Mrs. Audrey Joe-Ezigbo is co-founder and executive director of Falcon Corporation Ltd, a wholly indigenous conglomerate with diverse portfolio of investments in oil & gas, energy and infrastructure, amongst others. A recent winner of the ‘Ernst and Young Entrepreneur of the Year West Africa Award’, Joe-Ezigbo speaks to Kunle Aderinokun on economic diversification, its dependency on the power sector, the industry reforms and investment opportunities in the gas sector
Falcon Corporation Ltd is a 22-year-old company. Now, looking back to its advent; coming from outside of the oil and gas industry, what inspired your entrepreneurial drive and what drove your choice of the industry to invest in?
If you are driven by the spirit of entrepreneurship, you see only opportunities only where there are challenges. Falcon was birthed out of a realisation that the founding partners both shared some very key attributes, which over time, we came to realise, had the potential to create something truly exceptional. Though, we were in different streams of academia, we both had strong entrepreneurial aspirations and had been involved in one form of venture or the other on a small scale in our individual capacities at the time.
We were both committed and determined people, who are driven by excellence and creativity. Indeed, the choice of the name Falcon is a reflection of our innate strength, resilience, dexterity and focus; all core characteristics of our Falcon Brand. The name Falcon spoke then and still speaks to the heights to which our company soars, and the much more robust future we are both confident Falcon will achieve.
Take-off for us was tough. We had very little resources at hand, and our initial investment was very quickly exhausted. Initially, the company was set up with the intention of producing and marketing an array of lubricants out of petroleum bi-products. However, the circumstances playing out within the industry at that time did not allow that aspiration to be birthed. We built and leveraged goodwill that allowed Falcon initial registrations and small projects within and outside of the petroleum industry that sustained the operations of the company through those early years.
Our humble beginnings notwithstanding, we had clarity from the start that Falcon would need to deliver excellent customer service in order to build credibility with any client that gave us an opportunity to be of service. We understood that building a reputation of service excellence from the start was the foundation that would allow us to grow into executing larger projects in and out of the oil and gas sectors.
What was your first breakthrough in the industry?
The beginning was very difficult like I said. Falcon was registered with a few of the IOC’s and we were ready to take the market but it was difficult getting a head-start. Everyone wanted you to have experience, but no one was willing to give you a project that would allow you gain exactly that experience. It was the proverbial chicken-and-egg type of conflict that start-up entrepreneurs face everywhere.
Initially, we were not even given the opportunity to tender for any projects, and then eventually we found ourselves tendering for an uncountable number of projects without success. We submitted all manner of proposals and made all sorts of presentations to no avail. Those were really hard days and there were days we couldn’t put food on the table but we survived and continued to look into the future with optimism. We understood that we needed to make personal sacrifices, and make even more of an investment of time, hard work and effort in order to attain that future.
The industry at the time was also very much skewed towards giving opportunities to companies that profiled foreign technical partnerships or ownerships, and/or a high quota of expatriate staff, whereas Falcon was a wholly indigenous company very much convinced that we could make significant impact and add value to the industry notwithstanding. As you can see today, this strategy has paid off. With the FGN Local Content drive, the industry has evolved and serious local contenders such as Falcon are more strategically positioned to plug into major industry opportunities that were previously the exclusive preserve of foreign players.
Our big break actually began with a very small project. We had done extensive work towards carrying out a gas distribution project in the eastern part of Nigeria years ago. We made several presentations to the authorities and the gas owners, but surprisingly had the rug pulled out from beneath us just when we thought it was all agreed upon.
We bounced back very quickly and proactively found a way to remain involved and to support the system by offering our services in pipeline construction, equipment modification, installation and commissioning, and training which we did for several years. We got a small break with an opportunity to construct the gas distribution pipeline for the first company to use Natural Gas in the greater Lagos area as this then paved the way for our constructing at least 80 percent of the internal industrial gas utilisation projects within Lagos and Ogun States today.
In retrospect, we must say it was good that things happened the way they did because it gave us time to get more grounded in the system and perfecting our systems and structures. When the Ikorodu project became available we were more than ready and won the bid ahead of other multinationals that also bid for it. There was a lot of pressure as competitors questioned our ability to deliver on the project and the bid exercise was repeated three different times.
We did not give up; we continued to put our best foot forward and came up heads each time such that we were finally awarded the franchise in December of 2004. We signed the final sets of agreements with NGC in August 2005, obtained all design approvals and were given the go-ahead to commence construction by February 2006, and we delivered the project in just seven months by November 2006. Today, we have grown the operations in that franchise and currently provide alternate natural gas as fuel to several manufacturing companies in Ikorodu and also bringing about positive impact to the community, families and the environment as a whole.
The oil and gas industry has been dominated by multi-nationals and there has been the Nigerian content. Has it helped you a lot or was it just your own initiative?
From inception, we had maintained a wholly local content in all aspects of our operations, drawing on foreign technical expertise strictly only in areas of works and on project-related equipment which are otherwise not locally available. In the early days, we were driven more by the conviction that we would be successful at whatever sector we settle for. We actually never understood well enough at the beginning that the oil industry at that point was completely driven by the multi-nationals.
It was very unique to see that most of the organisations’ strategic management positions were filled by Nigerians. With our state of naivety then and driven by excellence, we were inspired to deliver quality beyond our clients’ expectations. So for us, local content was originally ingrained in our operations even before it became driven by regulation.
Today, we remain a wholly indigenous organisation that strongly believes in and supports the Nigerian Local Content policy thrust. Our employment policy mirrors this as Nigerians with appropriate skill set are offered jobs in preference to foreign nationals. They are developed further through trainings both locally and abroad on a continuous basis. Expatriate engagement in any aspect of our work is solely for knowledge transfer purposes.
We take these steps to create deliberate opportunities for indigenous participation in tender exercises involving stiff competition and high capital investment and technology. In so doing, we encourage local companies to invest in equipment and facilities as well as in training to enhance their capabilities, and grow from being agents to local companies that are able to provide value-adding technical services in the medium to high technology sectors.
Falcon participated in the recent Nigeria Gas Association conference in Abuja. What was the takeaway for Falcon? And how are you harnessing the opportunities that emerged from the meetings?
Let me state first of all, that Falcon is not new to the NGA, I have been sitting on the NGA Executive Committee for the last 8 years and I’m currently the 2nd Vice President of the NGA, so our engagement has been robust in terms of being corporate members, in the inner workings of the council, and as a strong player in the industry. The recent conference is very strategic considering the industry today finds itself at a critical tipping point. All our aspirations as a nation in terms of diversification are hinged on one key thing and that is the power sector.
While we are working on solutions from other innovative technologies such as solar, renewables and the like; we cannot take away the fact that gas-to-power presents the nearest-term options towards resolving the power conundrum in Nigeria on the scale that is required, and as such there is an urgency that must be employed towards resolving the issues that are pervasive across the gas-to-power value chain. As players in the gas space who appreciate this therefore, it was interesting for us as Falcon to hear and experience the quality of the discourse at the NGA conference, in terms of where we are as an industry and what we need to do to maximise the inherent increasing investment opportunities that exist despite the myriad challenges.
The conference served to validate strategies we had adopted to progress some of the opportunities that we had already identified as being viable, and which will aid us in channelling our investments for maximum impact. Prior to now, we have been exploring some opportunities in the LPG sector, which we have positioned to make incursion into. Many of the conference presentations and conversations, and the pronouncements by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, regarding provisions within the draft National Gas Policy for the restructuring of the entire industry to create a segregation of the upstream, midstream and the downstream sectors, served to validate our own objectives and plans in this regard.
Talking about a company, which has existed for more than two decades, Falcon has made its marks in the industry but not without attendant challenges. What have been the challenges?
The challenges that sector participants face are numerous and multi-dimensional. Ours has always been an industry fraught with various issues and risks, but I dare say these have been grossly exacerbated by the current state of the economy and the attendant impact on the general environment of business. Over the years, we have had to deal with the technical and operational constraints attendant to the country not having in-country manufacturing capabilities for certain aspects of requirements on projects, such that there in inadvertently an international market dependency for some critical resources, be it niche technical skillsets or material resources and equipment. Thankfully, the situation has improved over the years, but we are still a long way from attaining the level of resource independence that we have the potential to achieve.
The issue of funding constraints cannot be over emphasised. The sector is highly capital intensive and projects are mid to long term in nature, whereas available funding was traditionally short-term, and today is more mid-term than long; and not to mention the high interest rate regimes that we have to contend with. In our early days, we struggled with demonstrating capacity, so funding was a daunting issue then but over the years, as we demonstrated capacity and strength in delivering superior solutions, our operations kept growing and we began to have significant support from the banks and those life lines brought about significant leap in our operations today. Of course, we have, as well backed this by very efficient financial planning and prudent cost management. Our current constraints stem from the exchange rate regimes currently prevalent, which have almost doubled the capex outlays projected for our expansion projects, a situation that is impacting all sectors and which, we are working to resolve through a scaling of our projects.
Over the years, human resources have also posed a challenge, both in terms of getting the right skills and competencies, and more so in people who share our values and commitment to doing business in an ethical manner. We have addressed this at Falcon by placing a premium on training to ensure that our people are the best they can be and that they of course remain ahead of the market; and backing this with the imprinting of our core values in the hearts and heads of our people through various robust engagements. We also have a very strong leadership that exemplifies the values we hold, and this has helped us to keep our core teams committed over the years.
Falcon Corporation was appointed into a Lagos State Government Special Committee on Power called Light up Lagos Committee under the leadership of Governor Akinwunmi Ambode. Could you let us into how your firm made the committee membership? And, what is Falcon’s role in this committee?
I believe what Governor Ambode tried to do was to look at who are the leading and strategic players in the energy space, who can bring value to the Light up Lagos initiative and process. The Lagos State Government has a huge aspiration in terms of powering up Lagos. This is somewhat an offshoot of what ex-Governor Fashola started and I’m glad to see that consistency and continuity.
Falcon Corporation’s positioning as the operator of the Ikorodu Natural Gas franchise is strategic and this was duly recognised by the Lagos State government. Our AGI and pipeline network within the Ikorodu gas franchise has been identified as key infrastructure that is critical to enabling gas supply that will back various power plants envisioned within the initiative. A lot of work has gone in that area, including the robust roadmap that has been developed, as well as the technical validation currently going on. At Falcon, we understand our role as enablers and remain committed to ensuring that the gas requirement is met.
The current administration under Kachikwu has separated gas from oil. With the establishment of a gas sector and availability of $51billion worth of investments, how is Falcon taking position to harness the opportunities that are inherent?
As you are aware, Falcon had taken a strong position in the industry long before we got to this point. Thus, we have our investment options and strategies and processes have been laid out well ahead of these policy developments, and as I said earlier, the policy provisions only serve to validate the path we had chosen where the expansion of the frontiers of our business is concerned.
Based on detailed research and industry knowledge for instance, it was very clear to us that one of our key expansions would be in the LPG sector. We understood that ultimately the kerosene subsidy would have to go because it was not sustainable in many ways, not to mention the unwarranted environmental and health impacts. We understood that the tapping of opportunities we could foresee would be a question of which investors would be savvy and proactive enough to play leading roles in what will certainly be a huge transformation of the sector going forward.
For us there was a clear answer that companies like Falcon, who take the initiative and bear the early mover market risks will also come out more strongly positioned in the long run. In addition, there is the fact that as an institution, our corporate focus is on viable investment opportunities within Nigeria and across Africa. We are constantly scanning the environment looking for opportunities for us to deepen our footprints in the gas sector, as well as in other sectors that present interesting investment options to us.
Several global reforms are pushing for clean energy. How does that portend for growth in natural gas demand and revenue opportunity from that sub-sector?
With increasing concern over the environmental effects of burning fossil fuels, the call for a more sustainable resource base has never been louder. Both developed and developing nations are currently transitioning to a renewable energy-base, which depends on an assortment of primary energy sources to produce electricity, like natural gas, biomass, oil and other renewables.
The consumption of natural gas worldwide is projected to increase to 203 trillion cubic feet (Tcf) in 2040 from the 120 Tcf it was in 2012. Natural gas remains a key fuel in the industrial sector. In the power sector, natural gas is an attractive choice for new generating plants because of its fuel efficiency. Natural gas also burns cleaner than coal or petroleum products, and the more we see governments at both national and regional levels begin to implement gas plans the more the increase in demand and invariably revenue opportunity.
As a nation, therefore, we need to start paying more attention to the issue of carbon credits. We must become strategic and deliberate in rewarding and or recognising compliance to clean energy in a manner that operators and industry participants across various sectors of the industry can see the tangible advantages whether in terms of fiscal incentives, or other reward framework that would grossly increase growth. With regulatory frameworks that can drive the translation directly to business bottom line, there would be no doubt a huge embrace that would translate to consistently increased operation and output.
What are the key milestones recorded by Falcon in the last two decades of operation?
We recently marked 22 years of operation in the oil and gas sector and this is quite exciting. It’s remarkable to be in operations for twenty something long years playing in the oil and gas sector through a diverse portfolio of services that cut across engineering, procurement and construction (EPC) as well as natural gas distribution. We, however, remember each day and each year with nostalgia as every aspect of this journey was challenging, remarkable and also inspiring.
There have been several milestones as we made the journey to where we are today. The most significant however which we remain very excited about and reference often is our Ikorodu Gas franchise. For two reasons: first, Falcon was a young indigenous company going head-to-head with multinationals to bid for a project we knew we were highly capable of and strongly positioned to deliver. Secondly, beyond being able to win the franchise, Falcon has consistently continued to deliver on the projects in a timely manner. Our unwavering commitment to excellence saw us through and today remains a key driver of our business, and we have several industry recognitions and awards that attest to this.
If you knew the history and background to this project then you would understand why we are very fulfilled taking it to such great new level. PZ Ikorodu had the first gas delivered by NGC about eight years earlier and everything had thereafter stagnated. By the time Falcon won the franchise in 2005, a few of the industries had actually shutdown and relocated their operations to other franchise areas where natural gas was already being delivered, and there was apathy among the existing industries within Ikorodu who did not believe gas supply to them was still a possibility.
But with our record of performance our organisation is known for, we threw all that is required into the project and we delivered and commissioned our first gas in November 2006. For us that was a big break that changed the dynamics of the entire landscape.
Another thing that was very notable was a venture capital partnership that we had with the African Capital Alliance Group. For us, it was an attestation of how we had been able to position ourselves internally in terms of established earnings potential, corporate structure, sound policies and effective governance to make ourselves attractive enough for that kind of investment to come in and that helped to up the ante for Falcon. Backed by the ACA investment, we were able to take on bigger projects.
As you are aware, banks rarely want to fund long-term projects, but with the partnership with African Capital Alliance Group, we moved to a position of strength and it opened the doors for cheaper longer-term financing, which enabled us execute our projects, purse our growth and expansionist vision as well as deliver value to our stakeholders. The investment in Falcon is still noised within the ACA group as one of the most significant and successful investments in the group’s portfolio over the years. We still ride on that as we take on bigger mandates.
Still talking milestones, in line with our value of quality, Falcon attained our certification to the ISO 9001: 2008 Standard 4 years ago. We have maintained that certification all these years which is an endorsement of our passion for quality, international best practice, customer satisfaction, and continual improvement in all facets of our operations.
In the beginning, every one asked us the question: “who are your technical partners?” That for us was the biggest hurdle we had to surmount. It was surprising that this budding enterprise had no international affiliations yet delivered projects that were of world class standard. Right from within our Falcon Group, we designed, constructed and commissioned the Ikorodu pipeline system. Our delivery on this not only earned us the seal of quality we needed for our operation, it also earned us trust within the industry.
Most importantly, it reinforced our confidence that there is no limit to our potential and growth. So with our demonstrable capabilities and track records, the quality seal and the committed and passionate people on our team, we are indeed positioned for the top.
And what is the future outlook for Falcon?
Falcon’s strategic growth initiatives are robust and we look into the future with so much optimism. We would continuously seek opportunities were they exist. One of our core objectives is to remain the local distribution company of choice, meeting and contributing to the nation’s energy need. Falcon is assiduously forging towards an entry into upstream Gas supply side, while working to deploy other innovative delivery alternatives in downstream and midstream Gas transmission and processing.
We are expanding our EPC competencies through the acquisition of additional highly specialised technical equipment and more technical skills training. Our end objective is to become a major player in the upstream sector of Nigeria’s oil, as well as gas industry. As a group, we have evolved into a full business conglomerate with strength and competencies in providing services in not just EPC and gas distribution, but also in the energy and real estate sectors of the economy. We would continuously create value, contributing further to local skills and technological development through strategic partnerships.
