APCL 09.11.2018 kl 07:48 1655

New laws 'by end of year' on licensing and awards and revamp for local content and fiscal regime

Senegal President Macky Sall has promised that new laws will be ready before the end of 2018 to reflect a reformed licensing and awards process, and a local content and fiscal regime tailored to encourage development of a competitive oil and gas industry.

Addressing a conference in Dakar convened late last week by the Extractive Industries Transparency Initiative (EITI), Sall appealed for political opponents, local activists and media to be better informed about how the oil and gas business works.

He attacked opposition leaders for demanding that exploration activity be taxed and blasted local activists and media for their “lack of understanding” of upstream industry practices.

It is unclear how Senegal will develop indigenous participation in upstream licenses, but one operator active off Senegal told Upstream that officials had indicated a preference for introducing reforms similar to those enacted by Nigeria in the early 1990s.

Those earlier Nigerian laws required foreign companies to act as technical partners, with indigenous parties retaining 60% operatorship.

However, this encouraged the rise of so-called ‘briefcase companies’ which fronted for non-nationals while siphoning off funds for political campaigns.

There is also talk in Senegal of requiring international oil companies to slice off a piece of equity in any upstream venture for local assignment.

Macky Sall himself has come under fire locally.

Opposition figures have criticised his role and that of his brother, Aliou Sall, in ushering in Romanian-Australian magnate Frank Timis to a strong upstream position, later held by African Petroleum, an explorer listed in Oslo and Australia, from which Timis has since substantially divested.

Investor sources have suggested this divestment has “made it possible for African Petroleum to talk farm-out to bigger companies including majors as Senegal would prefer.”

The Minister of Economy & Finance, Amadou Ba, stressed to conference delegates the importance of determining ultimate beneficial ownership of investor companies, but gave no hint of how deep inquiries may go or how compliance might be monitored.

Macky Sall is desperate to keep opposition figures at bay and the country’s restive youth onside in the run-up to presidential elections next February.

To achieve this, he needs to flag intent to implement a pro-jobs local content policy to extract maximum participation by indigenous business and expertise.

Several global service companies have set up subsidiaries in Senegal or absorbed local outfits to train professionals and tap into the bonanza when it arrives.

However, Senegal has a small industrial and professional base to draw upon and cannot easily absorb the capital and technology required to seed a viable upstream sector.

No thresholds or definitions of domiciled ownership were mooted for debate in the conference.

At the EITI event, local businesses openly criticised BP, operator of the Greater Tortue-Ahmeyim project, for not publishing a list of preferred contractors and contracts to be tendered and for not making its London-based procurement office accessible to local entrepreneurs.

They contrasted this position with the more open philosophy of Woodside, development lead for the SNE project.

There is limited parliamentary opportunity to pass such a comprehensive package of legislation before the end of this year, as election campaigning intensifies.

And if Sall loses the presidency in February, then all bets are off.

There is underlying concern among development partners and lenders like the International Monetary Fund (IMF) that Senegal may not be positioned to take advantage of upstream sector opportunities as they arise.

In a review of Senegal’s IMF Policy Support Instrument, concluded this week in Dakar, growth in gross domestic product was anticipated to reach 6% for the fifth consecutive year while government revenues were projected to fall short of next month’s target by 0.9% of GDP.

The IMF approved the 2019 draft budget, but urged rapid reform of the tax system, also recommending Senegal “set up a framework to manage the oil and gas wealth in line with international best practices and aiming to limit the pro-cyclicality of fiscal policy.”

The IMF suggested that the second phase of the so-called Emergent Senegal Plan should address the “structural impediments to long term growth performance.”

Possibly in response to an initiative by Sall to support the rapid contribution of local content in the upcoming oil and gas bonanza, the IMF tasked Senegal to urgently “develop its financial sector and improve the flow of credit to small and medium-sized enterprises by reducing energy costs and simplifying the tax administration to allow the private sector growth”.

The conference, which focused on beneficial disclosure, followed on the heels of the 41st meeting of EITI’s international board, convened in Africa for the first time.

Redigert 09.11.2018 kl 07:58

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