The World Bank’s board of governors has approved a new kind of project for Africa’s oil and gas industry, giving Senegal $20m to create a much-needed programme to provide practical advice and technical assistance, along with support for strengthening government capacity whenever it is engaged in complex gas negotiations.
In 2013, Senegal’s natural gas reserves were marginal at 363 million cubic metres and natural gas sales surpassed 41 million cubic metres. But in the past few years, several significant oil and gas discoveries have been announced, including in the offshore Tortue well, shared with neighbouring Mauritania.
Driven by the recent discoveries, the new World Bank project aims to optimise fiscal revenues while generating other benefits for the country and maximising operators’ expected profits. Several challenges need to be addressed by Senegal’s government to ensure that ongoing oil and gas developments adequately contribute to economic growth and employment.
A capacity audit and a gap analysis are being developed in order to assess capacity enhancement requirements; ensure effective negotiation of the oil and gas projects; optimise project execution; and enable the Senegalese people to seize job opportunities that will be directly and indirectly created by these projects.
While scaling up capacity and finding affordable options to finance the share of the national oil company are common requirements to any new sectoral development, there are other more specific challenges.
Crossborder hydrocarbon deposits can create complex legal issues between countries so an immediate challenge for Senegal and Mauritania is to develop the foundation for a successful unitisation agreement. The development of the transnational resource at Tortue is a high-risk, high-reward project for both Senegal and Mauritania.
Tortue is an ultra-deep water gas discovery, located 150 kilometres from the coast. It has a complex geology and straddles the borders of Mauritania and Senegal. The size of the resource is sufficiently large to serve both the regional and international markets.
Given that the regional market is very limited in size and has no gas transport infrastructure network, resource development would mostly target international markets and involve the liquefaction of the gas. This could be done in a liquefaction plant that could be located either on a floating liquefied natural gas (LNG) plant, where gas treatment could also be done in shallow water or, more traditionally, treatment and liquefaction could be managed onshore.
In the latter case, a harbour would have to be built for the loading of LNG cargoes. Roads and an airport would typically be built around the plant, which would either have to be connected to the power grid or to be built using its own power generation system. LNG projects are therefore ‘mega-projects’ that include several large infrastructure projects, the construction of which can bring job opportunities and other local development.