‘Manufacturers can save over 30 per cent in energy cost with diesel-to-gas migration’

Deepak Khilnani is the Chief Executive Officer of Clean Energy Group. In this interview with FEMI ADEKOYA, he speaks on challenges in the Nigerian energy and real sectors, the need to encourage a migration to clean and sustainable energy and what government must do to address the challenges. Excerpts.

WHAT is the business of Clean Energy Group here in Nigeria?
We are pioneers in the clean energy business, we came to Nigeria in the late 90s and we started to develop the utilisation of gas. As you know, Nigeria has abundance of gas. Much of it unfortunately, is flared and wasted which is a waste of money but it also very damaging to the environment. Hitherto, everybody was relying on diesel and diesel has many disadvantages. It is dirty, expensive and imported.

So when you have a natural resource in a country, why should you bring diesel from outside. So we started to develop our business and our business has grown, we have some very good partnership and relationships in Nigeria which has enable us to grow our business and there is a significant demand for connecting the dots. So the gas is there, our demand is there, how do you deliver that?
One thing is very important to note; the cost of generation of power from gas is less than cost the half of diesel.

You will be aware that many organisations, people at homes have diesel generators. This actually delivers a very significant impact to the economy. When a company can have low empty cost, it can make more profit, pay debts and employ people that can pay their salaries and can meet their supplications. Many companies have shut down because of the expensive energy cost. So this is something we are focusing on.

How much can be saved if there is a migration from diesel to gas; considering the rising demand in the industrial sector?
This is something that we pioneered in Nigeria. We started construction in 2007 and in 2009, we commissioned the first plant. Today we have made more than 50,000 deliveries of gas by tanker and the concept is very simple. Natural gas is very voluminous, it’s like air. So you can either transport in a pipeline but then there is constraint in building the pipelines.

The other alternative is to compress the gas, put it in a tanker to deliver it to areas that are not connected by the pipelines and we have pioneered that business successfully. There are a number of other companies who have followed and done the same thing. Nigeria now has a good coverage of gas broader than where those pipelines are reaching.

In terms of cost, generally when you compare the pipeline gas to diesel generation. The cost can be half, when you have to compress the gas and transport it and you had some cost for the compression and transportation and in that case, the cost maybe 30 percent cheaper than diesel cost.

Why do you think many manufacturing firms are still fixated on diesel consumption, rather than switch into gas?
As I said earlier, there is a very big market place out there. And there are not many companies that can meet all the demand of all the people. This is a very capital intensive business. We have invested as a group over $220 million in Nigeria. We have a similar amount to invest in the next three years.

That is a lot of resource. Maybe to reach all the customers and all the industries, it will take several millions of dollars of investment. As I mentioned that other companies are coming into the field, investment will increase, and you will see more and more companies switching over to using natural gas.

We have done a number of projects in the power sector. We have nine projects that are currently running, and we have seven under development. On the gas side, we have two projects running and we have three under construction. As far as location is concerned, there are projects in Ota , Abeokuta, Agbara and Lagos. There are a number of projects in Lagos. Then in the East, we have a project in Port-Harcourt, Aba and Port-Harcourt.

What would you say are the challenges of doing business in Nigeria for a foreign investor?
Challenges in business are everywhere. Specifically in Nigeria, the availability of finance is always an issue, and money is very expensive in Nigeria. Exchange rates are high. All our projects are capital intensive. We have invested in substantial amount of equities for the last few years that we have been working. That is certainly a challenge that we have. Sometimes the road traffic is a little bit of challenge. By and large, I believe Nigeria to be very dynamic and exciting place to do business. We overcome the challenges as they arise.

What is your assessment of government’s efforts towards power generation and distribution? Do you think government is towing the right line in terms of privatization of the transmission generation lines?
Yes, absolutely. I think not everything has gone has quickly as we all would have liked it to happen. But I strongly believe that government is much on the right path particularly now with the new government. They are taking things very seriously to compress the timelines to achieve the objectives that have been laid down.

I think you are already seeing the changes. But they say the distribution companies are performing better now as power availability is better. Things are definitely getting better; you will see. I believe over the coming months, the national generation will continue to rise. So I do believe the government is taking very proactive step to ensure that the privatisation and the growth of generation, transmission and distribution continue in a sustainable way.

Gas flaring remains a major concern in Nigeria. What do you think government is not doing right about addressing the issue?
The problem is not so much to be put at the door of the government. The problem is actually the technical considerations. If you are producing oil, often you would produce associated gas. What can you do with that gas when the oil comes out? You have three options: One is re-injection into the firm that is not always technically possible. The second option is- you flare it, for safety. Otherwise if you just allow the gas to float up into the atmosphere, it is poison.

The third is to use it. And what our business has been about, right from the beginning and continues to be on the basis is of the utilization of domestic, natural gas. And once that grows, you will find that the flaring will reduce substantially. All government can do, or say to all companies ‘is, “we will fine you” but, if they fine them and the flaring is still happening, then they can shut them down. But when you shut them down, the oil production stops. So actually, I do not put the problem at the door of government. Actually, the only real sustainable solution is to have a utilization of natural gas.

How have you been able to cope with competition in the industry and what is your relationship with local investors?
We have lots of competition in Nigeria, especially over the years as how businesses have grown. We are pioneers. We were the first in the compression of natural gas. We were the first with the IPP model supplying power to industries on gas. However, there is a lot of demand in Nigeria. It is a dynamic market place, there is availability of gas to spread. With more people harnessing the opportunity in the sector, there have been new entrants.

There are so many good companies now; both local companies and international companies are coming into the field. I think it is also a very positive step because the only way you can stop gas flaring is by using gas and by creating demand. For us, the market is huge, even today in our wildest dream; we can only serve a small proportion of the market. So we are not selfish people. The more closer they come the more better they would be and it would grow the business as far as competition is concerned.

CSR is very dear to our heart. It is embedded as part of our DNA. Corporate wise and internally, it is very important to give back. God has blessed us, he has made us very fortunate for what we have and we need to give back. Within the corporate sector, we have significant ongoing CSR. This is not just about giving money, it is not about the company giving out a proportion of its resource. Of course you have to put money and give money for project but if you look and see within our organisation in Nigeria, the real measure of our CSR achievement is what is we called employee engagement and over 60 percent of our employees actively participate.  Apart from the philanthropic side, CSR is very good for business because you have to work with your communities regardless of your location. Cooperation with the communities is an important part of our business; we are very engaged in that process.

Having been in this business since the 90s, how would you rate your impact in the gas sector?
Nigeria is probably the most dynamic country on the continent. Dynamic in the sense that there is a lot of demand, the population has grown and the industry has grown, requirement for electricity has also grown substantially. My dealings with the Nigerian people have always been positive. Of course there have been many changes, some things have not improved, by and large, the country moves forward and I am very optimistic about the direction Nigeria is going.

What is your work force like? How many Nigerians are working for you?
A substantive part of not only our work force but our management is Nigeria. We strongly believe in that. As I said earlier, we have a very capable and smart potential work force so we made it a policy to recruit as much as we possibly can. Certain technical expertise and specialties and all that, we have to recruit from oversees. But we provide training and all that, and we develop local competence in that respect.

In terms of the number, I think we are a little over 300 at the moment. But that work force is expanding very rapidly because of all the projects that are under construction. I expect within two years, that work force will rise over a thousand in terms of what we are doing. These are genuinely skilled workforce. It is not unskilled. These are engineered and technicians and all that, because we are dealing with high-tech equipment.

Sometimes back, it was reported that you were having issues with your local partners. What are the issues?
The issues that we have been having are of a commercial nature. They are commercial disputes that arose as a result of our business interactions. We have tried to settle them in a normal way that companies and management settle those issues, but unfortunately, we have not succeeded in doing that. Three years ago, civil litigation was commenced and that is currently going through the Federal High Court. We are following the due process of law, and very happy to go by whatever judgment that the court might come to. As far as that is concerned, that is a civil matter, and it continues to be a civil matter.

Unfortunately, some of the litigants decided that they will try and push this matter using some of the agencies of state, specifically the police. Perhaps, part of that was to put pressure on us. But one thing I want you to be very clear about is; I am not the owner of this business. I work in this business. I may be the Chief Executive but I work in this business and I am accountable to my shareholders. It is not me that will say, ‘I will give you this, I will give you that’.

Again they introduced the aspect of police investigation into several allegations. The police have investigated that matter, and they have confirmed that there is no criminal activity involved in our dispute. The police advised that the matter was purely a civil one and that we should resolve our issues. Unfortunately, the rest you would have read on the pages of newspapers. I am surprised that the Directorate of Public Prosecution decided to initiate criminal charges on the matter. To this day, I have not received a notice to appear in the court. If I receive a notice to appear in the court, I would be more than happy to do so. And the suggestions that ‘I am running away from Nigeria is untrue. I am sitting down here in front of you. I am not only here to meet you, I am here to continue to do the business that we do here in this country.

I have full confidence in the Nigerian Justice system because despite the allegations people can make, at the end of the day, there is a judicial system. I have full faith in the Nigeria judicial system. I say that unequivocally. And because, I have that faith, we will continue to invest. Understand one thing; what you see here, this does not happen only in Nigeria. Government has set up the courts for the purpose of resolving disputes. The same government has also set up the police to investigate crime. If the police investigate crime, and find out that there is no criminal activity, then, they have done their job.