Momentum Building Offshore Senegal

December 20, 2018

Performance of Senegal’s offshore oil and gas market appears to be gaining momentum as the West African country moves to shed the tag of being an uncertain prospectivity to join the region’s league of oil and gas producers as more international oil companies step up their exploration and appraisal activities.

Despite persistent volatility of the global liquefied natural gas (LNG) prices and the huge investment requirements necessary to exploit Senegal’s huge hydrocarbon resources, a number of international companies are pushing on with their work programs in the country, including securing necessary government approvals for their investment plans and environmental and social impact assessment studies.

In addition, the Senegalese government has reiterated commitment to review the country’s Petroleum Code to ensure it not only enhances the benefits accrued for Senegal from its offshore oil and gas resources, but also provide clarity in terms of taxation, conflict resolution and a workable local content structure.

Australia-based independent, Africa-focused oil and gas company FAR Limited has become the latest international oil company to announce progress of its growth strategy offshore Senegal after it confirmed commencement of the front-end engineering and design (FEED) activities for the first phase of its deepwater SNE field development.

FAR, which has made offshore oil discoveries in Senegal with the 1,430m deep FAN-1 and 1,000m deep SNE-1 wells and holds an additional portfolio of exploration licences in The Gambia, Guinea-Bissau and Kenya, said early this week the FEED entails a series of studies and activities “to finalize budget, schedule and technical definition for the SNE Field development aimed at the Joint Venture reaching a final investment decision (FID) in 2019.”

“Commencement of FEED activities is a significant milestone for our Joint Venture and the SNE Field development offshore Senegal,” said Cath Norman, FAR’s managing director.

FAR and joint venture partners Cairn Energy (operator), Woodside and Petrosen, are proud it has taken only 48 months from discovery to the reaching FEED phase in spite of less than favorable general oil and gas market conditions, even as they move to the next phase of project financing.

Commencement of the FEED for the SNE development builds on a series of successful pre-production activities launched by a number of joint ventures offshore Senegal and which appear to have been set off by the 2014 discovery well deep offshore Sangomar block by U.K.-based Cairn Energy.

Other previous positive developments that have laid the foundation for a possible sustainable expansion of Senegal’s offshore oil and gas market include the Geumbeul-1 &2 offshore discovery wells in the Tortue and Teranga project by Kosmos (operator) with its partners Timis and Petrosen. This discovery was highly anticipated, especially coming shortly after the Ahmeyim-1 offshore well in neighboring Mauritania, also by Kosmos jointly with Mauritanian Hydrocarbons and Mining Resources Corporation (SMHPM).

The May 2017 signing of two exploration agreements between the Senegalese government and French supermajor Total S.A was more of spicing up the already appetizing offshore Senegal despite a few challenges that still stand between the country and its dream of an oil and gas boom.

Apart from the volatility of global oil and gas prices, Senegal has been working with neighboring Mauritania on how they can viably address the challenge of having oil and gas blocks that straddle their common boundary. So far there has been a good working relationship between the two neighbors, which has been reinforced by having some oil and gas explorers operate blocks that cut across the boundary.

Elsewhere, Senegal is fine-tuning its Petroleum Code to align with the current global hydrocarbon industry good practices and international standards, such as compliance with globally recognized environmental requirements, in addition to making regulations investor friendly for small and big oil and gas companies, including those already active offshore Senegal.

If Senegal manages to successfully maneuver around the contentious issues of taxation and local content and ensure they are engraved in the Code with clarity, then the oil and gas story of this West African country, which has the advantage of having geologist Macky Sall as President after long stints as Director General of Petrosen and also Minister for Mines, Energy and Hydraulics, is likely to stand out from the rest of West Africa, a region that is yet to get it right with their hydrocarbon sector policies.

Recent developments offshore Senegal have raised optimism among explorers and Senegalese authorities of likely final investment decisions in 2019 and even first commercial production by or before 2022.

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