Why Senegal & Mauritania Must Capitalize On Their Vast Natural Gas Resources As Quickly As Possible – NJ Ayuk
Senegal and Mauritania could be described as rising stars in the energy industry.
After one significant offshore discovery after another in the region between 2014 and 2017, it has become evident that the region has massive stores of natural gas: as much as 1.13 trillion cubic meters (tcm) in proven reserves in Senegal and 28.3 billion cubic meters (bcm) in Mauritania.
There was a time in the not-so-distant past when Senegal and Mauritania’s odds of fully capitalizing on their rich resources were not entirely certain. Large African oil and gas discoveries were met with hand wringing by western countries and environmental organizations. The general argument was that African countries were better off leaving their petroleum resources in the ground so they wouldn’t contribute to greenhouse gas emissions and global warming. International oil companies (IOCs) and investors were becoming increasingly reluctant to support African petroleum projects.
But now, world events have changed much of that. During the last few months of 2021, global gas demand began exceeding supply, sending natural gas prices to record highs in Asia, Europe, and the U.S. Gas concerns heightened earlier this year as European countries began looking to Africa to help them wean themselves from their dependence on gas from Russia in response to its invasion of Ukraine. The situation has grown even more urgent for Europe in recent months: Russia answered Europe’s plans to gradually use less Russian gas with immediate reductions in gas deliveries.
As a result, Western countries that once pressured African countries to strand their petroleum resources are now investing in African oil and gas projects. They’re interested in building African infrastructure. They’re focused on doing anything they can do to help meet their pressing gas needs.
I would not describe the undersupplied gas market or the suffering in Ukraine as opportunities, but these situations have created a new reality for African countries with oil and gas reserves.
My advice for Senegal and Mauritania, and the companies that have discovered petroleum there, is to be aggressive about keeping their projects on schedule. Natural gas and liquified natural gas (LNG) projects are already in various stages of development in Senegal and Mauritania, but it is imperative that stakeholders do everything possible to drive their projects forward. They must avoid delays because it is impossible to know how long European countries will be willing to invest in and encourage these projects. The reality is, while Senegal and Mauritania now have a better chance to capitalize on their gas for domestic needs, monetize gas, and grow and diversify their economies with gas, their window to accomplish those things has an invisible expiration date.
The African Energy Chamber addresses this in its soon-to-be-released Petroleum Laws – Benchmarking Report for Senegal and Mauritania. One of the report’s key recommendations to government leaders and international oil companies (IOCs) in Senegal and Mauritania is to make it a priority to avoid project delays on project timelines.
We’ve Already Seen Slow-Downs
As our report notes, projects in the region already have hit some speedbumps.
Look at Greater Tortue Ahmeyim (GTA), the offshore LNG project on the maritime border of Senegal and Mauritania being developed by BP, Kosmos Energy, Senegal national oil company Petrosen, and Mauritania’s Societe Mauritanienne des Hydrocarbures (SMHPM). The project’s floating liquified natural gas (FLNG) project, a Phase 1 development, was initially scheduled to come online in 2022. Now project partners plan to complete Phase 1 in 2023. The initial delay was caused by the COVID-19 pandemic, but the project also has experienced a bit of “timeline slippage” due to cost inflation, which bumped Phase 1 completion from the first quarter of 2023 to the third quarter.
GTA, and the region’s other projects, from the Yakaar-Teranga power and LNG project to BP’s BirAllah gas project offshore Mauritania, must stay on track going forward.
As our report states, “Any delays in these projects which are already looking at late 2020s to mid-2030s (barring the GTA FLNG Phase 1) start-ups can result in not being able to fully utilize the under-supplied LNG market in the coming few years.”
It’s also important to recognize that while European countries are making every effort to import natural gas from Africa, they’re working just as furiously to get gas from other regions of the world, including the U.S., Guyana, Qatar, and Azerbaijan.
As Stanley Reed wrote for The New York Times, “As Russia tightens its chokehold on supplies of natural gas, Europe is looking everywhere for energy to keep its economy running. Coal-fired power plants are being revived. Billions are being spent on terminals to bring in liquefied natural gas, much of it from shale fields in Texas… Across Europe, fears are growing that a cutoff of Russian gas will force governments to ration fuel and businesses to close factories, moves that could put thousands of jobs at risk.”
We also should remember that Europe considers green energy sources part of its energy solution, too. Again, European leaders are looking to Africa to meet some of those needs, green hydrogen (produced without fossil fuels) in particular, which is a valuable opportunity. But that doesn’t mean we shouldn’t recognize the urgency of helping Europe satisfy its natural gas needs while we can. Missing out on all that gas can do for Senegal and Mauritania — on what it can do to help eradicate energy poverty, build business, and create jobs — would be a heartbreaking loss.
We Can Do This
I understand that some gas project delays, like the ones caused by the pandemic, are outside of anyone’s control. But there are measures that governments and companies can take to keep projects moving forward.
As I’ve made clear more than once, the governments of Senegal and Mauritania should be commended for everything they’ve done to create a positive environment for doing business in their countries. Their fiscal policies were created specifically to attract IOCs, and that was exactly the right thing to do. That said, I would encourage oil and gas ministries to continue looking for, and eliminating, red tape and inefficiencies with potential to impede gas projects’ progress.
I am encouraged by the words of Moustapha Bechir, the Director General of Hydrocarbons at the Ministry of Petroleum, Energy, and Mines in Mauritania, who has said that the ministry is working to optimize Phase 2 of the GTA FLNG project.
“We are now reshaping Phase 2 to better fit the concept and to accelerate it and maximize the economics of the project,” Bechir said in 2021.
As for the companies who’ve been exploring in Senegal and Mauritania, those who are moving ahead with gas and LNG projects, they’ve made great strides as well. I would simply encourage them to be proactive about recognizing situations that could interfere with project timelines so they can be addressed as efficiently as possible.
I have told my employees and fellow African energy stakeholders that we still have work to do — there’s still so much good we can accomplish. The same holds true for governments and companies in Senegal and Mauritania. The region’s natural gas truly has the power to benefit everyday people. It can make it possible for millions, many for the first time, to experience life with reliable electricity. It can create business opportunities and empower individuals to make a good living. And, it can set the stage, through industrialization and economic diversification, for a pattern of long-term growth and stability.
We simply need to move forward quickly and decisively to make these things happen.
– NJ Ayuk, Executive Chairman, African Energy Chamber.