with Dave Welbourne, Managing Director, Ilitha Group
The Ilitha Group was formed in 2003, but the company history goes all the way back to 1988. If we compare the engineering environment today with when you started, what are the major changes you have observed?
First and foremost, the fall of Apartheid in 1994 changed everything. We formed our first company, CSMS, to meet the South African demand to modernise oil refineries. We started with modernizing the Chevron CapeTown (previously known as Caltex) refinery, bringing in our experience and knowledge from Europe and other South African industries. Many of our team members arrived as expatriates and eventually became local residents.
In terms of the engineering skills shortages, South Africa has gone full circle when we compare today with the late 1980s and early 1990s. Skilled people from Europe had to be attracted to meet the engineering demands of the mega projects such as the Sasol Secunda CTL plants and PetroSA GTL plant. Today the shortage is a result of our education system which does not produce sufficient local engineers, and we have lost substantial amounts of people to countries such as Australia, New Zealand, and Canada. In addition many engineers have chosen to continue their careers in Offshore locations around Africa, Kazakhstan or the Middle East, for which the salaries are much higher than here. It is a continuous roller coaster of matching the availability of engineers to the demand, but our partnership with Jacobs Engineering fortunately enables us to source resources from Europe andthe UK in particular on a cost-effective basis.
What were the opportunities you saw to start Ilitha in 2003?
When we started Ilitha in 2003, Black Economic Empowerment (BEE) was already a major requirement for the company. But because we were a local company without Boards of Directors in Houston or Aberdeen, we could instantly adapt to the South African BEE requirements and we took our lead from key client PetroSA. Since that relaunch in 2003 we have actively recruited historically disadvantaged South Africans to fill our vacancies. But it is often a challenge to find any engineer to fill in a position, let alone a historically disadvantaged South African. Our clients often want an engineer right now and cannot wait for us to hire and train someone; this is why the partnership with Jacobs is so important.
PetroSA is a government-owned company with the most the stringent BEE regulations; so our strategy was that if we satisfy PetroSA’s BEE requirements , we will keep everyone else happy at well. At the time like so many other companies only 5 percent of our engineers were non-white, and PetroSA set us the target to reach the 50 percent in a very short period of time. We went through an intense training and development program to meet these demands. Together with Chevron we recruited a good number of junior engineers, using the refinery projects as a great place to gain practical experience under the guidance of seasoned mentors. Within three years we made the 50 percent benchmark, but at that point PetroSA had already raised the bar to 60 percent. Rightly so they are aiming for a reflection of society. Today we are 57 percent, and continue to grow and develop new talent.
When we started Ilitha, we realized that we wanted to offer our clients more value and we did this by putting more skills together. Control Systems Management Services at the time was an electrical, instrumentation and control systems service provider. S we teamed up with a process chemical engineering service provider and an organization that delivered resources, and we merged it all together. It turned out that by doing that and by complying with BEE standards, we were able to open up new opportunities , and this has often been supported by the South African Industrial Development Corporation (IDC).
We have been servicing companies like Chevron since 1987 and this client is very important to our organisation. These days , we have formed a holding company with new subsidiaries, such as Sunrise Energy, Oculus and Scion. Sunrise Energy is almost out of the starting blocks after a slow start due to regulatory obstacles regards receiving approvals from the Transnet National Port Authorities (TNPA). Together with the IDC we have spent over R 20 million on the early phases of building an LPG gas facility in Saldanha, and just a week ago we were selected as the preferred bidder.
Based on the knowledge gained from providing services to Chevron and PetroSA we anticipated a shortage of LPG in the Western Cape. LPG forms only 2 or 3 percent of each barrel of crude oil that comes from a refinery. And there is is already about 4,000 tons a month of LPG transported into the Western Cape region from Durban, Secunda and other locations. In the future we expect the local shortage to further increase, so we approached the IDC to ask for their assistance to raise funds to build a import and storage facility. We already have a construction license from the National Energy Regulator for the facility.
But the process of obtaining permission from the National Ports Authority to import LPG via the port of Saldanha has been very difficult to navigate. The National Ports Authority are bound by legislation to follow the S56 tendering process and this has been very slow and included long periods of during which we could not communicate with the authority. For two years we were not able to have a meaningful conversation with the Transnet National Ports Authority, so we investigated seven options for importing LPG, without knowing which one Transnet would prefer. We have since been selected as the preferred bidder and are now working with the authority to determine which of our options Transnet prefers.
We also interviewed Universal Africa Lines (UAL), which has been struggling to get its development plans in Saldanha approved. Are you approaching the situation differently?
Transnet seems to be making improvements in its decision-making structure and is starting to move at a faster pace. The organization is under government pressure to really take developments in Saldanha to the next level enable Saldanha to be a pivotal area in the industrialization in the Western Cape. Ministerial intervention is also playing a crucial role: both National Minister Davies of Trade and Industry and Minister Gigaba of Public Enterprises, and Western Cape Minister Alan Winde are all pushing for Saldanha to develop and create economic benefit for the area.
We are using our Oil & Gas industry skills to progress this project, and we are relying on our partner Jacobs for additional capacity and skills. The combination of a local group that can quickly spot opportunities and can work with organizations like the IDC for funding while being backed by Jacobs for the necessary additional expertise seems to be a successful formula.
You won the Supplier of the Year Award for Chevron in 2008. What are the challenges of obtaining, and maintaining, this preferred position for such a key player?
When working with a top player like Chevron, flexibility in terms of capacity is key. Projects for Chevron go in cycles which often require us to increase our onsite staff for project work that needs to be implemented during refinery shut-downs and then reduce our assigned staff after the shutdown. A client like Chevron also has high standards regards business ethicswith all their suppliers and they often have a right of audit to ensure compliance with these standards. We fully adhere to these high ethics standards , and the Chevron compliance audits have repeatedly verified this . Our partnership with Jacobs also means we work to their corporate standards.
Chevron is also very strict when it comes to safety standards: and we know that to continue to be a key supplier of services to Chevron we must also work to these high standards and continuously strive to improve our approach to safety using the Jacobs Beyond Zero ethos.
What are the business opportunities you now see for the Group at large?
On the service side we break out of the Oil and Gas industry through our services to the offshore diamond mining operations withinDeBeers. Offshore Oil and Gas and offshore Diamond mining share many common practices. Both industries use similar equipment which creates a number of synergies and opportunities for us.
On top of that, our cooperation with Jacobs, a large broad based organization with 72.000 staff and a major influence in a wide array of sectors, allows us to work with other major internationals such as Unilever. Jacobs is the chosen engineering partner to support Unilever’s modernization program, and we are supporting the South African operations in this respect. The modernization program is truly impressive: Unilever’s Durban savoury products facility is a true world class leader andproduces twice the product output with half the energy consumption. We are also working with ArceloMittal on the West Coast to try and help them reduce energy costs through our LPG project and other initiatives. ArcelorMittal consumes about 17,000 tons of LPG annually but currently depends on a weak supply chain. We are planning on providing them with the option of holding LPG stock on their doorstep.
Scion is another exciting part of the Ilitha Group that is in the business of providing environmental technologies that reduce polluting air emissions and energy technologies. Scion has recently secured the Pratt and Whitney Organic Rankin energy transfer and power generation technology, which enables us to convert wasted heat into power.
Our experience so far on the environmental technologies is that many companies are delaying the roll out of expensive environmental technologies until new government environmental regulations force them to proceed. However if a company builds a new factory in South Africa, it has to be compliant with the new environmental laws from day one andwe have the environmental air pollution solutions that they will need.
Another major growth driver is our control center business, Oculus, which provides the control desks to the new Eskom power plants, the oil and gas sector and many other clients. Our direct clients are often big equipment and systems suppliers such as Alstrom, ABB and Yokogawa. But whether it is a stock exchange or an oil refinery, and the facility needs to work 24 hours a day and 7 days a week we are set up to deliver the control desks and the complete interior design package to optimise productivity and efficiency. As a strong part of this offering we have a strong cooperation with an American supplier TBC Consoles which delivers a superb quality product and the right price.
Thank you very much! On a final note, where do you want to stand with Ilitha in five years from now?
In five years we will be a successfully diverse group with interests in providing industrial services, technologies and our own energy operating companies. By 2014 we plan to have our LPG import terminal in Saldanha up and running, and in five years it will be fully functional. We have been working on getting this done for a long time, and our efforts are finally beginning to pay off.
The Ilitha Group will continue to be entrepreneurial and continue to build on the strong relationship that we have developed with the IDC. We want to continue to prove to the IDC that they can effectively invest their money with us and can be sure that every cent is wisely spent and they will get results, and hopefully encourage them to support more of our ideas. That is why Sunrise Energy is so important.
The Ilitha Group also has a strong focus on the Western Cape, and we will continue to adapt to the needs of the region. We will see where the gaps are and pursue opportunities. But in addition to this we plan to expand the market served by Oculus and Scion to include the wider African region and Middle East