Sall to oversee Senegal's journey to first production

Sall to oversee Senegal's journey tofirst production

See link at: https://www.petroleum-economist.com/articles/politics-economics/africa/2019/sall-to-oversee-senegals-journey-to-first-production

WestAfrica's latest entrant to the hydrocarbons sector is expected to be producingoil and gas from 2022

The re-election of Macky Sall as Senegal's president promiseswelcome continuity for international oil companies (IOCs) at a crucial momentfor two multi-billion-dollar offshore hydrocarbons developments underway there.

A change of president following the 24 February election, whileunlikely to scupper projects that should be transformational for the Senegaleseeconomy, would have added an element of uncertainty into the sector.

Sall has guided the development of both a Woodside-operated SNEoil project off the central coast, and BP's Tortue-Ahmeyim gas developmentstraddling the maritime border with Mauritania in the north—both of which aretargeting first production in around 2022.

He scored a convincing outright victory in the first round ofthe election with 58% of the vote, compared to the 21% polled by second placeIdrissa Seck and 16% by third place Ousmane Sonko. However, the campaign—as itoften the case in Senegal's lively democracy—was not all plain sailing for theincumbent, who has held office since 2012.

The president was accused of over-spending on infrastructureprojects that critics say have done little to improve living standards forpoorer, rural Senegalese, including an international airport, train line andbridge across the Gambia river to neighbouring Gambia.

However, Sall likely benefited from the fact that his mostprominent political rivals—former Dakar mayor Khalifa Sall and Karim Wade, theson of Abdoulaye Wade, Sall's predecessor as president—were barred fromstanding due to corruption convictions. Their supporters have claimed theseconvictions were politically motivated.

The runners up have rejected the result, but also will notchallenge it. The constitutional council has confirmed Sall's victory andinternational observer teams found no major irregularities.

Avoidingthe oil curse

Some Senegalese remain fearful of the "oil curse" thathas affected others in the region, such as Nigeria and to an extent Ghana.

Sall, who is a former oil industry geophysicist, has said heintends to maximise the benefits of the industry for the Senegalese and ensurethat the business is transparent. A revised hydrocarbons code to take accountof the country's transition into a producer was approved by the national assemblyin January. He has also set up a new organisation, Cos Petrogaz, to oversee thesector, award licences and promote transparency, which operates independentlyfrom state oil company Petrosen.

The IMF has also been impressed by the country’s economic performance and reform programme, as well as its commitment to putting aside a hefty slice of hydrocarbons and mining income for a "future generations" fund. At a "National Consultation" forum last June, government and civil society decided that one third of the revenue will be set aside in the fund.

The size of Sall's victory owes much to his record on basicdevelopment and services — and economic growth. The economy has been on aroll of late, driven by agricultural exports. Real GDP grew by an estimated 7%in 2018, only slightly lower than the 7.2% growth of 2017, according to theAfrican Development Bank.

Sall was elected in 2012 for a seven-year term in office. Sincethen he has reduced presidential terms to five years, meaning the next electionis scheduled for 2024. He has also reinforced a rule imposing a limit of twopresidential terms, ruling himself out for re-election.

The 2024 election campaign is likely to be held against a verydifferent background to that prevailing today. By then, oil and gas should beflowing, with export revenues filling government coffers and, potentially, gassupplying the domestic economy.

Fullsteam ahead

Both the SNE and Tortue-Ahmeyim projects are advancing rapidly.

BP took a positive final investment decision (FID) on Tortue inDecember 2018 and has awarded a plethora of construction contracts. In March,it awarded the engineering, procurement, construction, installation and commissioning (EPCIC) contract for its floating production storage and offloading (FPSO) unit to TechnipFMC, which has already been working on front end engineering design (FEED) for the project. TechnipFMC said the EPCIC contract was worth between $500mn and $1bn.

The FPSO will be used in conjunction with a floating LNGfacility, with a capacity of some 2.5mn tonnes/year, initially tapping around15tr ft ³. The FLNG facility is being built by Golar LNG using aconverted LNG carrier. Further export capacity could be added later, ifsufficient further reserves are found, and a pipeline network to supply naturalgas to both Senegal and Mauritania is planned.

Woodside says it plans to take an FID later in 2019 on the SNEproject, and has already embarked on FEED. The project's subsea FEED contractwas awarded to a joint venture of Schlumberger and Norway-listed Subsea 7,while the FPSO contract has been awarded to Japan's Modec. The Australian firmplans to produce initially from oil resources estimated at more than 230mn blusing an FPSO with a 100,000bl/d capacity.

Source: Petroleum Economist