Lekoil advocates ESG adoption, integration for Africa’s energy transition

Lekoil Nigeria Limited, an indigenous oil and gas company focused on Africa has emphasised the importance of integrating the upstream and midstream sectors, along with adopting ESG principles, as key strategies to advance the continent’s energy transition goals.

Senior executives from Lekoil, a Platinum sponsor at the recently concluded 2024 AOW Energy Conference in Cape Town, South Africa, discussed the sector’s challenges and emerging opportunities during various panel sessions.

This year’s conference spotlighted sustainable exploration and production practices, gas monetisation, and the development of future fuels.

Speaking during the panel session with the theme: The Future of Independence for African E&P Companies, Edward During, Lekoil’s Chief Finance Officer, dwelt on challenges and opportunities specific to Nigeria while emphasising creative ways Lekoil navigates through them.

“Nigeria is a mature market and a very competitive and difficult area to break into. I have worked for Lekoil, a 14-year-old company for a while and to begin with the challenges, raising capital is not very easy, especially with equity for fossil fuel-type development projects, unlike the luck you can have with gas-type projects. It is particularly difficult to secure investments because as an independent oil company, the risk is high and the experience is low, so it impacts investor confidence,” During stated.

While focusing on the indigenous advantage due to local content requirements and networking, During added; “I believe the future looks promising for independent companies in Africa, as international oil companies appear to be shifting their focus or exiting the region. Governments also play a crucial role in ensuring security, creating favourable fiscal regimes, and supporting the industry. Additionally, Africa needs development banks to provide specialized financing, as access to funding remains one of the biggest challenges for the sector.”

Also speaking during the panel session on Exploring and Producing Gas: Economics of Developing Africa’s Gas Sector, Samuel Olotu, chief technical officer of Lekoil, suggested strategies for boosting the robustness of cash flow and funding for gas development projects in Africa.

“Traditionally, we always look at gas from the upstream and isolate the midstream. Going forward, Africa needs to integrate both the upstream and midstream. It helps to have control over the pricing. Integration as much as possible with upstream and midstream is very important in reducing gas flaring and increasing the robustness of cash flow. Africa should begin to look across geo-political boundaries because the African market is dispersed compared to the Asian or European market. A gas project is often limited to a small zone. Developing infrastructure across geo-political boundaries will make gas development very robust. For example, in Nigeria, a 250km gas pipeline contract has been signed between Nigeria and Equatorial Guinea. There’s a demand for LNG plants in Equatorial Guinea which is a long distance from Nigeria,” Olotu submitted.

Kike Fajemirokun, General Manager, Human Resources at Lekoil, noted that players in the African oil and gas sector must be intentional about enhancing the environmental, social, and governance (ESG) principles in their operations during a panel discussion titled ESG Investing: what strategies make African deals attractive in 2024?

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“Investors now expect companies to set clear ESG (Environmental, Social, Governance) goals and demonstrate real progress toward them because sustainability is no longer optional—it’s essential. When it comes to the ‘E’ in ESG, especially in Nigeria, you cannot discuss energy or oil and gas without emphasizing the significance of gas. Although gas is often categorized as non-renewable, in Nigeria it plays a critical role as a transition fuel. At Lekoil, we align closely with Nigeria’s energy transition plan, focusing on reducing gas flaring and discovering innovative uses for gas in our operations.

On the ‘S’ side, no business can truly thrive without fostering a strong relationship with its community. If investors detect any tensions or conflicts between a company and the local community, they will view it as a significant risk and may quickly withdraw their support. Equally, on the governance front, compliance with government regulations is critical. Failure to abide by the country’s laws, such as ensuring the renewal of operational licenses, could jeopardize the entire business. In short, running a sustainable enterprise requires thorough attention to every aspect—from environmental responsibility to social harmony and regulatory compliance.” Fajemirokun stated.

Pointing out the company’s global best practices approach, she added: “At Lekoil, we emphasize the critical importance of sustainable business practices. We’ve made it a priority to train not just our board and management but the entire company on this because government policies alone won’t guarantee success. If your stakeholders don’t fully grasp the significance of sustainability, the effort will ultimately fail. We’ve also taken the time to engage with our community, explaining what business sustainability means at various levels. They must understand what they can expect from us as a company and what we expect from them, so we can work together with a shared vision and avoid potential challenges when it comes to raising funds. Investors now demand a social license to operate within a community before they’re willing to invest. At Lekoil, we ensure that once operations begin, all agreements are clearly documented and legally binding, so all stakeholders’ expectations are understood and upheld.”