Senegal: From Newcomer to Potential Oil and Gas Powerhouse

Senegal has recently made headlines by stepping onto the global oil stage. In June 2024, Woodside achieved its first oil production at Sangomar, formerly the SNE field. This field, rich in oil and gas, is approximately 100 kilometres south of Dakar, the nation's capital.

The commencement of work on the Sangomar Field Development in early 2020 laid the foundation for what could be a transformative era for Senegal. The West African country has successfully launched its first crude cargoes, marking a significant economic and industrial milestone.

These initial shipments, destined for refineries in the Netherlands and Germany, underscore Senegal's emerging status as an oil exporter. The entry of Senegalese oil into the European market is particularly notable, coming at a time when the OPEC+ alliance is striving to stabilize oil prices amidst increasing American production.

The arrival of up to 100,000 barrels per day (b/d) of non-OPEC+ oil from Senegal offers European refineries a valuable source of medium-sour crude, comparable to grades such as Oman and Norway’s Johan Sverdrup.

The successful export of its first crude cargo was a turning point for Senegal, a nation that had achieved its first oil production only a month earlier. This development is seen as a catalyst for significant economic transformation.

The second Senegalese cargo, expected to load in July, will be transported by the Liberia-flagged Goldway crude vessel, further solidifying Senegal's role in the global oil market. Government officials are optimistic that the burgeoning oil sector will create substantial economic opportunities, potentially reducing the need for young Senegalese to undertake perilous journeys to Europe in search of better prospects.

S&P Global Commodity Insights recently reported that Thierno Ly, head of Senegal’s national oil company Petrosen, highlighted the importance of this milestone. “First oil from the Sangomar field marks a new era not only for our country’s industry and economy but, most importantly, for our people. We have never been so well-positioned for opportunities for growth, innovation, and success in our nation’s economic and social development,” Ly stated.

International confidence in action

Woodside holds an 82% stake in the Sangomar project, with Petrosen owning the remaining 18%. Crude oil is extracted from the 1.3-million-barrel floating production storage and offloading unit, Leopold Sedar Senghor, named after Senegal’s first president and located approximately 100 kilometres off Dakar's coast.

This substantial investment and collaboration highlight the international confidence in Senegal's oil sector. In addition to the Sangomar project, Senegal is on the cusp of launching the Greater Tortue Ahmeyim LNG project, a significant development by BP and Kosmos Energy.

This project, straddling the Senegal-Mauritania border, is expected to produce 2.3 million metric tons per year (mt/year) of liquefied natural gas (LNG) and come online later this year. The successful launch of this project would further bolster Senegal's energy sector, adding another layer to its emerging status as a key player in the global energy market.

Transparency and nationhood: Government focus

Recognizing the need for transparency and accountability, Senegalese President Bassirou Diomaye Faye announced an audit of the oil, gas, and mining sectors in April 2024. This audit aims to ensure transparency and protect investor interests while prioritizing the state's and people's needs.

President Faye emphasized that while investor rights will be safeguarded, the state's and its citizens' interests will remain paramount. This commitment to transparency and balanced governance is crucial for maintaining investor confidence and ensuring sustainable development.

Senegal's emergence as an oil exporter is a significant milestone that promises to reshape its economic landscape. However, the journey to becoming a major oil and gas giant is fraught with challenges and opportunities.

To harness the full potential of its oil wealth, Senegal must navigate complex geopolitical dynamics, manage environmental concerns, and ensure that the benefits of oil production are equitably distributed among its population.

A key factor in Senegal’s success will be implementing robust policies and regulatory frameworks that foster a stable investment climate. By prioritizing transparency, good governance, and sustainable practices, Senegal can attract more foreign investment and build a resilient energy sector.

Additionally, the government must invest in infrastructure, education, and healthcare to ensure that the economic benefits of oil production translate into improved living standards for all Senegalese citizens.

Furthermore, developing the oil and gas sector allows Senegal to diversify its economy. By investing in complementary industries such as petrochemicals, manufacturing, and renewable energy, Senegal can create a more balanced and resilient economy.

This diversification will be crucial for mitigating the risks associated with dependence on oil revenues, which can be volatile due to fluctuating global oil prices.

Senegal's ability to leverage its oil wealth for sustainable growth and development will serve as a model for other emerging oil producers. By prioritizing inclusive economic growth, environmental sustainability, and transparent governance, Senegal can pave the way for a prosperous future.