Senegalese President Macky Sall has become a popular figure on the international stage. His country’s gas reserves, which are due to begin exporting in the next couple of years, are now the focus of European leaders, who are desperately trying to find alternatives to Russian gas after Russia’s invasion of Ukraine in February 2022.
When German Chancellor Olaf Scholz visited Senegal in May, he said securing LNG supplies from the country was “a matter that should be pursued intensively.” The UK is already actively involved in the offshore sector, where BP is the operator of gas export projects. The EU energy commissioner visited Dakar at the beginning of the year.
Poland’s President Andrzej Duda visited Senegal and fellow African hydrocarbon producers Nigeria and Ivory Coast in early September to discuss the energy crisis among other topics – Poland’s liquefied natural gas (LNG) import terminal has already received its first shipment of Nigerian LNG and is keen to secure future deliveries.
Sall, for his part, plays up Europe as an LNG destination, noting that Senegal’s position on the western edge of Africa puts it within days of delivery from European markets, while suggesting there will be competition from Asian buyers. .
Solo’s strategy is paying off
Such keen interest underscores the shrewdness of Sell’s decision to favor offshore hydrocarbon export developments, which are easier to finance and faster to build, rather than more expensive, large-scale projects with more onshore facilities and more early-stage gas going domestically.
By agreeing to deals that kept upfront operating and financial costs and risks at levels deemed acceptable by international oil companies (IOCs), Senegal is now on track to become a gas exporter by 2023, with enough production to serve markets abroad and at home for decades if demand persists.
This would be just eight years after commercial gas reserves were discovered in Senegalese waters – a rapid turnaround in the context of African hydrocarbon projects. Years of project delays due to financial disagreements and political uncertainty are the norm on the continent, especially in states like Senegal that have no experience in oil and gas production.
Senegal’s history of political and economic stability and good international relations, as well as Saul’s background as a geological engineer with hands-on experience in the hydrocarbon industry, played a role in smoothing the way for gas development.
The first gas production should begin in 2023
Senegal’s first export will be from deep-sea reserves located on the maritime border with Mauritania. They are being developed on behalf of both countries by BP and its partner Kosmos Energy in the Greater Tortue Ahmeyin (GTA) project, which is the product of a successful collaboration between two politically, culturally and economically diverse neighbors.
For Phase 1 of the project, BP is using a 2.5-million-tonne-a-year floating LNG facility, which is piped from a floating production, storage and offloading (FPSO) vessel above the field. Most of these products will be exported. According to BP estimates, the field’s gas production potential is about 15 trillion cubic feet — enough for at least 30 years of production.
Despite the Covid-related construction delays of the FPSO, which is being built by Cosco in China under contract to Technip, first production is still expected by the end of 2023.
A final investment decision on the development of Phase 2 of the project should be made by the end of 2022. The concept for this is not yet complete, but it could be another floating LNG (FLNG) project of the same size.
Senegal also has another commercial find further south, entirely in its own waters, called Yakaar-Teranga, which is also being developed by BP and Kosmos. This discovery is estimated to contain about 20 trillion cubic feet of gas.
It is from Yakaar-Teranga that the economic upswing for Senegal will begin, apart from the impact of export earnings. President Sal said that about half of the products from the development will go to the domestic market as raw materials for power plants, fertilizer and ammonia plants and other industries, while the rest will be exported.
A final investment decision at Yakaar-Teranga is also expected in the next few months, with production possible by 2024, potentially using a similar FPSO and FLNG system deployed in the GTA, with the addition of an onshore pipeline to serve domestic customers.
In addition to gas development, Senegal is also set to become an oil producer. Australia’s Woodside is due to start production in 2023 with a 100,000 bpd FPSO at the Sangamar field, 100 km offshore from the capital Dakar. A second phase of that project is planned, likely to be the same size and cost around $2.5 billion, but no development schedule has yet been released.
Future tasks
While the short-term outlook for hydrocarbon exports is positive, due to the impact of the war in Ukraine on global supplies, there remains a risk that newly discovered reserves in Senegal and elsewhere may not be fully exploited as global demand for fossil fuels falls in the next 10-20 years.
Sall, who is the current rotating chair of the African Union, is one of several African leaders calling for natural gas to be considered as a legitimate transition fuel for African countries.
Despite the progress of Senegalese hydrocarbon projects and a buoyant global energy market for producers, it has not been easy for Sal at home. International NGOs and opposition parties have criticized the government for lack of transparency in some oil and gas supply contracts with foreign firms in the past.
Sal’s ruling coalition is less popular at the polls than it was, winning only a narrow victory in legislative elections in August 2022 amid economic hardship for many Senegalese due to the impact of the Covid pandemic and high fuel prices, as well as accusations that that opposition politicians are silenced.
There is also concern that Saul has not yet ruled out a third term in the 2024 presidential election, despite the two-term limit under the current constitution. However, the risk of losing, taking into account the growth of the opposition’s electoral power, may still deter him, according to regional analysts.
But whoever becomes president after the next election must have access to the country’s first oil and gas revenues to increase opportunities for economic growth.
