In Washington, the IMF asked the government mission to review the 2024 budget, which should not be funded by oil revenues.

The government mission in Washington to hold talks with Senegal’s financial partners received a cold shower from the IMF, who has called into question the budget framework for the current financial year, asking the Senegalese authorities to review the 2024 budget and drastically reduce revenue forecasts. The IMF considers that the expected oil revenues will not be forthcoming. The revenue hopes that boosted the budget for 2024, with strong additional revenues for the year, have vanished. The multiannual budget and economic programming document published in July 2022 states that Senegal is expected to rake in revenue of 888 billion CFA francs from oil exploitation over the period 2023-2025, broken down as follows: « 59 billion in 2023, the year production starts, then 327 billion in 2024 and finally 501 billion in 2025. » Clearly, all these fine forecasts have fallen by the wayside.

Should this come as a surprise to the new government authorities?

The news comes as a shock to public finance officials. Sources close to the companies partnering the exploitation of the Sangomar field have confirmed that the reality remains stubborn: « The start of exploitation remains set for the end of June 2024, but during the first five to six months, production will not really begin. We will be in a test phase and operations will only begin to be viable or optimal from the end of November 2024. » Oil exploitation  experts explain this situation with technical considerations. « There is no other way. The first barrels of oil pumped are always contaminated by elements such as mud or other rocky sediments, and large quantities will have to be extracted to access crude oil of marketable quality. »

The threat of renegotiating contracts

Multinational oil companies, already committed to the goal of exploiting hydrocarbon resources, remain doubtful or are overcome by a degree of cautiousness regarding the future of their relations with Senegal. The new President of the Republic, Bassirou Diomaye Faye, and his Minister of Petroleum, Energy and Mines, Birame Soulèye Diop, have been very vocal about their desire to renegotiate mining contracts. It has to be said that there many suspicions surround these mining contracts. The Head of State has committed his government to a forthcoming audit of mining contracts, which could lead to their renegotiation.  When you consider that an audit procedure will take several months between the selection of firms, the start of the mission and the submission of contradictory reports, you might wonder whether the 2025 horizon for the effective exploitation of oil and gas might not even be too close.

Presidential Visits to Nouakchott and Banjul: Diomaye in Diplomatic Fields

« Until we have a clearer picture, it will be quite difficult for us to think about increasing our investments in Senegal. We need to know how it’s all going to work out », says a director of a multinational. What’s more, the major ones were beginning to drag their feet about starting to pump oil and gas in Senegal. Exploitation costs may be more expensive than in some regions, as very deep water deposits require more logistical and technical resources. Some companies were thinking of keeping the estimated volumes of oil in Senegal in reserve. This is certainly not a prospect that Senegal will be happy about. There is reason to fear a tumultuous future with disputes arising from the calling into question of agreements already signed by Senegal. We may recall the disappointments of President Abdoulaye Wade’s regime in 2000 with the Canadian electricity company Hydro-Québec and those of Macky Sall’s regime with the Indian steel group Mittal. The renunciation of these contracts, signed by previous political regimes, resulted in Senegal paying substantial compensation to put an end to the litigation.

Negotiations with Mauritania 

The gas files shared equally by Senegal and Mauritania will be at the centre of official discussions during President Bassirou Diomaye Faye’s visit to Mauritania today. The two countries had managed to reach a fairly easy agreement on the conditions for exploiting and sharing the resource, but the arrival of a new political regime in Senegal could change all that. Who can guarantee that Mauritania will agree to be patient and give Senegal time to carry out the audits and other due diligence required, and perhaps call into question the existing agreements between the two countries and those signed with investors? Mauritania has high hopes of an economic and social take-off thanks to the resources expected from the exploitation of its gas.

Diomaye Outings: Step by Step Towards Sobriety

On 11 April 2022, we reported that « experts consider Senegal’s estimated gas resources to be world-class. Senegal is set to become a major gas exporting country. The Grand Tortue Ahmeyim (Gta) field, shared by Senegal and Mauritania and discovered in 2014, is now estimated to contain between 15 and 20 Tcf of gas resources, or between 530 and 700 billion m3 of proven gas.  British Petroleum (Bp) considers that the potential of this natural gas deposit is much greater. Another field, Yaakar Teranga, off Cayar, was discovered in 2016 and has proven resources of around 700 billion m3. According to experts, the potential of Yaakar Teranga is far greater than that of Gta. Other gas pockets have been identified off the coast of Senegal, such as Sangomar (Fatick). Onshore gas fields have also been identified in Senegal, including the Ngadiaga field in Thiès. Total gas consumption on the African continent is 153 billion m3 per year, according to the Bp Statistical Review of World Energy, published in June 2021. This gives a good idea of the size of Senegal’s gas reserves. However, more exploration and research is needed to confirm or refute this assessment. What is certain is that the confirmed potential is sufficient to launch a very large gas project. This is one of the key reasons why Bp, the third largest private oil company in the world after ExxonMobil and Royal Dutch Shell, has entered this project and taken the lead, holding 53% of the shares compared with 27% for the American Kosmos Energy. In hydrocarbon circles, the general feeling is that Senegal has not yet carried out enough research to discover all the gas that its sedimentary basin should contain ».

Hostility against Senegalese gaz

President Macky Sall’s regime was able to work hand in hand with the authorities in Nouakchott to develop the Grand Tortue Aymehim (Gta) gas field. But we know that some of Senegal’s ‘friends’ would not look favourably on the exploitation of this hydrocarbon resource. Senegalese gas appears to be very competitive in comparison to other regions and suppliers. Will Senegal and Mauritania still be able to ignore the headwinds and continue their partnership? Some countries, notably Russia, Qatar and Algeria, may not look favourably on the arrival of Senegalese-Mauritanian gas on the international markets.

In fact, President Macky Sall had to fight hard on the international stage to get acceptance for African countries to continue the exploitation of fossil fuels. In a bid to protect the environment, many developed countries are continuing to call for a halt to this type of exploitation, especially in the case of offshore deposits, which are presented as high pollutants to the environment. Will Bassirou Diomaye Faye have a voice as strong as Macky Sall’s to make the international community see reason?

By Madiambal DIAGNE / mdiagne@lequotidien.sn

  • Translation by Ndey T. SOSSEH / Serigne S. DIAGNE