Lekoil is aiming to slash its carbon emissions in the long term and may consider an energy transition spin-off, even as the Africa-focused player hunts fresh funds to kick off drilling at its promising Ogo oil and gas field off Nigeria.

The company is exploring emissions-reduction and offsetting measures, with a focus on gas as a transition fuel, but also has its eye on greener technology solutions on the continent.

“My goal is to achieve (net) zero carbon emissions by 2050 and I mean that, so the planning must start now. Opportunities can arise anywhere but my preference is for Africa,” chief executive Lekan Akinyanmi told Upstream.

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About half of Lekoil’s booked assets are gas, and the company reckons it has best-estimate contingent resources of three trillion cubic feet of gas at Ogo alone.

“We need to figure out how to quantify projects to offset the inevitable volume of emissions,” Akinyanmi said.

Located on Dahomey basin development block OPL 310, Ogo is projected to pump 150,000 barrels per day of crude oil at plateau.

The company is aiming to raise $100 million to enable drilling on the asset within months, with Akinyanmi cognisant of the need to counter the emissions from its traditional oil and gas operations.

“Regarding the Ogo production profile, we must put sound measurement systems in place, then calculate associated carbon emissions and assess which projects should handle the transition, either via Lekoil or perhaps an affiliate, or spin off a sister company that can access our infrastructure,” he said.

Preparation is already under way to clean up Lekoil's Otakikpo oil and gas operation near Port Harcourt, where it is technical partner to indigenous operator Green Energy, which Akinyanmi claims is on board with the offsetting plan.

"They must agree, given their name, right?" he said.

Otakikpo produces 6000 bpd of which 40% — or 2400 bpd — is net to Lekoil. To arrest gas flaring, some $10 million-worth of processing equipment has been shipped to the site for installation over the coming weeks and the field partners aim to commission all units before the end of February.

“The gas is free and we reckon on saving an extra $6 million annually on cash flow as the cost of providing diesel will be eliminated from operational expenditure, liberating condensate to flow with the oil and even allowing us to produce liquefied petroleum gas for sale.”

Akinyanmi said the gas generators have arrived, but the intention is to cease all gas flaring as soon as possible and with no extra burden incurred.

The Lekoil boss is also looking at greener solutions to help drive down emissions, with solar an option.

“It all depends on how many megawatts can be generated to offset emissions, how to fit plug-and-play technologies into the mix and what kind of carbon capture opportunities arise," according to Akinyanmi.

“All oil and gas projects have calculated returns, with the majors expecting a return on capital of between 15% and 20%, but we need more than that and most renewable projects even struggle to generate a return of 5%."

Akinyanmi, a Massachusetts Institute of Technology graduate, said green technologies do require a different approach to the more traditional oil and gas business.

“You must monitor the cost curve as the business progresses, so a project returning 3% on a solar investment must be grown incrementally as technology permits, and by accelerating down the cost curve you preserve the projected revenue and protect the return,” he said.

Mentioning the possibility of Lekoil spinning off a business unit to manage its energy transition plans, Akinyanmi is realistic that it would likely do little more than break even in the early stages, adding, however, that companies must show flexibility in assessing the cost of capital as project life cycles will vary.

The Nigerian government has made supportive noises about renewable energy, but there is no real programme to incentivise or assist players in this regard.

“But it's early days," Akinyanmi said.

He favours projects using a mix of energies such as compressed natural gas dovetailed with solar power to develop transport operations.

"I think we’ll see more hybrid solutions in Africa, particularly as we have so much sunshine, and alternative business models will emerge.”

However, he cautioned: “As I told the Davos convention in Switzerland earlier this year, half of all Africans lack access to power, and smaller scale solutions such as solar can help alleviate energy poverty.”

(Corrects the name of a development block in the sixth paragraph.)