How Senegal is Hedging its Energy Bets
Senegal announced this week a new round of oil and gas licensing for three offshore blocks, as the country is readying to tap rich reserves and boost national revenues. If this seems to indicate that the government envisions an economy based on fossil fuels, however, that is hardly the case. Dakar has even bigger plans for the domestic renewables sector and is determined to see Senegal emerge as Africa’s green leader. For a country with close to 40 percent of the population living under the international poverty line, there can be little doubt that Senegal’s future lies in its burgeoning energy fortunes.
It is understandable that the government under President Macky Sall is unwilling to forego the looming profits that can be expected from Senegal’s massive oil and gas reserves. He has identified gas-to-power and petrochemicals as important industry drivers to fuel the country’s economic growth. Estimated to sit on 50 trillion cubic feet of natural gas and a billion barrels of oil, it is no wonder that Senegal’s Minister of Petroleum and Energy, Mouhamadou Makhtar Cissé, has been promoting the various investment opportunities in the country, assuring investors that a “stable regulatory and investment framework” is already in place.
As industry majors flock to the country in the expectation of a pending oil boom, observers the world over are predicting positive outcomes for Senegal. As the country’s oil economy grows, so too will opportunities for the local population and existing businesses. Moreover, the days of attracting foreign investment in Africa at any price are long past, and most Senegalese expect an equitable distribution of the benefits of the coming energy windfall.
There are a number of factors that suggest that the country could avoid the so-called oil curse that has plagued many of its neighbors like Nigeria, Angola and other African states who all fell prey to economic and political instability due to an influx of petrodollars. Senegal, however, is considered to have a good shot to avoid the worst of corruption, inflation, and inequality thanks to relatively strong state institutions and bureaucracy. President Sall is himself a geological engineer who trained at the French Institute of Petroleum and is the former head of Senegal’s national oil and gas company, Petrosen.
What’s more, Dakar is also hoping to benefit from Senegal’s great potential for renewables. The government has maintained repeatedly that building up the renewables sector – and even turning Senegal into Africa’s renewable leader – is a priority. The goal was also enshrined in the Plan for an Emerging Senegal (PES), under which universal access to electricity by 2025 is to be achieved.
If investing both in fossil fuels and renewables seems contradictory, it is important to note that there is a logic to this two-pronged approach. Oil promises good revenues for the foreseeable future, considering that it will continue to be the world’s primary source of energy in the medium-term. Dakar is hoping to reap a windfall from this and provide job opportunities in a high-skill sector. But when the time comes, it wants to be prepared for a renewable future, where lessons learned from developing the oil and gas industry can be applied to the renewable energy industry – particularly electrical engineering and computer science.
Senegal has set particular targets to be achieved, including having 15 percent renewable energy in the country’s energy mix by 2025, with wind and solar power plants due to be added to the national grid in the next two years. According to energy experts, a further benchmark of 25% renewable energy in the mix by 2030 would then be achievable as well.
To that end, Dakar has increased cooperation with other African countries that pursue a strategy of boosting renewables. In May this year, Senegal sent a delegation to Tunisia to learn the country’s best practices in terms of adapting the policy framework to the peculiarities of renewable energy production. International financial institutions have been quick to provide funding for solar farms, with the French Development Agency, the European Investment Bank (EIB) and the International Finance Corporation (IFC) having pledged to provide €38 million in loans to fund two 30 MW solar power plants in the country. Senegal currently has around 650 MW of total installed power generation capacity and plans to deploy a further 200 MW of solar in 2020.
With Senegal having begun construction on West Africa’s first large-scale wind farm project in May – slated to provide close to one-sixth of the country’s energy needs when completed and prevent the emission of 300,000 tons of CO2 – Senegal’s path forward is clear. Dakar is hedging its bets to profit from both fossil fuels and renewables, but with progress on wind and solar rapidly progressing, the government is rooting its future firmly in a low-carbon economy.