Africa’s big oil and gas finds do little for locals
DAKAR: The last thing Senegal needed in its long-drawn-out effort to capitalise on large oil and gas finds off its coast was political turmoil.

Africa’s newest natural gas superstar had bubbled with optimism when BP Plc, Woodside Energy Group Ltd and Kosmos Energy Ltd agreed to develop the fields off the shores of the West African country a few years ago.

The finds were touted as a game changer in a country where villages are still not connected to the power grid and more than a third of the inhabitants live in poverty.

“General electrification for the entire population will become a reality,” Sokhna Ba, the youngest member of Senegal’s parliament, said in an interview in the capital Dakar late last year.

“The revenue could also be used to improve the living conditions of the population.”

But a string of delays in BP’s US$4.8bil Grand Tortue Ahmeyim (GTA) gas project, with the latest coming just last month, has meant it won’t happen soon, prompting the country to say it may miss the International Monetary Fund’s (IMF) economic growth forecast in 2024.

Now, matters have been made worse by a bid to delay elections that extends President Macky Sall’s term by almost a year, throwing the country that is among the most stable democracies in West Africa into crisis and raising the cost of funds needed for its energy aspirations.

Senegal joins other African countries that have struggled to ride some of the world’s biggest oil and gas discoveries in decades.

The finds have rarely lived up to their promise, often doing more harm than good.

Everything from project delays to political uncertainties and mismanagement have capped export revenues, forcing the nations into additional borrowings and worsening their financial situations.

Senegal’s debt is becoming more expensive, Mozambique has had to restructure its loans and Ghana defaulted amid the mismanagement of its oil and gas production.

The discoveries have also done little to improve the energy situation at home.

Domestic markets across the continent are no match for the lucrative ones beyond its borders.

Foreign companies balk at developments that don’t target export markets, leaving local economies with limited access to their own gas that can be used to generate electricity for homes and industry.

Almost 600 million people, or just under half of Africa’s population, lack direct access to energy even as 6% of the world’s gas and about 7% of its oil is produced there.

“Natural gas is mostly being exported, with African countries benefitting from foreign exchange revenues, but it is true that domestic needs for more energy are significant and are not being met,” said Vijaya Ramachandran, director for energy and development at the Breakthrough Institute, a California-based think tank.

Africa is the only continent where the number of people without electricity access has actually risen over the years.

Most Africans connected to the grid consume less per capita than a refrigerator in the United States.

According to the ​​​​​​International Energy Agency (IEA), the continent’s universal access to modern energy carries a price tag of US$25bil a year, the equivalent of building one liquefied natural gas (LNG) terminal.

But with project developments dependent on foreign companies, and strong demand from Europe, especially as an alternative to Russian gas, electrification in African countries has gotten short shrift.

While the IEA said as much as two-thirds of the continent’s oil and gas production could potentially go to meet local demand by 2030, that estimate is contingent on the interests of foreign companies and nations converging, something that hasn’t been happening.

Take the case of Senegal. On the cusp of becoming a major natural gas producer, the proceeds from exports of up to 100,000 barrels of oil a day and at least 2.5 million tonnes of LNG a year from the GTA project are already baked into the country’s economic forecasts.

But its hopes of tapping the offshore Yakaar-Teranga gas field to help industries at home and in the region seem remote.

President Sall had earmarked the field – Yakaar meaning “hope” in the local Wolof language and Teranga translated as “prosperity” – as one that would spur electrification in West Africa.

But expectations were dealt a blow in November when BP, the operator with a 60% share, exited the field.

BP wanted to export the gas from Yakaar-Teranga, but Senegal wanted it for domestic use, Oil and Energy Minister Antoine Felix Diome told parliament.

As Senegal’s national oil company Petrosen and Dallas-based Kosmos, which temporarily took over BP’s stake, hunt for a new partner with deep pockets, hopes for the development of the field are fading fast.

Khady Ndiaye, West Africa manager for Kosmos, said in emailed comments that the company is working with Petrosen to meet the government’s timetable.

“BP has their interests, and so does Senegal,” Ba, the lawmaker, said. “The difference is that Senegal lacks the means and the expertise to develop its resources.”

BP, which didn’t respond to queries on the project, is still the operator of the GTA development, with healthy demand for LNG exports to Europe.

GTA and another development, Sangomar, could still help boost Senegal’s growth to 8.3% this year as long as operators avoid more delays.

Elsewhere in Africa, Mozambique went through a similar wave of enthusiasm and disappointment following major gas discoveries starting in 2010 off its shores.

Plans by Shell for a gas-to-liquids plant and a fertiliser project led by Norway’s Yara International ASA were cancelled, after they cited changes in strategy and market fluctuations.

In anticipation of revenues from LNG exports, Mozambique, one of the poorest countries in the world, had boosted annual growth forecasts by up to 24% from 2021 to 2025.

It restructured its eurobond in 2019, with the repayment schedule tied to expected revenues from a project that would be bought by TotalEnergies SE.

But an insurgency delayed the onshore facility and associated revenues, raising the risk of servicing the debt.

It has left Mozambique worse off, according to the International Institute for Sustainable Development, a Winnipeg-based think tank. — Bloomberg
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DAKAR: The last thing Senegal needed in its long-drawn-out effort to capitalise on large oil and gas finds off its coast was political turmoil.