Senegal is celebrating joining the list of African oil producers after its first offshore field started pumping crude oil in June. The country sees its nascent oil and gas industry as vital to its economic development.
The first phase of production from its Sangomar oil field, which sits some 90 kilometers (56 miles) off Senegal’s coast, will be far less that Africa’s bigger oil producing countries; Sangomar will potentially produce 100,000 barrels per day for export compared to Nigeria’s 1.2 billion.
Senegal’s massive Greater Tortue Ahmeyim (GTA) gas field, which straddles the border of Senegal and Mauritania, is also expected to come online later this year although both projects were scheduled to start production three years earlier.
“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,” said Thierno Ly, the general manager of Petrosen, Senegal’s state owned energy company, in June.
Petrosen holds an 18% stake in the Sangomar project, with Australian energy giant Woodside as the main stakeholder in the project, which cost around $5 billion (€4.6 billion). The state owned energy company also has a 10% stake in the GTA field, which is being developed by BP and Kosmos Energy.
Oil and gas fuel Senegal’s economic growth
These fossil fuel resources won’t transform Senegal into a rich country, experts warn, but they are expected to boost its economy.
In its April 2024 regional economic outlook, the International Monetary Fund (IMF)found that Senegal was among the fastest-growing economies in sub-Saharan Africa, projected to expand by 8.35% in 2024, “thanks to oil and gas projects coming online.”
The contribution of oil and gas production to the overall economy is expected to remain “relatively limited,” however, at less than 5% of total GDP, noted Papa Daouda Diene, senior economic analyst at the Natural Resource Governance Institute, a US-based think tank.
“So as you see, these resources alone cannot transform Senegal into Dubai,” Diene told DW from Senegal’s capital Dakar.
“But if managed well — I really want to put the emphasis on that — if managed well, they can help initiate and or strengthen Senegal structural transformation.”
Shrinking fossil fuel market
But it isn’t certain that Senegal will see as much oil and gas revenue as it has projected as the global transition to cleaner energy is expected to shrink longer-term demand for oil and gas.
Algerian climate policy analyst Yamina Saheb, a lead author on the Intergovernmental Panel on Climate Change report on climate mitigation, is blunt in her assessment of Senegal’s oil and gas investments.
“It’s very bad news indeed, because they’re going to find themselves locked into an economic model that no longer works,” she told DW.
A controversial gas terminal off Senegalese coast
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The latest World Energy Outlook, published by the International Energy Agency (IEA), finds that global demand for coal, oil and natural gas is flattening this decade and will decline in next decade.
The October 2023 report projects that renewables’ share of the global electricity mix will near 50% by 2030, up from around the current 30%.
“These expectations on fossil fuel revenues fueling development are a bit inflated,” said Mats Marquardt, a climate policy analyst at the German-based New Climate Institute, who has researched Senegal’s liquid natural gas (LNG) market.
“It’s clear that we were seeing that that the Golden Age of gas is over,” he told DW. “This is something that the IEA has been very vocal about and under these circumstances, obviously the business case for fossil fuel exports also have to be under scrutiny now.”
If global oil and gas prices drop significantly, Senegal and other countries who invest heavily in developing their fossil fuel resources, might struggle to cover their initial costs. This could leave countries sitting on so-called stranded assets, that is assets that become obsolete before the end of their economic life without their cost being recouped.
In 2022, Germany’s Chancellor Olaf Scholz (right), seen here with Senegal’s then President Macky Sall, said he wanted to intenstively pursue talks about Senegal’s gas reservesImage: Robert Adé/DW Europe’s search for new gas sources over
West Africa’s closest major export market for gas is Europe. But the European Union (EU), which initially signaled intense interest in investing in African gas projects after Russia launched its war on Ukraine in 2022, has seen support for new investment cool as it shifts its focus to renewables.
In 2022, wind and solar generated 22% of electricity in the EU, overtaking gas at 20% for the first time, according to the 2023 European Electricity Review.
“The European market as a mature market with very strong climate target targets … doesn’t need major new sources of LNG export,” said climate policy analyst Marquardt.
Africa not responsible for climate change
African nations often stress that they have the right to develop their fossil fuel resources as they seek to bring electricity to the roughly 50% of people without it on a continent responsible for only a fraction of the greenhouse gas emissions driving climate change.
But investing in fossil fuels risks locking African countries into using emissions-intensive energy generation domestically, which would see Africa being left behind again, experts warn.
Around half of all people in sub-Saharan Africa don’t have access to electricityImage: Ahmed Jallanzo/epa/picture alliance
One of them is Tunisian economist Fadhel Kaboub, a senior adviser at Power Shift Africa and a member of the Independent Expert Group on Just Transition and Development.
“They risk doubling down on investments in obsolete technologies, expensive stranded assets and letting the rest of the world leapfrog into the green industrialization and decarbonization,” he said.
Africa has enormous untapped renewable energy resources, he said.
“According to IEA’s latest report about Africa, they’re saying by 2040, with existing renewables technology, not with new fancy innovations, Africa can produce 1,000 times its energy needs.”
Wendy Bashi contributed to this article.
Edited by: Benita van Eyssen
Source link : https://amp.dw.com/en/should-african-nations-develop-their-own-fossil-fuel-resources/a-69660494
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Publish date : 2024-07-18 09:16:34
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