Senegal - Mauritania: "Audits challenge BP's spending on the GTA cross-border gas project".

Following the delay in the launch of operations at the Grand Tortue-Ahmeyim (GTA) offshore gas field, shared by Mauritania and Senegal, a disagreement has arisen over the costs charged by British energy giant British Petroleum (BP), which heads the consortium responsible for this major project. Audit reports initiated by both countries have disputed the expenses claimed by BP.

The launch of the project, originally scheduled for earlier this year and constantly postponed, is now facing further potential delays. The problem is no longer technical or related to previous Covid-19 delays, but rather concerns a complex dispute involving BP, Mauritania and Senegal.

Nouakchott and Dakar are increasingly at odds with their consortium partner, BP, over the rising costs associated with the delayed start-up of the project, now scheduled for the fourth quarter of 2024. These delays have significantly increased investment costs, which in turn diminish potential returns for Mauritania and Senegal. This financial constraint prompted the two nations to announce cost audits in January 2024, as development, construction expenditure for the FLNG (Floating Liquefied Natural Gas) unit and the FPSO (Floating Production Storage and Offloading) unit doubled compared with initial 2018 estimates.

At the start of the project, the project partners-BP (61%), the American Kosmos Energy (29%), and the national companies of Senegal (Petrosen) and Mauritania (SMHPM), totalling 10%-committed to an investment that far exceeded the planned figures. BP entered the project by acquiring a 61% stake from Kosmos Energy for $1 billion, positioning itself to manage investment, operations and marketing.

However, the doubling of project costs poses a risk of reduced future revenues for Mauritania and Senegal. Faced with rising costs and perceived financial discrepancies, both countries have initiated audits to examine BP's financial claims for the project.

The main costs of the project involve four major components:

1. An offshore breakwater housing the liquefaction plant, awarded to a Franco-Italian Eiffage-Saipem consortium for $350 million.
2. Marine engineering for gas extraction for $750 million, awarded under an EPCI contract.
3. The FPSO, contracted to TechnipFMP for around $1 billion in EPCIC mode, covering construction to operation.
4. The FLNG unit, valued at $1.3 billion under a 20-year lease and operating agreement.

These components were originally budgeted at around $3.5 billion, but have since risen due to repeated delays and unforeseen expenses, including the bankruptcy of US engineering firm McDermott, a key BP partner in the project.

By 2020, Mauritanian expert Hassana Mbeirick noted that BP's investments had almost reached $10 billion, a figure that has continued to rise. As a result, projected revenues for Mauritania and Senegal in the first phase of the project are limited to 2.5 million tonnes per year, with earnings of a few hundred million dollars.

Following another announcement of project delays in January 2024, both countries launched full audits to determine whether BP had inflated their financial reports. The initial findings of a Tunisian accounting firm, headed by oil cost specialist

Samir Labidi, suggest that BP may have overestimated their expenses.

According to Africa Intelligence reports, the preliminary results of the audits have been handed over to the Mauritanian Minister of Petroleum, Energy and Mines, and similar conclusions have been reached by the Senegalese authorities. The two countries are now coordinating their responses to address these issues with BP, including concerns about non-compliance with local content requirements in the oil sector.

Given the substantial revenue potential of the GTA project, estimated at $80-90 billion over 20 years, and the critical financial stakes involved, Mauritania and Senegal are advocating a comprehensive renegotiation with BP. However, multinational companies often include stabilization clauses in their contracts to protect themselves against political risks and legislative changes. Despite these protections, proven overbilling could force a revision of financial terms to ensure fair compensation for Mauritania and Senegal.