the informed participation of those affected.

• To improve or at least restore the livelihoods and standards of living of displaced persons.

Performance Standard 5 recognizes that project-related land acquisition and restrictions on land use can have adverse impacts on communities and persons that use this land. Involuntary resettlement refers both to physical displacement (relocation or loss of shelter) and to economic displacement (loss of assets or access to assets that leads to loss of income sources or other means of livelihood) as a result of project-related land acquisition and/or restrictions on land use. Resettlement is considered involuntary when affected persons or communities do not have the right to refuse land acquisition or restrictions on land use that result in physical or economic displacement. This occurs in cases of (i) lawful expropriation or temporary or permanent restrictions on land use and (ii) negotiated settlements in which the buyer can resort to expropriation or impose legal restrictions on land use if negotiations with the seller fail.

IFC Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources


• To protect and conserve biodiversity.

• To maintain the benefits from ecosystem services.

• To promote the sustainable management of living natural resources through the adoption of practices that integrates conservation needs and development priorities.

Performance Standard 6 recognizes that protecting and conserving biodiversity, maintaining ecosystem services, and sustainably managing living natural resources are fundamental to sustainable development. The requirements set out in this Performance Standard have been guided by the Convention on Biological Diversity, which defines biodiversity as “the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological

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complexes of which they are a part; this includes diversity within species, between species, and of ecosystems.

IFC Performance Standard 7 Indigenous Peoples


• To ensure that the development process fosters full respect for the human rights, dignity, aspirations, culture, and natural resource-based livelihoods of Indigenous Peoples.

• To anticipate and avoid adverse impacts of projects on communities of Indigenous Peoples, or when avoidance is not possible, to minimize and/or compensate for such impacts.

• To promote sustainable development benefits and opportunities for Indigenous Peoples in a culturally appropriate manner.

• To establish and maintain an ongoing relationship based on informed consultation and participation with the Indigenous Peoples affected by a project throughout the project’s life-cycle.

• To ensure the Free, Prior, and Informed Consent of the Affected Communities of Indigenous Peoples when the circumstances described in this Performance Standard are present.

• To respect and preserve the culture, knowledge, and practices of Indigenous Peoples.

Performance Standard 7 recognizes that Indigenous Peoples, as social groups with identities that are distinct from mainstream groups in national societies, are often among the most marginalized and vulnerable segments of the population. In many cases, their economic, social, and legal status limits their capacity to defend their rights to, and interests in, lands and natural and cultural resources, and may restrict their ability to participate in and benefit from development. Indigenous Peoples are particularly vulnerable if their lands and resources are transformed, encroached upon, or significantly degraded. Their languages, cultures, religions, spiritual beliefs, and institutions may also come under threat. As a consequence, Indigenous Peoples may be more vulnerable to the adverse impacts associated with project development than non-indigenous communities. This vulnerability may include loss of identity, culture, and natural resource-based livelihoods, as well as exposure to impoverishment and diseases.

IFC Performance Standard 8: Cultural Heritage


• To protect cultural heritage from the adverse impacts of project activities and support its preservation.

• To promote the equitable sharing of benefits from the use of cultural heritage.

For the purposes of this Performance Standard, cultural heritage refers to (i) tangible forms of cultural heritage, such as tangible moveable or immovable objects, property, sites, structures, or groups of structures, having archaeological (prehistoric), paleontological, historical, cultural, artistic, and religious values; (ii) unique natural features or tangible objects that embody cultural values, such as sacred groves, rocks, lakes, and waterfalls; and (iii) certain instances of intangible forms of culture that are proposed to be used for commercial purposes, such as cultural knowledge, innovations, and practices of communities embodying traditional lifestyles.

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It is important to note that not all of the IFC PS will necessarily apply to a development. During the environmental and social impact identification and assessment process required by PS1, identified site-specific issues will determine which of PS2-PS8 are triggered. Supporting Documentation

The following key documents are amongst a suite of additional material provided by the IFC to support the interpretation and implementation of the requirements of the IFC PS:

• International Finance Corporation’s Guidance Notes: Performance Standards on Environmental and Social Sustainability, dated 1 January 2012.

• Handbook for Preparing a Resettlement Action Plan, published by the IFC Environmental and Social Development Department (undated).

• Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets, published by the IFC, dated May 2007.

• Doing Better Business Through Effective Public Consultation and Disclosure, A Good Practice Manual, published by the IFC (undated).

• Good Practice Notes (GPN) - The IFC has also issued a number of GPN, though not all will be relevant to every project.

The World Bank Group EHS Guidelines

The EHS Guidelines are technical reference documents with general and industry-specific examples of Good International Industry Practice (GIIP). The General EHS Guidelines (2007) are designed to be used together with the relevant Industry Sector EHS Guidelines which provide guidance to users on EHS issues in specific industry sectors. For complex projects such as chemicals projects, use of multiple industry-sector guidelines is necessary. The EHS Guidelines contain the performance levels and measures that are generally considered to be achievable in new facilities by existing technology at reasonable costs. Application of the EHS Guidelines to existing facilities may involve the establishment of site-specific targets, with an appropriate timetable for achieving them. The applicability of the EHS Guidelines should be tailored to the hazards and risks established for each project on the basis of the results of an environmental assessment in which site-specific variables, such as host country context, assimilative capacity of the environment, and other project factors, are taken into account. The applicability of specific technical recommendations should be based on the professional opinion of qualified and experienced persons. When host country regulations differ from the levels and measures presented in the EHS Guidelines, projects are expected to achieve whichever is more stringent. If less stringent levels or measures than those provided in these EHS Guidelines are appropriate, in view of specific project circumstances, a full and detailed justification for any proposed alternatives is needed as part of the site-specific environmental assessment. This justification should demonstrate that the choice for any alternate performance levels is protective of human health and the environment. The relevant sectoral EHS Guidelines applicable to this review in addition to the General EHS Guidelines are:

• IFC EHS Guidelines for Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation, 2007;











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• IFC EHS Guidelines for Large Volume Petroleum Based Organic Chemical Manufacturing, 2007;

• IFC EHS Guidelines for Natural Gas Processing, 2007;

• IFC EHS Guidelines for Nitrogenous Fertiliser Production, 2007;

• Petroleum based Polymers Manufacturing, 2007;

• Pharmaceuticals & Biotechnology Manufacturing, 2007; and,

• Phosphate Fertilizer Manufacturing 2007.

As well as the EHS Guidelines applicable to the chemical production processes, a number of other sector-specific EHS guidelines may apply to additional developments without which the chemical facilities could not be constructed or operate. These developments are known as Associated Facilities, which for a chemicals plant may include for example a power plant, gas pipeline or transmission line. These EHS guidelines are not within the scope of this review, but may need to be considered at the plant development stage and may include:

• Natural Gas Processing 2007;

• On-shore Oil and Gas Development 2007;

• Thermal Power Plants 2008;

• Electric Power Transmission and Distribution 2007;

• Mining 2007;

• Water and Sanitation 2007; and,

• Waste Management Facilities 2007.

International Conventions

Ethiopia has ratified or acceded to a large number of international treaties and conventions, which must be considered as appropriate during the planning and development of the chemicals sector, including in the ESIA process:

• ILO Conventions as discussed above;

• The Stockholm Convention on Persistent Organic Pollutants;

• Convention on Biological Diversity;

• Cartagena Protocol on Bio-safety;

• Montreal Protocol on Substances that Deplete the Ozone Layer;

• The Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade;

• The Basel Convention on the Control of Trans-boundary Movements of Hazardous Waste;

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• Bamako Convention on the ban on the Import into Africa and the Control of Trans-boundary Movement and Management of Hazardous Wastes within Africa;

• Libreville Declaration on Health and Environment in Africa;

• The United Nations Convention on International Trade in Endangered Species (CITES) of Wild Fauna and Flora 1973;

• The United Nations Framework Convention on Climate Change, 1992;

• The United Nations Convention to Combat Desertification in those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa;

• The United Nations Convention for the Safeguarding of the Intangible Cultural Heritage;

• The United Nations Convention on the Protection and Promotion of the Diversity of Cultural Expressions;

• The United Nations Convention Concerning the Protection of World Cultural and National Heritage;

• The Vienna Convention for the Protection of the Ozone Layer; and,

• The United Nations Convention on Biological Diversity (Rio Convention) 1992.

National and International Emissions Standards

The following sections present the identified national and international limits, guideline values or standards that are likely to be applicable to the processes associated with the identified priority chemicals. National limits are taken from the Standards for Industrial Pollution Control in Ethiopia (2003), prepared by the EPA and The United Nations Industrial Development Organization under the Ecologically Sustainable Industrial Development (ESID) Project (US/ETH/99/068/ETHIOPIA). National standards are provided for:

• specified industrial sectors;

• general standards for all other industrial effluents;

• general gaseous emissions; and,

• noise emissions.

The standards are for point source emissions, but there are no requirements regarding control of impacts of emissions on ambient concentrations. International guideline values are taken from the general and sector-specific WBG/IFC EHS Guidelines. The EHS Guidelines contain “performance levels and measures that are generally considered to be achievable in new facilities by existing technology at reasonable costs”. Guidelines are provided for point source emissions and, where relevant, with regard to impacts on ambient concentrations of pollutants. Where appropriate, the detailed notes on interpretation of the guidelines are repeated. The following tables combine relevant national and international standards and/or guideline levels:

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• Table F-5: Emissions to the atmosphere: Industry-Specific Standards (including Annex);

• Table F-6: Emissions to the atmosphere: General Standards for all Other Gaseous Emissions;

• Table F-7: Emissions to the atmosphere - small combustion facilities emissions (3-50 Megawatt thermal, MWth)

• Table F-8: Ambient Air Quality Guidelines;

• Table F-9: Emissions to water: Industry-Specific Standards; and,

• Table F-10: Noise Limits.

Should there be a divergence between the national and international standard, the EHS Guidelines require that more stringent of the two standards is applied unless there is appropriate and scientifically justified argument for a deviation11. It should be noted that the emissions standards provided in the following tables are those identified at the time of writing and the design and project-specific ESIA for the ultimately proposed chemical facilities will need to review the relevant identified standards12 at that time.

11 The General EHS Guidelines state: “Application of the EHS Guidelines to existing facilities may involve the establishment of site-specific targets, with an appropriate timetable for achieving them. The applicability of the EHS Guidelines should be tailored to the hazards and risks established for each project on the basis of the results of an environmental assessment in which site-specific variables, such as host country context, assimilative capacity of the environment, and other project factors, are taken into account” 12 Where there are gaps (i.e. a standard is not available from either the national requirements or the EHS guideline), detailed review of other leading regulatory regimes (e.g. the EU) at design/ESIA stage should be completed to fill these gaps if possible.

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Table F-5: Emissions to the Atmosphere: Industry-Specific Standards






Fertilizer Plant



Ammonia 50 mg/NM3

HCl 30 mg/NM3

NOx 500 nitrophosphate unit 70 mix acid unit mg/NM3

Sulphuric Acid Plant Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation

Sulphur Dioxide (as SO2) 450

2 mg/NM3 kg/t acid

2 kg/t acid

Sulphur Trioxide (as SO3) 60

0.075 mg/NM3 kg/t acid

0.15 kg/t acid

Hydrogen sulphide 5 mg/NM3

NOx 200 mg/NM3

Phosphoric acid plant EHS Guideline: Phosphate Fertilizer Manufacturing and Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation




Ammonia Production EHS Guideline: Nitrogenous Fertilizer Production

Nitrous oxides (as NO2) 1.3 kg

NOx (in flue-gas from the primary reformer) Temp. 273K (0°C), pressure 101.3 kPa (1 atm), oxygen content 3% dry for flue gas.

300 mg/NM3

Sulphur oxides (as SO2) 0.1 kg

Carbon dioxide (as CO2) 500 kg

Carbon monoxide (as CO) 0.03 kg

Ammonia (NH3) (from process, prilling towers, etc.) 50 mg/NM3

Particulate matter (from process, prilling towers, etc.) 50 mg/NM3

Fertilizer Plant


Ammonia 50 mg/NM3

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Amines 5 mg/NM3

PETROCHEMICAL MANUFACTURING


Nitrous oxides (as NO2) 500 mg/NM3

Sulphur dioxide (as SO2) 800 mg/NM3


Benzene 5 mg/NM3, 0.1 ppb at plant fence mg/NM3

1,2-Dichloroethane 5 mg/NM3, 1 ppb at plant fence mg/NM3

Vinyl chloride 5 mg/NM3, 0.4 ppb at plant fence mg/NM3

Chlorine 20 mg/NM3

Ammonia (as NH3) 15 mg/NM3

PESTICIDE MANUFACTURING





PESTICIDE FORMULATION

Total Particulates 10 mg/NM3




PHARMACEUTICAL MANUFACTURING


Active ingredients 0.15 mg/NM3 (each) 0.2 mg/NM3

Organic compounds: (See Annex to Table F5 – following table)

Class I 20 mg/NM3

Class II 100 mg/NM3

Class III 300 mg/NM3

Particulate Matter 20 mg/NM3

Total Organic Carbon 50 mg/NM3

Hazardous Air Pollutants 900-1800 kg/year (Process-based annual mass limit. 900: Actual HAP emissions from the sum of all process vents within a process; 1,800: Actual HAP emissions from the sum of all process vents within processes.)

Total Class A (Applicable when total Class A compounds exceed 100 g/hr)

20 mg/NM3

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Total Class B (Applicable when total Class B compounds, expressed as toluene, exceed the lower of 5 t/year or 2 kg/hr.)

80 mg/NM3

Benzene, Vinyl Chloride, Dichloroethane (each) 1 mg/NM3

VOC: (EU Directive 1999/13/EC. Facilities with solvent consumption > 50 tonnes/year. Higher value (150) to be applied for waste gases from any technique which allows the reuse of the recovered solvent. Fugitive emission values (not including solvent sold as part of products and preparations in a sealed container): 5 percent of solvent input for new facilities and 15 percent for existing facilities. Total solvent emission limit values: 5 percent of solvent input for new facilities and 15 percent for existing facilities.) VOC: (Waste gases from oxidation plants. As 15 minute mean for contained sources)

20-150

50

mg/NM3

Bromides (as HBr) 3 mg/Sm3

Chlorides (as HCl) 30 mg/Sm3

Ammonia 30 mg/Sm3

Arsenic 0.05 mg/Sm3

Ethylene Oxide 0.5 mg/Sm3

Mutagenic Substance 0.05 mg/Sm3



* For Sulfuric Acid Plants and Phosphoric Acids Plants see ‘Sulphuric Acid Plant’ above *

Nitric acid plants

NOx 300 mg/NM3

N2O 800 mg/NM3

NH3 10 mg/NM3



NOx (facilities with total heat input capacity ≤ 300 MWth) NOx (facilities with total heat input capacity > 300 MWth)

150 50

mg/NM3 mg/NM3

SO2 75 mg/NM3

PM10 10 mg/NM3

VOC 150 mg/NM3

CO 100 mg/NM3

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Vinyl chloride (VCM) 80

500 g/t s-PVC g/t e-PVC

Acrylonitrile 5 (15 from dryers) mg/NM3

Ammonia 15 mg/NM3

VOCs 20 mg/NM3


Mercury 0.2 mg/NM3


Dioxins/Furans 0.1 ng TEQ/Nm3


(Dry, 273K (0°C), 101.3kPa (1 atm), 6% O2 for solid fuels; 3% O2 for liquid and gaseous fuels)





Benzene 5 mg/NM3

1,2-Dichloroethane 5 mg/NM3

Vinyl chloride (VCM) 5 mg/NM3

Acrylonitrile 0.5 (incineration)

2 (scrubbing) mg/NM3

Ammonia 15 mg/NM3

VOCs 20 mg/NM3


Mercury and compounds 0.2 mg/NM3


Ethylene 150 mg/NM3

Ethylene oxide 2 mg/m3

Hydrogen cyanide 2 mg/m3

Hydrogen sulphide 5 mg/m3

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Nitrobenzene 5 mg/m3

Organic sulphide and mercaptans 2 mg/m3

Phenols, cresols and Xylols (as Phenol) 10 mg/m3

Caprolactam 0.1 mg/m3

Dioxins/Furans 0.1 mg/NM3

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* Note on interpretation (from National Standards): During Continuous Monitoring: a) No 24 hour mean value shall exceed the emission limit value. b) 97% of all 30 minute mean values taken continuously over an annual period shall not exceed

1.2 times the emission limit value. c) No 30 minute mean value shall exceed twice the emission limit value. d) For Total Organic Carbon (as C) concentration limits, no hourly average value shall exceed 1.5

times the emission limit value. During Non-Continuous Monitoring: e) For flow, no hourly or daily mean value, calculated on the basis of appropriate spot readings,

shall exceed the relevant limit value. f) Mass flow threshold refers to a rate of discharge expressed in units of kg/h, above which

concentration the emission limit value applies. Mass flow threshold rates shall be determined on the basis of a single 30 minute measurement (i.e. the concentration determined as a 30-minute average shall be multiplied by an appropriate measurement of flow and the result shall be expressed in units of kg/h).

g) Mass flow limits shall be calculated on the basis of the concentration, determined as an average over the specified period, multiplied by an appropriate measurement of flow. No value, so determined, shall exceed the mass flow limit value.

h) For all Total Organic Carbon (as C) concentration limits, the average of all readings in one monitoring exercise shall not exceed the emission limit value and no hourly average value shall exceed 1.5 times the emission limit. At least three readings shall be obtained in each monitoring exercise.

i) For all other parameters, no 30 minute mean value shall exceed the emission limit value. The concentration and volume flow limits for emissions to the atmosphere shall be achieved without the introduction of dilution air and shall be based on gas volumes under standard conditions of : ̶ in the case of non-combustion gases, a temperature of 2730K, and a pressure of 101.3

KPa without any correction for oxygen or water content; and ̶ in the case of combustion gases, a temperature 2730K, and a pressure 101.3 KPa of dry

gas with 3% oxygen for liquid and gas fuels, 6% oxygen for solid fuels, and 10% oxygen for thermal oxidisers.

F-36


Annex 1 to Table F-5 – Classification of Organic Chemicals (from National Standards)


Class Substance

Empirical formula

Class Substance

Empirical formula

Class

Acetaldehyde C2H4O I Ethylamine C2H7N I Tetrahydrofuran

C4H8O II

Acetone C3H6O III Ethylbenzene C8H10 II Thioalcohols n/a I

Acrylic acid C3H4O2 I Ethylene glycol

C2H6O2 III Thioether n/a I

Alkyl alcohols n/a III Formaldehyde CH2O I Toluene C7H8 II

Alkyl lead compounds n/a I

2-Furaldehyde

C5H4O2 I


C2H3Cl3 II

Formic Acid CH2O2 I Furfuryl alcohol

C5H6O6 II


C2H3Cl3 I

Aniline C6H7N I

4-Hydroxy-4-methyl-2-pentanone

C6H12O2 III

Trichlorethylene

C2HCl3 II

Biphenyl C12H10 I

2,2-Iminodiethanol

C4H11NO2 II

Trichlormethane CHCl3 I

2-Butanon C4H8O III Isopropenylbenzene C9H10 II

Trichlorphenols

C6H3OCl3 I

2-Butoxyethanol C6H14O2 II Isopropylbenzene C9H12 II

Triethylamine

C6H15N I

Butyl acetate C6H12O2 III Carbon disulphide CS2 II

Trichlorfluormethane CCl3F III

Butyric aldehyde C4H8O II Cresols C7H8O I Trimethylbenzenes C9H12 II

Chloracetaldehyde C2H3ClO I

Maleic anhydride

C4H2O3 I Vinyl acetate

C4H6O2 II

Chlorbenzene C6H5Cl II

2-Methoxyethanol

C3H8O2 II

Xylenols (except 2,4-Xylenol)

C8H10O I

2-Chlor-1,3-Butadiene C4H5C1 II

Methyl acetate

C3H6O2 II 2,4-Xylenol

C8H10O II

Chloroacetic acid C2H3C1O2 I

Methyl acrylate

C4H6O2 I Xylenes C8H10 II

Chloroethane C2H5Cl III Methylamine CH5N I

Chloromethane CH3Cl I Methyl benzoate

C8H8O2 III

2-Chlorpropane C3H7Cl II Methylcyclohexanons

C7H12O II

α - Chlorotoluene C7H7Cl I

Methyl formate

C2H4O2 II

Cyclohexanone C6H10O II Methyl C5H8O II

F-37



Class Substance

Empirical formula

Class Substance

Empirical formula

Class

methacrylate 2

Dibutylether C8H18O III 4-Methyl-2-pentanone

C6H12O III

1,2-Dichlorbenzene C6H4Cl2 I

4-Methyl-m-phenylendiisocyanate

C9H6N2O2 I

1,4-Dichlorbenzne C6H4Cl2 II

N-Methylpyrrolidone

C5H9NO III

Dichlorodifluoromethane CCl2F2 III Naphthalene C10H8 II

1,1-Dichlorethane C2H4Cl2 II Nitrobenzene

C6H5NO2 I

1,1-Dichlorethylene C2H2Cl2 I Nitrocresols

C7H7NO3 I

1,2-Dichlorethylene C2H2Cl2 III Nitrophenols

C6H5NO3 I

Dichloromethane CH2Cl2 III Nitrotoluene C7H7NO2 I

Dichlorophenol C6H4Cl2O I Olefin hydrocarbons n/a III

Diethylamine C4H11N I Paraffin hydrocarbons n/a III

Diethylether C4H10O III Phenol C6H6O I Di-(2-ethylhexyl)-phthalate C24H38O4 II Pinenes

C10H16 III

Diisopropyl ether C6H14O III 2-Propenal C3H4O I

Dimethylamine C2H7N I Propionaldehyde C3H6O II

Dimethyl ether C2H6O III Propionic acid C3H6O2 II

N,N-Dimethylformamide C3H7NO II Pyridine C5H5N I

2,6-Dimethylheptan-4-on C7H14O II Styrene C8H8 II

1,4-Dioxan C4H8O2 I

1,1,2,2-Tetrachlorethane

C2H2Cl4 I

Acetic Acid C2H4O2 II Tetrachloroethylene C2Cl4 II

2-Ethoxyethanol C4H10O2 II Tetrachloromethane CCl4 I

Ethyl acetate C4H8O2 III Tetrahydrofur C4H8O II

F-38



Class Substance

Empirical formula

Class Substance

Empirical formula

Class

an

F-39


Table F-6: Emissions to the atmosphere: General Standards for all Other Gaseous Emissions



Guidelines)


Ethiopia)


General EHS: Air Emissions and Ambient Air Quality (WHO Ambient Air Quality Guidelines)

GENERAL STANDARDS FOR ALL OTHER GASEOUS EMISSION Applicability: these emission limits from stationary sources represent the maximum allowable levels of pollutant from a site, process, stack, vent, etc.

PARTICULATE MATTER

Total dust

mass flow 2 kg/h

mass concentration 100 mg/NM3

Inorganic particulate matter

Class I:

Mercury and its compounds, as Hg

0.5 mg/NM3

Thallium and its compounds, as Tl

Class II:

Lead and its compounds, as Pb

10 mg/NM3

Cobalt and its compounds, as Co


Selenium and its compounds, as Se

Tellurium and its compounds, as Te

Class III:

Antimony and its compounds, as Sb

20 mg/NM3

Chromium and its

F-40




Guidelines)


Ethiopia)


compounds, as Cr

Easily soluble cyanides (e.g. NaCN), as CN

Easily soluble fluorides (e.g. NaF), as F

Copper and its compounds, as Cu

Manganese and its compounds, as Mn

Vanadium and its compounds, as V

Tin and its compounds, as Sn

INORGANIC GASEOUS SUBSTANCES

Class I:

Arsine

5 mg/NM3 Cyanogen chloride

Phosgene

Phosphine

Class II:

Bromine and its gaseous compounds, as HBr

30 mg/NM3

Chlorine

Hydrocyanic acid

Fluorine and its gaseous compounds, as HF

Hydrogen sulphide

Class III:

Ammonia Not stated

mg/NM3 Gaseous inorganic compounds of chlorine, unless included in class I or

Not stated

F-41




Guidelines)


Ethiopia)


class II, as HCl

Class IV:


3500 mg/NM3 Nitrogen oxides (nitrogen monoxide and nitrogen dioxide), as NO2

ORGANIC GASEOUS SUBSTANCES

(See tab: Annex 1)

Class I: 50 mg/NM3

Class II: 200 mg/NM3

Class III: 300 mg/NM3

CARCINOGENIC SUBSTANCES

Carcinogenic Chemicals

Class I:

Arsenic and its compounds, as As

0.5 mg/NM3

Benzo(a)pyrene

Cadmium and its compounds, as Cd

Water-soluble compounds of cobalt, as Co

Chromium (VI) compounds, as Cr

Class II:

Acrylamide

5 mg/NM3

Acrylonitrile

Dinitrotoluenes

Ethylene oxide


F-42




Guidelines)


Ethiopia)


4-vinyl-1,2-cyclohexene-diepoxy

Class III:

Benzene

10 mg/NM3

Bromoethane

1,3-Butadiene

1,2-Dichloroethane

1,2-Propylene oxide (1,2-epoxy propane)

Styrene oxide

o-Toluidine

Trichloroethene

Carcinogenic Fibres (may not be exceeded in waste gas emissions)

Asbestos fibres (e.g. chrysotile, crocidolite, amosite)

1x104 fibres/m³

Biopersistent ceramic fibres (e.g. consisting of aluminium silicate, aluminium oxide, silicon carbide, potassium titanate)

1.5x104 fibres/m³

Biopersistent mineral fibres

5x104 fibres/m³

MUTAGENIC SUBSTANCES OR PREPARATIONS

mass concentration <0.5 mg/Nm³

EMISSION LIMITS FROM COMBUSTION SOURCES

Total particulates

Coal 500 mg/NM3

Fuel oil 250 mg/NM3

Gas 50 mg/NM3

Nitrogen oxides (as NO2)

Coal 700 mg/NM3

Fuel oil 1000 mg/NM3

Gas 400 mg/NM3

F-43




Guidelines)


Ethiopia)


Sulphur oxides (as SO2)

Coal 4300 mg/NM3

Fuel 5100 mg/NM3

Gas 100 mg/NM3

Carbon monoxide 150 mg/NM3

Smoke 2 units on the Ringleman scale

STANDARDS FOR MOTOR VEHICLE EXHAUST

General EHS: Air Emissions and Ambient Air Quality

Smoke (to be compared with Ringlemann Chart at a distance of 6 meters or more) Emissions from on-road and off-road

vehicles should comply with national or regional programs.

2

units on the Ringlemann Scale during engine acceleration mode

Carbon monoxide (under idling conditions: non dispersive infrared detection through gas analyser)

New Vehicles: 4.5 Used Vehicles: 6

% of the exhaust volume % of the exhaust volume

ODOUR

Highly odourous substances

Guidance to manage and minimise nuisance and noxious odours are provided in industry guidance. No limits are detailed.

No specific limits are detailed, but the following guidance is provided:

Where an installation is likely to emit highly odourous substances during normal operation or operational malfunctions, appropriate emission control measures shall be applied, e.g. enclosure of all or part of the installation, operation under negative pressure with off gasses directed to appropriate odour abatement technologies. Adequate provision shall be made for raw materials and products to ensure minimization of odorous emissions. Highly odourous waste gasses shall be fed to waste gas purification

F-44




Guidelines)


Ethiopia)


installations, which are appropriate for abatement of the odorous substance. When defining the abatement requirements for individual cases, particular consideration shall be given to waste gas volume and mass flow of highly odourous substances, local propagation conditions, the duration of emission, and the distance of the installations from the nearest existing or planned residential area. If it is not possible to identify or quantify the odorous properties of an emission based upon the amount or properties of substances contained in the emission, e.g. total quantity of amines or hydrogen sulphide, the odour characteristics of the off gas shall be established through olfactometry. For odour figures above 100,000 OU/Nm3 it is possible to reach odour reduction values of more than 99% through utilizing waste purification facilities such as biological or chemical scrubbers or biofilters.

F-45


Table F-7: Emissions to the atmosphere - small combustion facilities emissions (3-50 Megawatt thermal, MWth)

Air Emissions International standard (in mg/Nm3 or as indicated)

(Source: EHS General Guidelines)

Combustion Technology / Fuel Particulate Matter (PM) Sulphur Dioxide (SO2) Nitrogen Oxides (NOx) Dry Gas, Excess O2 Content (%)

Engine

Gas N/A N/A 200 (Spark Ignition) 400 (Dual Fuel) 1,600 (Compression Ignition)

15

Liquid

50 or up to 100 if justified by project-specific considerations (e.g. Economic feasibility of using lower ash content fuel, or adding secondary treatment to meet 50, and available environmental capacity of the site)

1.5 percent Sulphur or up to 3.0 percent Sulphur if justified by project specific considerations (e.g. Economic feasibility of using lower S content fuel, or adding secondary treatment to meet levels of using 1.5 percent Sulphur, and available environmental capacity of the site)

If bore size diameter [mm] < 400: 1460 (or up to 1,600 if justified to maintain high energy efficiency.) If bore size diameter [mm] > or = 400: 1,850

15

Turbine Natural Gas =3MWth to < 15MWth

N/A N/A 42 ppm (Electric generation) 100 ppm (Mechanical drive) 15

Natural Gas =15MWth to < 50MWth N/A N/A 25 ppm 15


0.5 percent Sulphur or lower percent Sulphur (e.g. 0.2 percent Sulphur) if commercially available without significant excess fuel cost

96 ppm (Electric generation) 150 ppm (Mechanical drive) 15


0.5% S or lower % S (0.2%S) if commercially available without significant excess fuel cost

74 ppm 15

Boiler Gas N/A N/A 320 3 Liquid 50 or up to 150 if justified by environmental assessment 2000 460 3 Solid 50 or up to 150 if justified by environmental assessment 2000 650 6 * Note on interpretation: N/A - no emissions guideline; Higher performance levels than these in the Table should be applicable to facilities located in urban / industrial areas with degraded airsheds or close to ecologically sensitive areas where more stringent emissions controls may be needed.; MWth is heat input on HHV basis; Solid fuels include biomass; Nm3 is at one atmosphere pressure, 0°C.; MWth category is to apply to the entire facility consisting of multiple units that are reasonably considered to be emitted from a common stack except for NOx and PM limits for turbines and boilers. Guidelines values apply to facilities operating more than 500 hours per year with an annual capacity utilization factor of more than 30 percent. Plants firing a mixture of fuels should compare emissions performance with these guidelines based on the sum of the relative contribution of each applied fuel.

F-46


Table F-8: Ambient Air Quality


International standard (Source: WHO Ambient Air Quality Guidelines13 – repeated from EHS General Guidelines*)

Limit Unit


24 hour Interim target 1: 125


10 minute Guideline: 500

µg/m3

Nitrogen oxides (nitrogen monoxide and nitrogen dioxide), as NO2

1 year: Guideline 40

1 hour: Guideline 200

µg/m3

PM10





µg/m3

PM2.5




Interim target 3: 37.5 Guideline: 25

µg/m3

Other: Ozone 8-hour daily maximum


µg/m3

13 World Health Organization (WHO). Air Quality Guidelines Global Update, 2005.

F-47


Notes on Ambient Air Quality Guidelines: Projects with significant sources14 of air emissions, and potential for significant impacts to ambient air quality, should prevent or minimize impacts by ensuring that: 1) Emissions do not result in pollutant concentrations that reach or exceed relevant ambient quality guidelines and standards by applying national legislated standards, or in their absence, the current WHO Air Quality Guidelines (as detailed in Table F6), or other internationally recognized sources*; and 2) Emissions do not contribute a significant portion to the attainment of relevant ambient air quality guidelines or standards. As a general rule, the EHS General Guideline suggests 25% of the applicable air quality standards to allow additional, future sustainable development in the same airshed. *The WBG General EHS Guidelines refer to the WHO guidelines (2005). However, it is important to note that the guidelines allow the application of other internationally recognized sources. This can in some circumstances permit the use of alternate guideline/limit values than those provided above.

14 Significant sources of point and fugitive emissions are defined as “general sources which can contribute a net emissions increase of one or more of the following pollutants within a given airshed”: PM10: 50 tons per year (tpy); NOx: 500tpy; SO2: 500tpy; and combustion sources with an equivalent heat input of 50 MWth or greater



Table F-9: Emissions to water: Industry-Specific Standards







Temperature 40 °C

pH 6 - 9 S.U. 6 - 9 S.U. Suspended solids 50 mg/l 50 mg/l

Total phosphorus (as P) 5 mg/l 5 mg/l

Fluorides (as F) 20

0.03 2

mg/l kg/ton NPK kg/ton phosphorus oxide (P2O5)

50 mg/l

Cadmium (as Cd) 1 mg/l


Ammonium Sulphate Plant Temperature 40 °C 40 °C pH 6 - 9 S.U. 6 - 9 S.U. Total nitrogen (as N) 150 mg/l BOD5 at 20°C 50 mg/l Suspended solids 50 mg/l Phosphorus (as P) 10 mg/l Phenols 1 mg/l Total heavy metals 1 mg/l All plants Temperature increase <3 °C pH 6 - 9 S.U. Ammonia plants NH3 5 mg/l Total nitrogen 15 mg/l TSS 30 mg/l Nitric Acid plants NH3 5 mg/l Total nitrogen 15 mg/l TSS 30 mg/l Urea plants Urea (prilling/granulation) 1 mg urea/l NH3 (prilling/granulation) 5 mg/l AN / CAN plants AN 100 mg/l NH3 5 mg/l Total nitrogen 15 mg/l