Oil and gas discoveries fuel Senegalese fears
Ordinary people doubt they will benefit from the expected windfall
Graffiti on a wall near the picturesque seaside promenade in Dakar, Senegal’s capital, makes clear what some locals think of their country’s recently discovered oil and gas reserves: more likely to be a curse than a blessing.
Macky=Aliou=Timis, reads a scrawl connecting President Macky Sall, his younger brother Aliou and the latter’s business partner Frank Timis, a controversial Romania-born businessman with an imploded mining company and heroin-related convictions to his name. Degage Gaz Petrole, it adds, which roughly translates as let go of the gas and oil.
With Texas-based Kosmos Energy sitting on 50tn cubic feet of gas reserves and UK-listed Cairn Energy boasting of projected reserves of 473m barrels of oil, Senegal is set to become Africa’s newest energy producer. But many ordinary Senegalese doubt the expected windfall will improve their lives.
“As always in Africa,” says Mansour Boiro, an accountant in his 40s with a small business in a Dakar suburb. “Whenever we have wealth, the government does not share it with the poor.”
Mr Boiro says he is thinking of Nigeria, Angola, the Democratic Republic of Congo and Mozambique. Across the continent, the nations with significant amounts of hydrocarbon and mineral resources are more often than not linked with corruption and poverty, not wealth.
In Senegal, Aliou Sall, the president’s brother, led Mr Timis’s Senegal subsidiary when Dakar awarded it two offshore permits in 2012. Two years later, the company sold them to Kosmos. Aliou Sall no longer works for Mr Timis’s Senegal subsidiary, though he has taken a new job for another Timis-controlled company.
The Y’en a Marre youth movement has joined small political parties in calling for more transparency in awarding contracts and more guarantees from the government that the Senegalese, and not just the state and international companies, will benefit. The government has said it will set up institutions to ensure greater transparency and is committed to ensuring that all Senegalese benefit.
Senegal has a lot to lose. With an economy underpinned by agriculture and forecast to grow at 6 per cent this year, the fact that it has never exported commodities in significant quantities has spared it from the slowdown gripping much of the rest of Africa in the wake of the commodities price crash more than two years ago.
“An economy dependent on oil is out of control because it is governed by geopolitical force and prices,” according to oil minister Thierno Sall, no relation to the president. Senegal intends “to learn from other oil-producing countries” and to act as the “guardian of these resources for the population”, he told an energy conference recently.
“Senegal is in a better position than many other African countries in terms of governance,” says Paolo Zacchia, chief economist for the World Bank in Senegal, citing rankings such as the 2016 Mo Ibrahim Foundation governance index.
Unique in west Africa, it has not witnessed a civil war or a coup since independence. In 2012, then president Abdoulaye Wade handed over power to Macky Sall, bolstering Senegal’s reputation in a turbulent region.
With a break-even price of $35 a barrel for its initial Senegal project, Cairn wants to push ahead to production while oil prices, and industry costs, are still low. It says it aims to get the first oil flowing in 2021, meaning revenues could reach government coffers in less than five years.
By contrast, analysts say commercialising Kosmos’s gas discovery may be prohibitively expensive and could also be complicated by legal and political challenges, because one of the main fields is split by Senegal’s border with Mauritania. It may also require a pipeline to be built through the Sahara to Europe.
There is still a lot to do. Few critical decisions, such as what percentage if any of revenues will be deposited in a fund for future generations, have been taken. The government has to overhaul its 1998 petroleum code and decide bidding procedures for future blocks. It is deciding how and where to educate young Senegalese in petroleum studies so they can eventually take well-paid jobs in the industry.
“I see a difference in pace between the operations on the ground [by the companies] and the discussions at the government level,” said Massaer Cisse, senior manager at Deloitte Senegal, one of the consultancies advising the government.
Some in the industry privately voiced concern about the government’s readiness to handle oil and gas revenues. “I don’t think they know what is about to hit them, and they don’t yet have the capacity to handle it,” said a senior executive from one of the companies in the consortium that will be extracting the oil.