The Top Contender For Oil And Gas Country Of The Year

It is not uncommon to see renowned magazines and journals name "people of the year" for outstanding achievements in various spheres of social, political and scientific life. Time has named the murdered Saudi journalist Jamal Khashoggi Person of the Year 2018 along with other "guardians" of truth, whilst The Economist labeled Armenia the one nation which has made the greatest headway last year in overcoming its past deficiencies. There still remain more than seven months in 2019, during which anything can happen, even the most outlandish of things, yet there is already a hot contender for the title of Oilprice Oilman of the Year - Macky Sall, President of Senegal. Having so far avoided the pitfalls of development gone wrong à l'africaine, Senegal foreshadows the heretofore rarely seen, unrefined picture of a transparent Africa.

The first advantage of President Sall is his background - it is very rare to see a President of an oil-producing nation actually hailing from the petroleum sector (Sall is a Dakar- and Paris-trained oil geophysicist). Most leaders, like President Bouteflika of Algeria, President Bongo of Gabon and Colonel Gaddafi of Libya, rose through military ranks - only Angolan President José dos Santos studied petroleum engineering in the Soviet Union. Throughout his political career, Macky Sall was director general of Senegal's national oil company Petrosen as well as the state's Energy Minister, making him one of the most suitable people for kick-starting Senegal's oil and gas production from scratch.

Evidently, professional qualifications and experience does not necessarily lead to success if they are coupled with unrivaled voracity (look at how Isabel dos Santos, the former Angolan President's daughter, became the richest business-lady in Africa) - one must also demonstrate considerable self-restraint. President Sall is definitely not the European type of leader, as attested by his somewhat awkward handling of Energy Ministers that question his authority in strategic, yet in terms of close collaborators, he has so far relied predominantly on people with direct petroleum industry experience. This remains true even after his 2019 re-election, following which he appointed Mouhamadou Makhtar Cissé (previously worked as the head of the national power utility company) as the new Petroleum and Energy minister.

The second advantage of President Sall's tenure is that he seems to prefer competition in the oil and gas market instead of monopolization. Three years ago he has created COS-PETROGAZ, a "strategic orientation" committee to oversee developments in the oil and gas sector, so as not to have the national oil company Petrosen doing those tasks. Revamping the country's Petroleum Code went quite smoothly and the changes were enacted into law in February 2019, most notably from now on, it is the people of Senegal (and not the state) that wield ownership of all resources on Senegalese territory. One may say it is a rather cosmetic change, as often this fact is neglected by those in power.

The Petroleum Code specifies the new rules of conduct on the Senegalese market. Instead of the previous, somewhat vague, phrasings it now states that the state will participate in at least 10 percent of any project's exploration and development phase - with an option to raise its stake by an additional 20 percent. The Petroleum Code also caps Cost Oil to be repaid to the PSA contractor, following the logic that the deeper you drill, the more you get back. The lowest Cost Oil stands at 55 percent for onshore oil projects and the highest at 70 percent for ultra-deep oil operations. Profit Oil is also stipulated in the contract, with the state share rising from the minimum of 40 percent to the maximum of 60 percent depending on the accumulated income.

There might be merit in saying that the previous Petroleum Code only referenced petroleum contracts on state participation or local content rules, leaving a wider maneuvering field for investors, whilst the current one broadens the mandate of Petrosen and the Energy Ministry. And with this we come to the third advantage of President Sall's administration - they actually pay heed to advice from third parties. The World Bank is heavily involved in drafting Senegal's energy policy, moreover the US Government-led Power Africa Initiative co-drafts Senegal's Gas Master Plan.

Source: Petroleum Economist.

It is no accident that the next landmark document to be adopted is the Gas Master Plan - Senegal's offshore seems to have a high gas/oil reserve ratio. The recent Yakaar discovery alone, estimated to contain 15 TCf of recoverable natural gas reserves, points towards the necessity to create a second LNG hub around it (the first being the cross-border Greater Tortue FLNG project) - with further discoveries in the Yakaar-Teranga-Greater Tortue triangle being an almost certainty. Given the abundance of offshore gas deposits, natural gas will become the primary source of power generation (with several power plants that currently run on crude oil anticipating a retro-fitting to gas), with crude oil from SNE gravitating towards exports (all the more so as Senegal only has one tiny and unsophisticated refinery that is working).

Senegal currently has only one producing hydrocarbon project - the onshore Gadiaga field, whose annual production hovers in the 600-700 MMCf interval. Onshore, however, is not the part of Senegal which conceals the true hydrocarbon bounties, for it one has to look at deepwater. Both the Tortue-Ahmeyim gas field and the SNE oil field are planned to start production in 2022, even though the latter is still missing a positive final investment decision. Endowed with recoverable reserves of some 0.7 BBbls of crude, the FAN-SNE complex in the southern part of Senegal's exclusive economic zone is the nation's only oil discovery. There might be more coming up as the operator firm Woodside has just contracted two drillships for further well-spudding, Ocean BlackRhino and Ocean BlackHawk, with the intention of drilling the Spica exploration well in 2020-2021 some kilometers to the north of the SNE field.

Everything that has been discussed above still needs to be acted upon. It is one thing to cut the presidential mandate from 7 to 5 years, it is an entirely different one to comply with it. Senegal's first big test will be the long-mooted Licensing Round of 2019, which now that there is a revamped Petroleum Code, should not encounter any administrative resistance. Petrosen intends to open 10 offshore blocks to investors, primarily in Senegal's ultradeep - if the list of global majors present in Senegal widens once it is concluded, you can be sure that the stakes would rise on the Senegalese energy market. For now, Senegal's transparency drive still feels fragile - the trust built up by constructive steps taken towards a transparent Petroleum Code might be shattered within a couple of weeks if the State resorts back to ad hoc arbitrariness. Yet if it does result in success, consider the OilPrice 2019 Oilman of the Year award earmarked.