New Senegalese leader to renegotiate oil and gas contracts with bp, Kosmos, Woodside

Katarina Höije and Paul Burkhardt, Bloomberg March 28, 2024

(Bloomberg) – Newly elected Senegalese President Bassirou Diomaye Faye plans to revisit the contracts of oil and gas projects developed by bp Plc, Kosmos Energy Ltd. and Woodside Energy Group Ltd. in order to boost revenue for the state.

Bassirou Diomaye Faye in Dakar, Senegal, on March 25

The West African country is set to open the taps this year on the $4.8 billion Grand Tortue Ahmeyim liquefied natural gas (LNG) project and Sangomar oil development after numerous delays, setting it up to become one of the world’s fastest-growing economies.

Faye drew investor attention days before this week’s presidential election when he pledged to review the projects. He expects to make good on that promise after a surprise victory in the vote, according to his economic team.

“To boost the state’s revenue from oil and gas, it’s necessary to renegotiate the contracts to increase the state’s shares and change the system of sharing of production,” said Ngagne Demba Toure, an oil adviser to Faye. “Renegotiating contracts doesn’t mean that the state will impose itself on the companies without taking the law into consideration, but that the two parties agree to discuss some clauses of the contract.”

Kosmos expects a “business-friendly” environment in the West African country to continue, the company said in a response to questions. “We remain focused on working with our partners to deliver first gas” at the GTA project later this year, it said.

bp aims to keep a constructive relationship with the incoming president, just as it did with the country’s previous leaders, said Gordon Birrell, executive vice president responsible for production and operations at the London-based company. He plans to meet with Faye when the new government is formed.

Woodside didn’t respond to an emailed request for comment.

Faye’s predecessor Macky Sall — who sparked a crisis in the country by postponing the election and trying to hold on to power for an extra year — said in an interview this month that trying to renegotiate existing contracts would be “disastrous” for Senegal.

“Oil and gas contracts can always be improved, but frankly, thinking that we can change the contracts already signed with the companies is not possible,” he said.

The incoming administration should set clear objectives over revisiting the contracts, according to Papa Daouda Diene, an analyst at the Natural Resource Governance Institute, a non-governmental organization.

“It is also important for the government to set realistic timelines on that process and communicate transparently to make sure that everything goes well and we do not add further delays,” he said.

The IMF revised its forecast for economic growth in Senegal this year to 8.3% from 10.6% after earlier delays to the projects designed to realize exports of as much as 100,000 bopd and at least 2.5 MMtpa of LNG.

Faye’s economic team also called into question the validity of an earlier deal that transferred offshore fields to bp.

“The blocks were awarded to someone with little experience on how to develop them,” said Babo Amadou Ba, his economic policy adviser. “They were transferred to BP and Kosmos without Senegal being able to use its first buyer’s right.”

In 2012, Senegal’s then-President Abdoulaye Wade signed a contract for natural gas blocks with Petro-Timis, a company owned by Romanian-Australian businessman Frank Timis. Allegations that outgoing President Macky Sall’s brother received payments in order for the company to keep the contracts under the new administration caused an uproar in 2019. By then, Timis had already sold the Saint-Louis and Cayar concessions to bp, which paid $10 billion at the time, according to a BBC report.

“Senegal has money, it has resources on its subsurface and this potential must benefit the Senegalese people,” Demba said. “It’s necessary that we change the contracts signed with those who exploit our oil and gas, looking at the clauses and to maximize the part of the state.”

Lead image: Greater Tortue Ahmeyim LNG project (Source: McDermott)

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