BusinessDay 24 May 2017

Wednesday 24 May 2017
04 BUSINESS DAY
C002D5556
WEST AFRICA ENERGY
power
‘Right policies will strategically pull
required investment to power sector’
Deepak Khilnani, Chairman of Cummins Power Generation Nigeria and Powergas
Africa. In this interview with Kelechi Ewuzie, Khilnani shares his thoughts on the
Nigerian power sector and his strategy to improve power availability. Excerpts:
What is your general assessment of
Nigeria’s power market and regulation
in relation to the current economic realities
in the country today?
There is a significant supplydemand
imbalance in the
Nigerian power sector. Grid
availability is currently not
sufficient to meet both industrial
and residential demand and hence
majority of sites in Nigeria rely on private
generators. I believe this will change in
the next few years as the government is
making a strong commitment and action
plan to improve grid power. For
example, Cummins is developing a 150
MW grid connected power project in
Rivers State.
With all these challenges, what policy
suggestions do you think will benefit
the oil and gas sector?
Strong and enforceable financial
guarantees will encourage further private
sector investment into the power
industry. Cummins is working closely
with Nigerian Bulk Electricity Trading
Plc (NBET) to develop national power
plants and we’ve certainly noticed a
strong alignment towards private sector
co-operation in the power industry
and ‘bankable’ PPA’s (Power Purchase
Agreements) to make the projects commercially
viable.
Moreover, additional investment into
the Transmission and Distribution infrastructure
will minimise power losses
and boost the confidence of the Generation
companies (GENCOs).
How did you receive the presidency’s
call for crude oil and gas companies
to return to the Niger Delta?
Let’s take Powergas for instance, it
provides quality compressed natural
gas to Nigerians no matter where they
live, Niger Delta inclusive. We operate
two gas compression plants in the Niger
Delta, which provide strong local employment
opportunities as well as serve
local industries with clean, reliable and
affordable natural gas. In fact we commissioned
our second plant in the Niger
Delta just last year. For a region so
wealthy in natural resources, the community
development also needs to keep
Deepak Khilnani
pace for the region to truly prosper and
become a stable environment for further
private sector investment.
Is the falling crude oil prices affected
natural gas sales in Nigeria?
Since the fall in crude oil prices, the
price of diesel in Nigeria has actually increased
because the crude is exported
from Nigeria and the refined diesel is
imported. Given diesel is the competing
fuel for natural gas in most off grid
power generation applications, natural
gas has become even more competitive.
Nigeria has the world’s ninth largest
reserves of natural gas. We locally
source, dry and process the gas, hence
are able to sell natural gas at approximately
half the price of diesel. We have
seen strong growth in sales over the past
year due to the wide price differential,
but also the improved industrial reliability
of operating on gas engines. Gas is a
much cleaner fuel than diesel and hence
requires less generator maintenance.
Moreover, the reliance on diesel is
very environmentally damaging and
puts strain on foreign exchange reserves
as a major proportion of dollars are
used to import diesel instead of utilising
cleaner and cheaper domestic fuels.
What do you think about the gas infrastructure
in Nigeria?
The pipeline gas infrastructure in Nigeria
to transport natural gas to the point
of use is relatively small given the size of
the nation and high demand for natural
gas. The pipeline network is limited
to just a few cities Lagos, Port Harcourt,
Aba and Benin City. Pipeline development
costs are high and usually part of
long-term infrastructure projects hence
we pioneered the ‘virtual pipeline’ business
to transport gas by truck to any location
across Nigeria not connected to a
pipeline.
With Cummins and Powergas leaders
in the Nigerian energy industry,
tell us your experience doing business
in Nigeria?
Nigeria is ranked 169 out of 190 in
the World Bank ‘Ease of Doing Business’
report. It is certainly a challenging
market, but I believe through hard
work and persistence you can set industry
standards. For example, our
relentless drive to compete on service
and safety stands out all our power
plants across Nigeria average over 99
percent power availability throughout
the year and we are proud to have a
100 percent safety record. Our business
model is based on a long-term
investment and leadership position in
the Nigerian energy industry.
Who are the majority of your customers
in Nigeria today?
Currently we serve a vast array of
clients in Nigeria ranging from multinationals
to small and medium industries,
hotels and large residential estates
with a tailored power solution for each
site. For example, we install and operate
waste heat recovery equipment at
large industries that require cooling and
heat for industrial process. Similarly, for
factories that require 24x7 power with
zero downtime, we install synchronised
diesel sets to cater for any chance of gas
outage.
We are also developing national pow-
er plants that supply electricity directly
into the grid and serve Nigerians with
reliable and clean electricity at home a
core right for all citizens in today’s day
and age.
What kind of innovation and technology
should be expected from Cummins?
Cummins recently introduced a
brand new 1540 KW high efficiency Osprey
gas generator which has one of
the lowest fuel consumptions globally
(up to 44 percent electrical efficiency).
Cummins is also launching an upgraded
2000 KW engine next year, which again
will boost performance, stretch maintenance
intervals and reduce gas consumption
all contributing to lower operating
costs.
We have also set up a partnership
with Soventix, a leading solar company
in Germany to support our ambitions to
further reduce emissions and tariffs at
our power plants across Nigeria. We will
be focusing on hybrid solar systems that
interface with the gas generators. There
is so much innovation in the energy industry
and it is essential to keep pace
with these disruptive trends.
What is your strategy to improve the
power situation in Nigeria?
Our short-term strategy continues to
develop reliable and localised energy
solutions that supply electricity and
compressed natural gas (CNG) to industries
and large residential estates. This
requires continuous enhancement of
technology such as remote monitoring
software to analyse plant performance
and people training and development.
I’ve always been a strong believer in
strong local capability in order to build
a sustainable enterprise – especially in a
business like ours that operates complex
industrial machinery across Nigeria.
We are very experienced in building
and operating captive power plants having
been operating in Nigeria since the
late 1990’s in this market.
Our medium-term strategy is to work
with the Federal Government of Nigeria
and local distribution companies to
develop a portfolio of 100 MW national
power plants that pump clean and reliable
electricity into the grid.