Sene­gal at cross­roads as oil boom looms

Kuwait Times - - BUSINESS -

DAKAR:

In a re­port last week de­tail­ing sub-Sa­ha­ran Africa’s dire economic out­look, the In­ter­na­tional Mone­tary Fund sin­gled out Sene­gal as a rare bright spot. One key rea­son: it does not pro­duce oil. While low crude prices have hob­bled ex­porters Nige­ria and An­gola this year and African growth stag­gers to its slow­est rate in more than two decades, Sene­gal’s econ­omy will ex­pand by over 6 per­cent.

To­day, how­ever, Sene­gal is on the verge of its own oil and gas boom. With re­cent finds promis­ing bil­lion-dol­lar pay­offs within a decade it would do well to learn from the mis­takes of oth­ers. “The oil and gas could boost the econ­omy, but at the same time re­sources can turn into a curse,” said Ibrahima Ai­dara, an economist at the Open So­ci­ety Ini­tia­tive for West Africa. In Africa’s top pro­ducer Nige­ria, bil­lions of dol­lars of oil rev­enues have van­ished while many in the coun­try re­main im­pov­er­ished. Long-time rulers in Equa­to­rial Guinea, Repub­lic of Congo and Gabon have long used pa­tron­age sys­tems fed by oil wealth to help main­tain power.

Al­ready, claims of cor­rup­tion and opac­ity in the gov­ern­ment’s manag­ing of the nascent sec­tor have raised con­cerns in Sene­gal, one of West Africa’s rare, rel­a­tively sta­ble democ­ra­cies. “You can­not hide in your of­fice and make pol­icy, be­cause this af­fects every­one,” Ai­dara said. Com­pa­nies in­clud­ing Royal Dutch Shell, Exxon Mo­bil and Cono­coPhillips spent 60 years ex­plor­ing in Sene­gal before Edinburgh-based Cairn En­ergy struck oil in deep wa­ters in 2014.

Cairn reck­ons it could be sit­ting on up­wards of 1 bil­lion bar­rels and plans to start pro­duc­tion in 2021. Dal­las-head­quar­tered Kos­mos En­ergy boasts about 50 tril­lion cu­bic feet of gas re­serves off the coast of Sene­gal and neigh­bor­ing Mau­ri­ta­nia - the equiv­a­lent of nearly two years’ worth of U.S. pro­duc­tion. Sene­gal’s gov­ern­ment fore­casts that just one planned nat­u­ral gas pro­ject will bring in at least $10-13 bil­lion - al­most equiv­a­lent to the coun­try’s gross do­mes­tic prod­uct over the next 25 years. “We are ex­pe­ri­enc­ing the pe­riod before a new age for Sene­gal,” said Mahi Kane, a di­rec­tor at Price­wa­ter­house­Coop­ers in Dakar who has seen the num­ber of en­ergy firms seek­ing ad­vice on tax and le­gal is­sues rise five­fold in the last three years.

“WE NEVER BEN­E­FIT”

When Ghana started ex­port­ing oil at the start of the decade on top of gold and co­coa it was con­sid­ered one of Africa’s hottest in­vest­ment des­ti­na­tions. But its oil sec­tor devel­op­ment has been slower than some had an­tic­i­pated.

A slide in crude prices since 2014 has meant oil has not brought Ghana the wealth some had hoped for and the West African coun­try is cur­rently re­ceiv­ing aid from the In­ter­na­tional Mone­tary Fund to re­duce in­fla­tion and lower the bud­get deficit. In Sene­gal, where the av­er­age an­nual in­come barely tops $1,000, not every­one is op­ti­mistic the loom­ing oil boom will re­verse their for­tunes ei­ther.

Hun­dreds took to the streets in the cap­i­tal Dakar last month ar­gu­ing that the oil will only ben­e­fit in­ter­na­tional com­pa­nies. “The coun­try only gets 10 per­cent,” said Adama Seck, 50, the leader of a small in­de­pen­dent po­lit­i­cal party, re­fer­ring to the gov­ern­ment stake in some con­tracts. “We never ben­e­fit from our re­sources,” he said, as po­lice fired tear gas and demon­stra­tors scat­tered. — Reuters

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