Senegal: What are the details of the gas and oil agreements that President Diomaye Faye wants to renegotiate ?

One of the key commitments of Senegal's new president, Diomaye Faye, concerns the renegotiation of mining, oil and gas contracts to better serve the interests of local populations. The exploitation of two major oil and gas fields in the country's territorial waters could generate revenues in excess of one billion euros per year over a thirty-year period.

These fields are located near Dakar. The two main oil and gas fields are scheduled to come on stream before the end of 2024. The gas field, named "Grand Tortue Ahmeyim", lies at a depth of 3,000 meters off the coast of Saint-Louis. The field will be jointly operated by British Petroleum (BP) and US-based Kosmos Energy.

The extracted gas will be transformed into liquefied natural gas (LNG). According to company estimates, production could reach 10 million tonnes annually by 2030, positioning Senegal as Africa's fifth-largest gas producer. A Chinese company is in charge of building the extraction platforms, located between Mauritanian and Senegalese waters. Senegal's state-owned oil company, Petrosen, is also involved in the contract.

Another significant deposit, the Sangomar offshore oil field, will be exploited by the Australian group Woodside.

Projects to extract these two hydrocarbon resources have suffered delays. The gas contract was signed in 2014 and the oil contract in 2004.

Exploitation of these deposits is crucial for Senegal, not least because operations, scheduled to start at the end of 2024, could bring in an average of 700 billion CFA francs a year over three decades. This is all the more important as the tourism sector, which accounted for 10% of GDP in 2018, is struggling to return to its pre-Covid level. The country is counting on these new resources to stimulate its economy.

European demand for LNG increased following the invasion of Ukraine. In May 2023, German Chancellor Olaf Scholz visited Dakar to secure Germany's gas supply.

As for President Diomaye Faye's ability to renegotiate these contracts, the new Senegalese authorities judge the agreements concluded under the previous administration to be unfavorable, although this is disputed by the previous administration and most experts in the sector. The President has announced an audit of the mining, oil and gas sector.

Previous President Macky Sall (2012-2024) expressed in an interview with Bloomberg on March 19 that while improvements were possible, denouncing existing contracts would be impractical and disastrous for Senegal.

According to oil expert Ibrahima Bachir Dramé, there are no explicit renegotiation clauses in oil contracts, but there are clauses regulating potential disputes.

Papa Demba Thiam, international economist and specialist in industrial development, points out that the renegotiation of mining or hydrocarbon contracts is commonplace worldwide, citing examples in the Latin America-Caribbean region where between 40% and 92% of contracts are renegotiated within 1 to 8 years of signing.

Senegal's constitution stipulates that natural resources belong to the people and should benefit them. According to Thiam, current conditions fully justify a renegotiation of the contracts, particularly in view of the delays in exploitation which are reducing the profitability of the projects.