Africa should target symbiotic investors with upstream-focused business model to revive Industry – Ogbue

• Industry advocacy groups like OPTS could facilitate push of harmonized set of standards for ESG goals across continent.
• To attract investments, Africa should stay ahead of global average on percentage of CAPEX for ESG-compliant projects.

Industry stakeholders across the continent gathered in South Africa to commemorate the Africa Oil Week, engaging on initiatives to develop the continent using its natural hydrocarbon resources.

The Managing Director of Zigma Ltd and President and Co-Founder, Women in Energy Network, Funmi Ogbue delivered a lecture on how to revive the Upstream Sector and make it an attractive destination for investment. She addressed concerns about divestments, environmental sustainability and governance (ESG), and policymaking using political, financing and technological considerations.

According to her, industry advocacy groups like Oil Producers Trade Section (OPTS) in Nigeria were a useful tool to help push a clear and harmonised set of standards for implementing ESG goals in African countries and working in tandem with the energy ministries.

“Building blocks for this are already present on the continent like Nigeria with its use of International Finance Corporation (IFC) Performance Standards and South Africa with Code for Responsible Investing in South Africa (CRISA),” she said.

She noted that if successfully implemented, the standards could become legislation that will enable uniformity and stability on the continent, hence making Africa a more attractive investment destination. “This presents an opportunity for the African energy industry to set the pace for the development and implementation of ESG standards in consonance with continental realities and growth aspirations.”

To stem the flow of divestments and create stronger ESG and climate policies, financing strategies such as focusing on encouraging new participants in the investment landscape were advisable, Ogbue noted.

“Symbiotic investors such as oil traders whose business model depends on a thriving upstream industry are considerable. In one such recent transaction, Sirius Petroleum, a United Kingdom (UK) independent, executed a senior loan facility with Trafigura in 2021 to fund E&P activities in Nigeria,” she said.

Increased participation of symbiotic investors could lead to a better competitive lending environment on the continent according to Ogbue. “Raise funds from investors who share similar ESG and commercial outlooks,” she advised.

She lamented that the perception by outsiders was that oil and gas companies were weakly committed to decarbonisation. Quoting a report by the International Energy Association (IEA), “Global investment in clean energy in 2020 by the oil and gas industry was 1% of capital expenditure.

“The energy transition to zero-carbon is a journey that will take more time than anticipated as policy meets reality (as witnessed with the current global energy crisis). The oil and gas industry will remain relevant albeit in a diminishing capacity through this period. However only operators that follow rhetoric through with action will survive.

“The opportunity here is for Africa to stay slightly ahead of the curve to attract funding. If the rest of the world is doing 1% of CAPEX on ESG compliant projects, then Africa doing 5% will send the right signals and attract investment,” she added.