Senegal’s LNG Drive Is an Economic Gamble

Senegal's plan to drive economic growth through exports of liquefied natural gas (LNG)-largely to Europe-is a gamble, new research warns, as forecasts indicate an imminent decline in international demand for gas due to countries pursuing decarbonization targets.

Major investment in LNG could ultimately leave Senegal over-dependent on uncertain fossil fuel markets, at risk of stranded assets, and unable to address energy security concerns. These fossil fuels will simultaneously take a heavy toll on the environment and local livelihoods, according to a report by the International Institute for Sustainable Development (IISD).

A key issue is the 8-10-year LNG production timeline in sub-Saharan Africa. New projects may not be operational before the mid-2030s-yet European demand is forecast to peak by 2025, and the International Energy Agency's current global net-zero energy scenario suggests falling global demand for fossil fuels by 2050, with likely impacts on short- and long-term profitability.

Meanwhile, there is an international race to exploit gas reserves, partly in response to sanctions on Russia, which have heightened European demand. As a result, Senegal faces increasing competition from established producing nations, such as Saudi Arabia, Iran, and the United States, as well as other African countries seeking to expand production and boost their economies, such as Nigeria and Mozambique.

"The Senegalese government is gambling that LNG projects will continue to operate profitably for years or even decades to come, despite considerable warning signs that this is unlikely to occur," said Bathandwa Vazi, Policy Advisor at IISD.

"As a new player in the LNG space, Senegal must anticipate potential risks, including increased competition, declining demand, low government revenues, and industry pressure to favour exporting gas rather than boosting domestic energy security."

The Senegalese government has said it plans to improve domestic energy access. Electricity is currently only available to 75% of the population-and a significant portion of this is supplied from LNG production. However, the research warns that improved domestic access will require investment in pipeline infrastructure and power plant conversions for domestic gas consumption, posing further financial viability challenges. Therefore, LNG financiers in Senegal may favour projects committed to exporting more production, potentially neglecting national demand.

Cheaper Renewable Energy

Meanwhile, the falling cost of renewable energy has already had a positive impact on the economy and helped Senegal hit its renewables targets under its nationally determined contribution. The country aims to increase renewable energy to 40% of its electricity mix by 2030.

Domestic renewable energy production poses far fewer risks than LNG, according to the authors of the report. Vazi added: "The Senegalese government should align fiscal policies and incentives with sustainability objectives to incentivize responsible investment in clean energy and promote a just transition toward a low-carbon economy. This will also help address the worsening climate crisis."

The report notes that Senegal already faces a range of climate-related challenges, including heat stress, shifting malaria patterns, and rising sea levels-a growing threat to the country's urban coastal areas, which accommodate a large portion of the population and industrial activity.

Gas exploration since 2014 has already raised concerns about the industry's impact, the authors say, with one gas field located close to a significant cold-water coral reef. LNG will be stored on floating facilities located 10 km offshore, posing environmental risks from potential accidents or leaks.

Coastal communities close to LNG activity have already experienced socio-economic issues linked directly to LNG production, which affect women and youth the most. Fishing is a key economic activity and source of income for communities in this region; however, many fishermen have already lost their jobs due to LNG exploration work, which has restricted access to fertile fishing areas.

Media Contacts:

Bathandwa Vazi, Policy Advisor, Energy - [email protected]
Harry Cockburn, Communications Consultant, Energy - [email protected]

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