Senegal’s decision to set up a commission to re-examine its oil and gas contracts has been greeted with calls for transparency by energy industry insiders.
The committee will review agreements and seek to “rebalance them in the national interest,” Senegal’s Prime Minister Ousmane Sonko said on Aug. 19 when he announced the first meeting of the committee. Sonko and President Bassirou Diomaye Faye, who took office in April, vowed to renegotiate energy contracts when they were in opposition.
The offshore Sangomar oil field, operated by Australian energy company Woodside, is likely to be one of the main assets to be scrutinized. It was discovered 10 years ago and is expected to produce 100,000 barrels per day.
Another project is the Greater Tortue Ahmeyim (GTA) liquefied natural gas (LNG) project, operated by energy giant BP, which straddles the Senegal-Mauritania border. It is expected to produce on average 2.3 million tonnes of gas per year.
The non-profit Natural Resource Governance Institute, in a new report, said renegotiations “could maximize long-term benefits for the state” if the process was transparent and well-managed.
“An opaque process could damage relations with partners, discourage future investments, and undermine citizens’ trust in the governance of their natural resources,” the report warned. It also said that “now is a tricky time to consider renegotiation, as several extractive projects in Senegal are entering production.”
Saul Kavonic, an analyst at the equities research firm MST Marquee, told Semafor Africa that making retrospective changes to existing projects “will do irreparable damage to Senegal’s reputation.” Such reputational damage “could extend to deter investment in other sectors well beyond oil and gas,” he added.
Source: semafor.com