Senegal rules out changing gas contracts amid corruption claims
MARDID (Bloomberg) - Senegal won’t change already-awarded natural gas contracts despite calls from the country’s political opposition to rework deals in the wake of corruption allegations, according to a government adviser.
In June, a BBC report alleged that President Macky Sall’s brother, Aliou, received payments in return for allowing a little known company to retain two gas concessions.
Neither pressure from politicians nor street protests will lead the government to change those contracts, in which the Senegalese state will gain at least 63% of profits, according to Mamadou Fall Kane, deputy permanent secretary of COS-Petrogaz -- the government committee overseeing oil and gas policies.
“I heard some leftist politicians say they will use the Venezuelan model and that is not a good sign,” Kane said in a phone interview. “There are no investors in Venezuela and the country is in a total blackout. We don’t want that for Senegal.”
Petro-Timis, a company owned by Romanian-Australian businessman Frank Timis, was originally awarded the rights to two gas blocks by the previous Senegalese administration. Allegations that Sall’s brother received dubious payments, in return for allowing Petro-Timis to keep the concessions, have sparked calls from opposition politicians demanding a Bolivian-style renegotiation to bolster the state’s participation in contracts.
A prosecutor in Senegal has launched an investigation into how the concessions were originally awarded. Timis has denied any wrongdoing.
The two offshore concessions, Saint Louis and Cayar, are currently owned by BP and Kosmos Energy. The BBC reported that BP agreed in 2017 to pay Timis Corp, another company owned by Timis, as much as $12-billion in royalties for its stake in the blocks.
“Quite frankly it is a sensational and inaccurate and irresponsible story by the BBC including numbers that are wildly inaccurate including showing documents that have reportedly come from BP and they aren’t,” BP Chief Executive Officer Bob Dudley said Tuesday on the company’s second-quarter earnings call. “The really disappointing thing is it perpetuates the idea that European and British companies cannot and should not do business in Africa.”
Over a decade ago Bolivian President Evo Morales aggressively reworked gas contracts as part of a wave of resource nationalizations in South America spearheaded by late Venezuelan President Hugo Chavez. Years of mismanagement left Venezuela’s economy in tatters, resulting in hundreds of thousands of people fleeing from poverty.
Kane, a former analyst at Credit Agricole CIB and one of the architects of the country’s new petroleum code, said the government will preserve the security of contracts to spur development in its hydrocarbon resources, which remains largely unexplored. He said the BBC report isn’t based on facts and reiterated that the government has been transparent in contract negotiations.
The allegations have not hindered investors’ appetite to gain a foothold in Senegal, with oil majors including Royal Dutch Shell, Exxon Mobil and China Petroleum & Chemical Corp., known as Sinopec, expressing interest in seven onshore and offshore blocks which may be launched in a new licensing round in October, Kane said.
A Shell spokeswoman declined to comment. Exxon and Sinopec could not immediately be reached for comment.
Kane said the Senegalese government has “a good dialogue” with international oil and gas companies. “They are very interested in having a stake in Senegal,” he said, adding that the government is planning roadshows in Cape Town, Houston and London later this year to drum up investor interest.
Kane also dismissed market concerns that the government planned to levy capital gains tax on the purchase of the two blocks by BP and Kosmos. He said the country’s petroleum law doesn’t stipulate charging duties on transactions during the exploration and development phases of projects.
