SAR’s role in Senegal
AES Senegal speaks to SAR CEO, Serigne Mboup
What is the role of Societe Africaine de Raffinage (SAR)?
SAR was built in 1961 and started operations two years later. At its birth, the refinery had a production capacity of 600,000 tons per year, which progressed to 800,000 tons per year in 1983 to 1,2 million tons a year today. The latest investment that was made to increase capacity is a fully digital central command room, allowing processing to be optimized throughout the lifecycle from crude oil to refined products. The role of SAR is to provide the domestic market which hydrocarbon-related products; the structure and growth of both local and regional markets have allowed us to make strategic investments such as a butane reception unit and a sea-line.
What are the expansions for SAR in the short term and long term?
Looking forward, SAR is looking to increase its capacity to satisfy the needs of the local market and increase its exports towards the sub-region, including Mali, which is already today a major importer of our products. We have put together an investment plan that runs from 2018 to 2020 which comprises three pillars:
- Increasing production capacity to 1,5 million tons (MT) per year, which would satisfy 70% to 75% of domestic market needs
- Modernizing equipment to produce crude oil more efficiently
- Proceed with an “Arret Metal” (temporary shutdown during which an intensive battery of tests is undergone aiming to increase safety and security)
Upon reaching those objectives in 2020, our next goal will be to reach a capacity of 2,5 to 3 MT per year. Such figures will allow us to fully satisfy the needs of the domestic market while fuelling national economic growth up to 5%, as well as reaffirm our position as a strategic partner for key stakeholders on the regional ground. These production capacity boosts are planned to go in hand with a strong increase of the storage capacities for both crude oil and refined products. Total investment for these goals is around 70 million euros €.
Are you planning to expand within the current area of the refinery?
The ‘circle of the danger’ (the circle of danger is a determined area around the refinery in which the resident population could be exposed to industrial hazards such as pollution or explosions), which has been stated multiple times in the press, is not an issue as such. No population is at risk due to the activities of the refinery within its area of activity. However, we must improve the logistics from the port to the refinery. The route goes through several highly-populated zones which can pose potential risks.
In terms of expansion, the size of our land allows us to build new infrastructure and meet the capacity goals I mentioned earlier. Additionally, our long-term plan is to comply with Afri4 and Afri5 norms. A flagship investment in that sense is to acquire a hydrocracker which will be able to treat crude with a higher concentration of sulphur, as well as produce more environmentally friendly petroleum products. This strategy is in line with the global push towards greener energy production which the SAR intends to fully comply with. Appropriate designing and construction works will allow the SAR to reach all these ambitious goals while staying within this space.
Is the government looking into increasing the refining capacity of the country as a whole?
Senegal has recently undergone several important offshore discoveries which will boost production and export prospects. Furthermore, Senegal and the MSGBC Basin is relatively underexplored when it comes to deep offshore exploration and unexplored when it comes to ultradeep exploration. Given the experience of other countries around the continent, we are very hopeful as to the potential of more discoveries to come in the near future. The government of Senegal has expressed its wish to make our country the energy hub of West-Africa, which therefore justifies the construction of a second, larger refinery that could process between five and 10 MT yearly, similar to Dangote’s refineries in Nigeria. This unit would be able to export massively to the continent and would also be in reach of further markets, given Senegal’s strategic position in relation to the Mediterranean, Europe and Latin America. Thus, entering competition with Asian refineries in India and China.
What funding model is envisaged for SAR’s expansion projects?
Above all, SAR has a public service mission to provide the Senegalese population with hydrocarbon products. The Fonds de Sécurisation des Importations des Produits Pétroliers (FSIPP, Petroleum Products Safety Fund) was created in 2006 to support that mission and to highlight the country’s natural resources. We are able to reinvest a part of the cashflow from this fund into modernization projects to maximize efficiency of our operations. This fund model has dramatically increased the confidence our shareholders have in our financial solidity.
How important is local content policy to the country’s hydrocarbon economy development?
Local content is a key topic at the core of the government’s oil and gas strategy, given the fact that the real value for the petroleum industry resides in services.
Regulatory frameworks were built through public consultations in order for the resulting laws to be as close as possible to the citizen’s wishes. Redistribution of generated revenues came up as a very important subject for them as they want to see an impact of the discoveries on key sectors, such as health and education, across all layers of society.
Moreover, the new oil and gas codes – which should take effect before the end of the year – will unlock Senegal’s potential through updated block licensing mechanisms, as well as increased transparency. Since our country joined the Initiative for Transparency of Extractive Industries, companies must submit balance sheets and financial figures publicly. This type of commitment shows the will of Senegal to compete on an international level with major petroleum players worldwide.
The final brick of local content strategy is the creation of the Institut National du Pétrole et du Gaz (INPG, National Institute of Oil and Gas) which aims to shape and train the future leaders and managers of the petroleum industry along with highly qualified technical workforce with international standards. It was created in partnership with Canadian and American schools and major industry players to ensure the highest possible level of education. Partnerships with majors and Small and Medium Enterprises are particularly important as it allows students to acquire field experience and learn best practices before the end of their studies, to be fully operational upon graduation. Not only will this institute train oil and gas workers of tomorrow, it will also support skill improvement of local companies across the petroleum value chain.
Indeed, in order to reach the government’s goal of 60% local content across the industry, we need to upskill our SMEs through workshops, training seminars, technical formations etc. SAR modernized its human resources strategy a while ago by implementing in-house training sessions, sending consulting groups to service companies and other similar initiatives. Senegal is well-known for the extraordinary quality of its human resources. The remaining challenge is to create more specialization in areas of interest, such as the petroleum industry.
We believe local content policy through sharing benefits, inclusion and transparency is the only way Senegal can embark on the fantastic adventure it has been entitled to by these discoveries.
This article will be published in the upcoming Africa Energy Series: Senegal report which will be launched at the London Investor Forum hosted by Africa Oil & Power on June 11, 2019.