Nigeria wastes much of its natural gas –Khilnani

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Mr. Deepak Khilnani is the Chief Executive Officer of Clean Energy Group. He tells OYETUNJI ABIOYE the challenges facing Nigeria’s energy sector and what the government must do to address them

What is the business of Clean Energy Group here in Nigeria?

When you talk about clean energy in Nigeria, we are the pioneers of the business. We first came into Nigeria in the late 90s and started to develop the utilisation of gas. As you know, Nigeria has natural gas in abundance. Unfortunately, much of it is flared and wasted. This is not only a waste of money, but also a great damage to the environment. Back then, everybody was relying on diesel, and diesel has many disadvantages. It is a dirty fuel, expensive and mostly imported. We wondered why anyone would have so much natural resource and still be bringing in diesel from outside. So, we started to develop our business, and it has really grown over the years. So far, we have some very good partnerships in Nigeria that has enabled us to grow our business. I must say that there is still a significant demand for connecting the dots. The gas is there, the demand is there, but how do you match both? I must emphasise the fact that the cost of power generation from gas is less than half the cost of diesel generation. You should be aware that many organisations, homes, people have diesel generators. So this actually delivers a very significant impact to the economy. When a company can have low relative cost, it can make more profit, pay more tax, employ more people and pay their salaries. Many companies have shut down because of expensive energy cost, so this is something we are focused on.

You talked about saving cost as a result of low energy and cooking energy. How do you ensure that Nigerians are able to access cooking gas?

Through compressed natural gas. This is something that we pioneered in Nigeria; we built the first plant. 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 our tanker. The concept is very simple: Natural gas is very voluminous; it is like air. You can transport it through the pipelines. The other alternative is to compress the gas, put it in the tanker and deliver it to areas which are not connected by pipeline. We have pioneered this second process very successfully. There are a number of other companies who have followed and are now doing the same thing. Nigeria now has good coverage of gas, broader than where the pipelines are reaching.

In terms of cost, how would you compare gas and diesel disparities?

In terms of cost, when you compare the pipeline gas to diesel generation, the cost can be half. When you have to compress the gas, and transport it, then you add some cost for the compression and transportation. In that case, the cost may be 30 per cent cheaper than diesel cost. This is still a very substantial saving.

Looking at the government’s effort at power generation and distribution, do you think they are taking the right path in terms of privatisation of the transmission and generation lines?

In a short answer, absolutely yes! I think everything might not have gone as quickly as we would have liked it to happen, but I strongly believe that the government is very much on the right path, particularly now with the new government. They are taking things very seriously to compress the timeline to achieve the objectives that were laid down. So I think you would see, and you are already seeing that power availability is much better. One solo does not make a summary as they say, but things are definitely getting better. I believe that power generation will continue to rise. I believe that the present government is taking very proactive steps to ensure that the privatisation and the growth of generation and transmission and distribution continue in a sustainable way.

Gas flaring is a major concern in Nigeria. What do you think the government is not doing right about stopping it?

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, which is not always technically possible. The second option is to flare it, for safety reason; 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 the utilisation of domestic, natural gas. And once that grows, you will find that the flaring will reduce substantially. All the government could 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, oil production stops. So, I do not put the problem at the door of the government. Actually, the only real sustainable solution is to encourage the utilisation of natural gas.

What is your relationship with local partners in the energy sector?

We have a serious competition in Nigeria. When we first came, we were the pioneers. We were the first to compress natural gas. We were the first with the IPP model of supplying power to industries on gas. However, as I said, there is a lot of demand in Nigeria; it is a dynamic marketplace, and there is availability of gas. As that availability of gas has spread and people have seen the advantage, more companies have come into the field. There are more Nigerian companies and reputable international companies in the field now, which I think it’s a positive step. Positive in the sense that, like I said earlier, the only way you can reduce flaring is by using gas, by creating demand. For me, I’m happy about it. The market is huge. Even today, in our wildest dreams, we have not touched half of the market share. We are not selfish people; we are not saying it should only be for us. The fact that more players have come, the better the understanding and appreciation there would be, and this would grow business.

Why do you think many manufacturing firms are still fixated on diesel consumption, rather than switch to gas?

As I said earlier, there is a very big marketplace out there. And there are not many companies that can meet the demand of all the people. This is a very capital-intensive business. We have invested, as a group, over $220m in Nigeria. We have a similar amount to invest in the next three years. That is a lot of money. Maybe to reach all the customers and all the industries, it will take several million of dollars of investment. As I mentioned that other companies are coming into the field, investments will increase, and you will see more and more companies switching over to using natural gas.

What are the projects you have carried out or done in Nigeria so far?

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 and Aba.

What is your workforce like? How many Nigerians are working for you?

A substantive part of not only our workforce, but also our management, are from Nigeria. We strongly believe in that. As I said earlier, we have a very capable and smart potential workforce, so we made it a policy to recruit as many as we possibly can. Due to certain technical expertise and specialties and all that required, we also had to recruit from overseas. 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 workforce is expanding very rapidly because of all the projects that are under construction. I expect that within two years, that workforce will rise to over a thousand in terms of what we are doing. These are skilled workforce. These are engineers and technicians and all that, because we are dealing with high-tech equipment.

Sometime back, it was reported that you were having issues with your local partners. What were the issues?

The issues that we have been having are of a commercial nature. They were commercial disputes that arose as a result of our business interactions. We have tried to settle them in a normal ways that companies and management settle those issues; 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 we’ll be happy to go by whatever judgement the court might rule. As far as that is concerned, that is a civil matter, and it continues to be a civil matter. Unfortunately, some of our protagonists decided that they would try and push this matter using some of the agencies of the state, specifically the police. Perhaps, part of that was to put pressure on us. But one thing I want you to be very clear of is: I am not the owner of this business, I work in this business. I may be the CEO, but I work in this business and I am accountable to my shareholders. It is not I that would say, ‘I will give you this, or 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 said that the matter was purely a civil one and that we should resolve our issues. Unfortunately, the rest you would have read in the newspapers. The Lagos Director of Public Prosecution took it upon themselves to suggest that charges were going to be filed. To this day, I have not received a notice to appear in the court. If I received 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.