Sall to oversee Senegal's journey to first production
West Africa's latest entrant to the hydrocarbons sector is expected to be producing oil and gas from 2022
The re-election of Macky Sall as Senegal's president promises welcome continuity for international oil companies (IOCs) at a crucial moment for two multi-billion-dollar offshore hydrocarbons developments underway there.
A change of president following the 24 February election, while unlikely to scupper projects that should be transformational for the Senegalese economy, would have added an element of uncertainty into the sector.
Sall has guided the development of both a Woodside-operated SNE oil project off the central coast, and BP's Tortue-Ahmeyim gas development straddling the maritime border with Mauritania in the north—both of which are targeting first production in around 2022.
He scored a convincing outright victory in the first round of the election with 58% of the vote, compared to the 21% polled by second place Idrissa Seck and 16% by third place Ousmane Sonko. However, the campaign—as it often the case in Senegal's lively democracy—was not all plain sailing for the incumbent, who has held office since 2012.
The president was accused of over-spending on infrastructure projects that critics say have done little to improve living standards for poorer, rural Senegalese, including an international airport, train line and bridge across the Gambia river to neighbouring Gambia.
However, Sall likely benefited from the fact that his most prominent political rivals—former Dakar mayor Khalifa Sall and Karim Wade, the son of Abdoulaye Wade, Sall's predecessor as president—were barred from standing due to corruption convictions. Their supporters have claimed these convictions were politically motivated.
The runners up have rejected the result, but also will not challenge it. The constitutional council has confirmed Sall's victory and international observer teams found no major irregularities.
Avoiding the oil curse
Some Senegalese remain fearful of the "oil curse" that has affected others in the region, such as Nigeria and to an extent Ghana.
Sall, who is a former oil industry geophysicist, has said he intends to maximise the benefits of the industry for the Senegalese and ensure that the business is transparent. A revised hydrocarbons code to take account of the country's transition into a producer was approved by the national assembly in January. He has also set up a new organisation, Cos Petrogaz, to oversee the sector, award licences and promote transparency, which operates independently from 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 basic development and services — and economic growth. The economy has been on a roll 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 the African Development Bank.
Sall was elected in 2012 for a seven-year term in office. Since then he has reduced presidential terms to five years, meaning the next election is scheduled for 2024. He has also reinforced a rule imposing a limit of two presidential terms, ruling himself out for re-election.
The 2024 election campaign is likely to be held against a very different background to that prevailing today. By then, oil and gas should be flowing, with export revenues filling government coffers and, potentially, gas supplying the domestic economy.
Full steam ahead
Both the SNE and Tortue-Ahmeyim projects are advancing rapidly.
BP took a positive final investment decision (FID) on Tortue in December 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 LNG facility, with a capacity of some 2.5mn tonnes/year, initially tapping around 15tr ft 3. The FLNG facility is being built by Golar LNG using a converted LNG carrier. Further export capacity could be added later, if sufficient further reserves are found, and a pipeline network to supply natural gas to both Senegal and Mauritania is planned.
Woodside says it plans to take an FID later in 2019 on the SNE project, and has already embarked on FEED. The project's subsea FEED contract was 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 firm plans to produce initially from oil resources estimated at more than 230mn bl using an FPSO with a 100,000bl/d capacity.
Source: Petroleum Economist
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