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The new Senegalese President, Basserou Diomai Fay, pledged to change and manage the country's affairs in a "more ethical" manner. He said after taking the oath that "the election results showed a deep desire for change," stressing his intention to "manage things in an ethical manner and build the economy."
The economy has always been a fundamental lever that pushed the opposition's shares higher, and finally resulted in the election of Diomai Fay as president of the country, according to observers.
Diomai's electoral campaign was based on promises to reduce the financial burden on the state treasury and expand its sovereignty over sources of natural resources, especially oil and gas, vowing to review the terms of contracts with foreign companies that invest in discovered oil fields and natural gas basins.
New Senegalese President Basserou Diomahi Faye pledged to build a strong economy (Anatolia)
Huge underground wealth
The period between 2014 and 2017 recorded the peak of oil and gas discoveries in the territorial waters of Senegal, after huge reserves were identified that attracted offers from foreign investment companies.
The joint offshore “Turtle-Ahmim” field with Mauritania is one of the most important projects, with reserves estimated at about 100 trillion cubic feet of gas, and an expected annual production capacity of about 2.5 million tons of liquefied natural gas in its first phase.
Upon completion of the second phase of field development - expected between the years 2027-2028 - annual production will rise to 3 million tons annually, after which it will continue on an upward production path, according to official estimates.
As for the Sangomar field, the average volume of oil production is estimated at about 100 thousand barrels per day, and it contains gas reserves ranging from 60 to 100 million cubic feet.
It is expected that production of between 60-90 million cubic feet per day of natural gas will begin between the years 2026-2027. This field will operate supported by a floating production and storage platform bearing the name of the first President of Senegal, Leopold Sédar Senghor.
The Yakar Teranga basin represents the third jewel in Senegal's underground wealth, with reserves estimated at about 140 billion cubic meters of gas. According to the plans of the government of former President Macky Sall, gas production will be allocated primarily to the local market and to strengthening energy networks.
Economic researcher Al-Hussein Muhammad Omar estimates the expected return from investing in the “Turtle-Ahmim” and “Sangomar” fields at approximately $828 million annually, initially, and he tells Al-Jazeera Net that the previous government “passed a law in 2019, which included aspects of spending oil and gas revenues, and the law specified a percentage 90% to finance development, while the remaining percentage, i.e. 10%, is deposited in an intergenerational investment fund, or what is known as the sovereign fund.
Al-Hussein Mohamed Omar expects that the new president will adhere to the general framework of the development strategy approved during the term of his predecessor, Macky Sall, with the possibility of “making changes to priorities.”
Review investment contracts
From a legal standpoint, contracts between governments and multinational companies are among the most complex contracts, which puts countries, especially those recently joining oil and gas producing countries, “in a weak negotiating position, due to a lack of experience,” according to Al-Hussein Muhammad Omar.
Omar talks about the existence of precedents “in which investment agreements were reviewed, but the reality of the proposal depends on flexibility from all signatory parties.”
Last year, British Petroleum announced its withdrawal from developing the “Turtlefa-Ahmim” field, citing losses during the Covid-19 pandemic and the resulting delay in completing the project, and refused to bear the costs of stopping work on the project.
The economic researcher says, "Mauritania and Senegal, as the two countries that share ownership of the basin, were forced to bear losses because the signed contracts did not include clauses for similar cases."
Hence, the difficulties of talking about reconsidering official contracts begin to appear. In this case, the new president must launch a campaign to persuade investing companies, which are difficult to imagine agreeing to review contracts unless they are “granted preferential privileges in fields that have not yet been explored,” according to researcher Muhammad Omar, who says that “acceptance of companies is possible in projects that Work has not yet begun, nor have the fields that have come far to be developed.”
The joint offshore “Turtlefa-Ahmim” field with Mauritania is one of the most important projects, with reserves estimated at about 100 trillion cubic feet of gas (Mauritanian press)
An additional obstacle also arises. In the case of the “Turtlefa-Ahmim” field shared with Mauritania, Passero Diomai Fay will have to convince Nouakchott of the matter, which “is likely to refuse to make any amendment to any agreement that it believes is in its highest interest to continue,” according to researcher Omar.
Researcher Al-Hussein Mohamed Omar stresses the necessity of “in-depth knowledge of the terms of the contracts signed between Senegal and investment companies, and what this entails in reconsidering some electoral promises?”
He adds, "The new president may try to review the contracts to satisfy voters, but he will find himself facing obligations signed by the Senegalese state." If he insists, the second party - i.e. companies - may resort to international arbitration. In this case, it may reflect an unstable picture of the country’s decision-making mechanisms and the resulting reluctance of investors in the future.
Positive indicators
Despite the legal obstacles, Senegal's economy appears to be driven by promising indicators. Growth is expected to jump during the current year to the threshold of 10%, a record rate on the continental level, ranking second after Mauritania, which expects a growth rate of about 11%, according to the World Bank.
By achieving these rates of growth, unemployment rates will fall to their lowest levels, touching the expected threshold of 6%, which is considered a valuable achievement compared to approximately 19% recorded in the third quarter of 2023, according to official figures.
All of this remains subject to the continuation of work in the three basic fields in accordance with what is in force. Senegal will begin receiving its first revenues from its shared field with Mauritania during the current year.
Senegal also possesses mineral reserves, most notably titanium, with revenues reaching more than $157 million in 2022, and gold, with exports exceeding $960 million annually, while zircon exports recorded approximately $112 million.
The mining sector is the second source of foreign currency and constitutes approximately 20% of the country’s total exports, with a margin of movement of a few points up and down, according to unofficial figures.
Source: Al Jazeera