What is your role in the Senegalese oil and gas industry and how have you seen the industry evolve in the last decade?
As Founder and Managing Director of Equinoxe Consulting, my role is to bring a significant contribution to the development of the Senegalese basin’s exploration. We have a proven track record in advising exploration and production companies and governments on exploration process and strategy and on the continually evolving industry best practices to explore for hydrocarbons.
In a context where environmental, social and governance matters have a pivotal importance, our industry knowledge and experience of local and regional regulations; ecological and social sensitivities; engineering processes, operations and project economics, allows us to advise on measures needed to manage efficiently the potential adverse environmental and social impacts. The industry has spectacularly evolved in the last decade and I am very honoured to have witnessed and played a major part to its growth as I am active in the Industry since 2012.
Do you believe COVID-19 will have a long-term impact on Senegal’s future as a major hydrocarbon producer?
The world as we know it was shaken by the rapid drop in the price of oil during March and April and universally all major companies reduced capital expenditures. While it appears that we are slowly emerging from the initial period of lockdown, and that the oil prices seem to be creeping up again, the timing and magnitude of a full recovery, if any, is uncertain. The U.S. Energy Information Administration is predicting that oil prices will continue to rise this year as oil stored is consumed and that this trend will carry out into 2021 and beyond. If you go on three to five years prices on the futures market price is approaching $50-$60/bbl. Brent liquefied natural gas (LNG) markets have also encountered significant downward pressure on price over the last year, a trend that was observed before the COVID-19 pandemic, but the commodity is also expected to see a price resurgence by mid 2020’s according to some analysts; driven by global trends for gas substitution of oil and coal for electrical generation.
Senegal’s mega projects are probably rephased outwards in time but not stopped as we observe with the delays at Grand Tortue Ahmeyim reported by BP and Woodside reviewing cuts and potentially additional delays to its Sangomar development. Given the context of demand and supply leading to price impacts, it is highly likely that this is what the investors of these mega projects are considering. Senegal will join its place as a major hydrocarbon producer, but it may take longer to achieve this goal.
What major sector restructuring is necessary to insure smooth revenue generation from petroleum production?
I see multiple weak links and challenges at present. First and foremost, the country must maintain a competitive advantage on its commercial offer for investors and this goes beyond just the hydrocarbon law. Senegal’s low ranking (141st out of 190 countries) in the 2019 World Bank’s Doing Business survey reflects the bureaucratic challenges foreign investors can face. The Government of Senegal continues to implement measures to reduce the cost of setting up a business and to simplify the administration processes, but this needs to remain a focused priority.
A hydrocarbon sector needs a highly local functioning banking sector; able to transact quickly and internationally with very large quantum of money involving different currencies. The banking sector and the regional financial markets are not fully prepared for these transactions. This is one weakness I can see early on.
A longer-term weak link for revenue generation, occurs in the downstream space. Building a local gas economy that utilizes production to displace refined products and use of liquid fuel for electrical generation and chemical plants will take years to develop but is required to improve long term revenue streams for the country and to assist in the development of a local industry.
How can Senegal increase its already strong oil and gas attractiveness?
The country has a tremendous potential and the Senegal basin offers world-class opportunities. Senegal has demonstrated its attractiveness by being welcoming to investors, by being competitive in its exploration and production offer, by delivering a high rate of return for money invested, and nonetheless need to continue improving its fiscal & administrative attractivity.
Government must have constant oversight and revise as necessary the laws in the value chain so that Senegal becomes one of the country of choices on the African continent and beyond for hydrocarbon capital expenditure.