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Senegal—the start of a beautiful friendship

A victory for Macky Sall in the presidential elections in 2019 would cement the future of his country's hydrocarbons industry and bring more exploration

Even before final investment decisions (FIDs) have been taken on Senegal's first major hydrocarbons projects, wider industry interest in the country has been ignited. More drilling may be the outcome.

Kosmos Energy and BP are already moving on with exploration in Senegalese acreage to the south of the cross-border Tortue finds, where they could find oil or gas. Kosmos has long pushed the oil—as well as gas—potential of its Senegalese and Mauritanian acreage, and while BP insists it is keener on gas than oil these days, an oil find could still help the economics of any future developments.

But major oil discoveries have yet to materialise on their licence areas. Kosmos, which runs the partners' exploration campaign, said in December that analysis of data from the Lamantin-1 well, located in Block C-12 in Mauritania, had failed to find significant oil or gas and was being plugged. There had been hopes that the structure would be oil-rich. In October, the company said its Hippocampe-1 well in Block C-8, Mauritania, had also been unsuccessful.

Now attention has turned to Senegalese waters. The Ensco DS 12 drillship has moved across the border from Mauritania to drill in the Requin Tigre prospect in northern Senegal, to the west of the Tortue finds, where there are also hopes of finding oil. Results are expected in the coming weeks.

"You could argue that the companies are close to the stage where they don't necessarily need any more gas and they certainly don't want another duster, so it would seem very favourable to find some liquids in Requin Tigre," says David Thompson, sub-Saharan analyst at Wood Mackenzie.

Others are joining the hunt for hydrocarbons, notably Total, which—belatedly for the French national champion in a country with strong ties to France—signed an agreement with the government last year to explore. The company secured exploration rights on the Rufisque Offshore Profond deep-water block, which covers more than 10,000 sq km and also said it would perform studies to assess the exploration potential of Senegal's ultra-deep offshore.

Australia's Far Limited, a minority partner in SNE, also has exploration acreage adjacent to the development, and also hopes to drill in The Gambia, just to the south of SNE. The Gambia is surrounded by Senegal on all sides other than towards the sea. Far also has interests in acreage on the Senegal-Guinea Bissau border in the south, in the AGC concession area shared between the two states, where China's Cnooc farmed into acreage in 2017. The AGC has yielded some small oil finds.

The Sall effect

More firms may follow, wooed by Senegalese President Macky Sall's reputation as a leader who "gets" the oil industry. He is up for re-election in 2019, after FIDs are due to be taken on the existing development projects.

Senegal is a lively democracy, with a recent history of change at the top. The flamboyant Abdoulaye Wade was replaced by the considerably less flashy Sall in 2012, when controversially running for a third term. So, there is no guarantee that Sall will be re-elected in 2019, though Western diplomats in the country think that, with the economy doing well and the promise of future hydrocarbons revenues, he has a good chance.

A popular opposition leader has not emerged either. Karim Wade, son of the previous leader, was jailed for corruption for six years in 2015. He had been chosen as the presidential candidate of the main opposition party, while already in prison and awaiting the verdict.

2019—Next presidential election

Observers of Senegalese politics are quick to point out that a change of leader need not, in any case, signal a change of approach to the oil industry—even if the perceived risk would certainly be heightened.

If Sall wins in 2019, he would be in power until 2024 under the new term span of five years, recently changed from seven. He would have to stand down after the maximum two terms in office. But the hydrocarbons industry ought to be well established by then and the country better able to handle the multi-billion-dollar investments it is just starting to see happen.

Sall may understand oil and gas, but he will be no pushover for the industry, which can expect the cost of investing in the country to rise as interest in the sector grows. In particular, gas developments will face demands to bring more supply onshore for power or future onshore LNG projects. These would bring more obvious direct benefits to the local economy than floating LNG in terms of jobs, improved transport and other infrastructure.

While the shape of the Greater Tortue development, based on FLNG, is influenced by the need to keep both Senegal and Mauritania happy, it should prove simpler to develop discoveries such as BP's and Kosmos' Yakaar and Teranga finds, which lie completely within Senegalese waters. No one has suggested how a project to exploit those resources could look, but an onshore LNG facility would clearly be one option.

Source: Cairn Energy

This article is part of a report series on Senegal. Next article is: Senegal-Mauritania borderline development

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