Senegal’s Gas Supply, Slowed But Still Strong

Senegal has begun its economic recovery following the initial Covid-19 pandemic, notably pausing production of the Greater Tortue Ahmeyim (GTA) and Sangomar gas fields. The recent discoveries had heralded a promising new age for the Senegalese economy until the Covid-19 pandemic hit the global oil and gas industry, placing many projects on hold as the market stabilized.

The West African nation, like most others, has seen their economic growth forecasts slashed from a pre-pandemic 6.4% in 2020 to just 3.3% – a 0.9% y-o-y expansion. While the economic retraction is far from ideal, Senegal can take look to the recent gas discoveries to restore life into the local economy. Fitch Ratings predicts a growth recovery at 5.4% in 2021 and 6.4% in 2022 – 3.3% above the medium-term Sub-Saharan average. In September, President Mackay Sall announced a growth estimate of 13.7% by 2023 as a result of oil and gas discoveries.

Greater Tortue Ahmeyim

The Greater Tortue Ahmeyim gas discovery represents a promising new era for the country as they seek to take advantage of new found gas resources in the offshore basin that straddles the border with Mauritania. Owned as a joint venture between BP, Kosmos Energy, Petrosen and SMHPM, the GTA is the deepest offshore gas field in Africa to date, lying in waters over 2km deep.

The initial timeline had earmarked an early 2022 date for the start of commercial production, however Covid-19 led to the operator, BP, into declaring a force majeure – allowing them to unilaterally halt production due to international travel restrictions, market volatility and stark barriers to complete construction and installations. Among the projects paused was Golar LNG’s floating processing facility.

Following the production pause, Phase 1 of the GTA timeline has now been revised to first production in 2023 and at a revised cost of $4.3 billion – an added $300 million cost above original estimates.

The GTA field is thought to hold up to 15 trillion cubic feet of gas, with BP and Kosmos estimating 100 tcf in the wider basin. The Golar floating LNG facility, once complete, is expected to process 2.5 million tonnes of gas per annum during the Phase 1 cycle.

Sangomar

Senegal’s fortunes were given an additional boost with the development of the offshore Sangomar oil and gas field, 100km south of Dakar. It is the first oil discovery in Senegal, and the country believes it holds the potential to bring an added impetus to the regional oil and gas sector.

The Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore (RSSD) joint venture is owned by Woodside (operator), FAR Ltd and PetroSen. First discovered in 2014, the development timeline initially set the development of the field to commence in early 2020. Yet as the global pandemic threw the oil markets into chaos, the timeline for first commercial production had to be reviewed.

The $4.2 billion project had threatened to be slowed by the anticipated sale of a portion of FAR’s 13.67% stake in the Sagomar exploration field and 15% of the RSSD evaluation area to Woodside, all while FAR Ltd concurrently considers a takeover of the company by Russian E&P outfit, Lukoil. Lukoil have proposed a non-legally binding bid that values FAR Ltd at $170 million.

Despite the pandemic, Woodside has reaffirmed their commitment to the original project timeline that saw first oil production happen in 2023. The Australian company is confident that this timeline can still be met, albeit even if a few months later in the year.

The oil field will be serviced by a permanently moored FPSO vessel built by MODEC, which the company says can process 100,000 barrels of crude per day with a storage capacity of 1,3 million barrels of crude.

Senegal’s government is under pressure to extract the greatest value from these finds, and channel them toward development of the local economy. Since 2000, Senegal has improved the lives of its citizens across most metrics; growing the GDP from $6 billion to $23 billion, expanding access to education, healthcare and extending life expectancy by 10 years. With these discoveries and the laws regulating oil and gas sector, most forecasts predict Senegal will exceed economic expectations and successfully rebound from a challenging period under the Covid-19 pandemic.

The global downturn, especially within the oil and gas industry, allowed for a moment to consider the operational expenditures and commitment to the developments.  Ultimately, the reformed regulatory environment in Senegal has promoted confidence from both investors and operators, a confidence deepened by the response of oil and gas markets to surge close to pre-2020 prices.