2024 promises to be a pivotal year for Senegal. After the surprise election, in the first round, of opponent Bassirou Diomaye Faye to the presidency, the West African country is preparing to become a hydrocarbon producer. The exploitation of Sangomar (offshore oil and gas), operated by the Australian Woodside, is due to start in June, followed a few months later by the Grand Tortue Ahmeyim megafield, known as “GTA” (offshore gas), operated by the British BP. Ten years after the discovery of these deposits, the nascent oil industry is expected to boost growth, expected at 8% this year (compared to 5% over the last decade), one of the strongest on the continent.
But the president-elect, whose promises to break with power won immense popular support – more than 54% of the votes in the first round on Sunday March 24 – specifically designated oil contracts as one of his hobbyhorses. His mentor, Ousmane Sonko, the undisputed leader of the African Patriots of Senegal for work, ethics and fraternity (Pastef, dissolved by the authorities in July 2023) but who could not run for president, has repeatedly designated these contracts as “a dispossession” of the Senegalese.
Enough to create trouble within the sector, after several billion dollars of cumulative investment between the majors and local subcontractors, direct or indirect. Contacted, a spokesperson for Woodside did not fail to emphasize that the company “respects the right of governments to determine the legal and regulatory framework which governs the development of oil and gas”. He added: “Experience has shown us that the most successful jurisdictions are those which work in partnership with industry, respect the sanctity of contracts and create a secure framework for investments. » BP, for its part, did not respond to our requests.
“It’s not panic at all.”
According to an operator who requested anonymity, it is above all surprise that dominates in the Senegalese capital. The sector had until now focused “on preparing for the election, to put itself in order in case it got out of hand”. But the vote having gone off without a hitch, behind the scenes, “it’s not panic at all,” he says.
Bachir Dramé, oil expert and former communicator for the public company Petrosen, confirms a certain “wait and see attitude”. “I do not think that renegotiations will be able to be done on Sangomar or GTA, contracts which are already in progress,” he adds, insisting on the fact that this last field is shared, physically and commercially, with Mauritania: “We can’t do anything without Mauritania. However, Mauritania has never talked about renegotiation of contracts. »
On the other hand, discussions could open for other, less advanced blocks, such as those of Yakaar-Teranga, for which Dakar is looking for another investor after the recent withdrawal of BP, notes Mr. Dramé. Several sources interviewed doubt drastic decisions. “We think that they will very quickly be caught up with reality, realizing that renegotiating these contracts will cost them much more than keeping them,” concludes the previously cited operator.
In fact, analysts have noted a certain weakening of Mr. Faye’s speech and his movement as the election approaches. “The tone has changed in recent days,” confirms Samantha Singh-Jami, head of strategy for Africa at Rand Merchant Bank in Johannesburg, quoted by Bloomberg. The position on the CFA franc is the most obvious element. After having defended a clean break with this currency, a legacy of colonization, MM. Faye and Sonko focus their speech on negotiations at the community level. “The ideal would be to [leave the CFA franc] within the framework of ECOWAS, with the eco,” Mr. Faye told Le Monde just before the election, regarding this project for a new common currency which is struggling to come to fruition. If it does not succeed, “we will have to consider taking our sovereignty alone, as Mauritania did, which left the CFA franc” in 1973, he added.
“Relieved Markets”
While the markets had been nervous before the vote, their reaction to the election of Mr. Faye was resolutely positive. As proof: the drop in interest rates requested on Senegalese bond loans, a sign of investor confidence which began to manifest itself from the first rumors of Pastef’s victory on Sunday evening. After months of tension and uncertainty, “the markets were quite relieved that the choice of the next president did not ultimately turn out to be part of an interminable process,” said Tochi Eni-Kalu, analyst for West Africa at Eurasia Group, also adding that recent statements suggest that “Pastef will probably be more pragmatic once in business”.
The renegotiation of oil contracts and the reform of the CFA franc do not constitute the only economic axes of Mr. Faye’s program. In his desire to use public money more fairly and to fight corruption – a pillar reiterated again on Monday in his victory speech – the former tax inspector promises in particular to reform tax collection and to rationalize government spending. The new president also intends to review fishing agreements, develop local production, both food and industrial – in order to ensure food security while reducing costly imports.
Whatever the agenda, these measures will take time. As Mr. Eni-Kalu notes, some will have to wait at least for the next finance law, negotiated later in the year, while, for the most complex measures, the new power could seek to obtain a strong majority at the end of the year. National Assembly by calling for early legislative elections. A dissolution cannot take place before July according to the law. In the shorter term, notes the Washington-based economist, the markets are curious to know the composition of the government, in particular the choice of the minister of the economy and that of finance, “a real milestone which will set the tone for reforms” .
