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Senegal makes big changes to oil and gas sector
Time of transition ‘reflecting change in country from an exploration to a producing play’
Barry Morgan Paris
14 October 2016 Updated 14 October 2016
SIGNIFICANT change is overtaking Senegal’s oil and gas sector, without fanfare but likely to have a profound effect on the way upstream business is conducted in the West African country.
Instead of an Energy Ministry hoarding power, President Macky Sall has indicated that from now on state oil company Petrosen should discharge decision-making functions, said a source close to the Council of Ministers.
There is even talk of a new oil and gas steering committee directly advising the presidency.
Myriad licence-holders seeking approval to drill, shoot seismic or extend their tenure must now negotiate directly with Petrosen, under director general Mamadou Faye, which will then make recommendations for ministerial signature.
It is also likely that a direct channel will exist between Faye and the presidency, as former geologist Sall once served as head of Petrosen and later as energy minister.
Senegal’s incumbent Minister of Energy, Thierno Alassane Sall — no relation to the head of state — will sign only on the recommendation of Petrosen, representing a definitive shift in internal practice and preparing the state oil company “for a stronger role similar to Angola’s Sonangol,” said a source.
This change will enable the company’s professionals to engage continuously with oil companies during a critical time of transition “reflecting the transformation of Senegal from an exploration to producing play,” said the source.
Minimum capital expenditure will be demanded from future entrants.
“No longer is Senegal begging for favours,” added an observer. “Outfits unable to meet obligations will find themselves out of the game.”
Promise of an oil and gas bonanza has led several interest groups to surround well-positioned politicians in a bid to oust smaller players from acreage where unmet obligations have yet to be renegotiated.
But with a fresh and open dispensation replacing the official obstructivism of recent years, the president now has no need of that earlier mooted Cabinet reshuffle which may have shaken alliances and proven costly in the run-up to polls next April.
As a result, Sall can demonstrate a strong and united leadership presiding over the revival of dialogue between upstream companies and a freshly enlivened Petrosen, keen nonetheless to ensure that only the deep-pocketed players move forward.
The system urgently needed unblocking without risking lengthy litigation by sitting tenants frustrated by the bureaucracy.
Even now, licensing and public procurement reforms remain under review, requiring officials to proceed under existing legislation and evaluate applicants on financial capacity under a first-come, first-served basis.
Many smaller players such as the controversial Romanian-Australian magnate Frank Timis, who claims equity positions in a variety of regional oil and mining assets, may struggle to meet looming cash calls once the joint operating agreements kick in.
It is likely that Dallas-based Kosmos Energy and Petrosen will hammer out an interim work programme on the Greater Tortue gas discovery before the end of this year, prompting the need to find funds.
Cairn Energy, operator of the SNE oil discovery, has welcomed potential new partner Woodside Energy into its SNE-Fan acreage, but the UK explorer remains mired in a dispute with India’s revenue authority and may feel financial pressure after January.
Kosmos has secured finance for its gas play and has time on its side, as does Woodside Energy.
More broadly, regaining momentum in Senegal’s upstream sector is perceived as essential in shoring up sub-regional energy security.
Dakar this week stepped up cooperation with international partners to fight Islamist extremism.
A pact signed by Interior Minister Abdoulaye Diallo and his French counterpart Bernard Cazeneuve promised to “build on existing intelligence accords to secure borders across the region.”
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