By Mickaël Vogel, Director of Strategy at Centurion Law Group
With the Greater Tortue Ahmeyim and Sangomar Offshore Oil projects moving slowly but surely forward, Senegal is set to see first gas and first oil coming up in the next few years. To keep attracting investments and keep at par with the latest international developments in the industry, the country has modernized its legal framework over the past two years. In 2019, it adopted Law No. 2019-4 of January 24th, 2019 pertaining to local content in the hydrocarbons sector, followed by Law No. 2019-03 of February 1st, 2019, its new Hydrocarbons Code.
None of those created a framework to regulate and oversee the midstream and downstream gas activities that are expected to flourish in Senegal over the coming years. Under its Plan Senegal Emergent and its Gas to Power Strategy, Senegal is giving a prominent place to natural gas in its energy mix and to power industries. For electricity production for instance, it is planning to convert all its existing thermal power plants to gas, including the 115MW IPP Tobene Power, 67.5MW Kounoune Power and 86.6MW IPP Contour Global power plants. Meanwhile, new under-construction thermal plants like the 130MW Malicounda combined-cycle station are already being built with the right kind of technology to be eventually converted.
To ensure the development of a robust and efficient gas-value chain, mitigate carbon emission, limit climate change and bring electricity tariffs down, Senegal finally adopted a Law No. 2020-06 (Gas Code) on January 27th, 2020. It was signed by President Macky Sall on February 7th, 2020.
Key innovations brought by the Code notably include access right for third parties to gas infrastructure, establishment of a gas regulator to regulate and oversee the participation of the private local and international sector in gas operations, the protection of consumers and operators’ rights and interests, and the respect of international quality norms in terms of HSE.
Under the new Gas Code, Senegal’s new gas regulator oversees all midstream and downstream gas activities, and is notably in charge of establishing pricing structures for gas, from its production until its distribution, based on a price ceiling principle.
The new Law establishes several types of Licenses and Concession contracts for future midstream and downstream gas activities. Licenses are granted following a bidding round or direct negotiations, under ministerial order, while concession contracts are signed by the Minister before being approved by decree and published on the Official journal. All licenses and concession contracts holders and their sub-contractors must abide by Senegalese local content regulations, as per Law No. 2019-4 of January 24th, 2019 pertaining to local content in the hydrocarbons sector.
Article 27 provides for third party access to gas infrastructure, stipulating that operators of gas transportation and distribution networks as well as storage infrastructure must guarantee third party access and respect tariff transparency and equal treatment to all actors. The only acceptable reasons for refusing third party access are lack of capacity, technical or operational difficulties, or serious financial complications in the execution of sales contracts.
All licenses and concession contracts holders abide by the General Tax Code and Custom Code.
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