VZCZCXRO2370
PP RUEHMA RUEHPA
DE RUEHDK #0714/01 1701345
ZNR UUUUU ZZH
P 181345Z JUN 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 0685
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHLMC/MCC WASHDC
UNCLAS SECTION 01 OF 02 DAKAR 000714
SIPDIS
SENSITIVE
STATE FOR AF/W, AF/EPS, AF/RSA, EB/ESC/IEC, AND INR/AA
E.O. 12958: N/A
TAGS: EPET BTIO ENRG EINV SENV ECON EFIN SG
SUBJECT: LOTS OF GAS BUT NO MONEY TO PAY FOR IT
DAKAR 00000714 001.2 OF 002
1. (SBU) SUMMARY: In a meeting with Rogers Beall, CEO of oil and
gas concern Fortesa International, he said his Senegal concession
has proven natural gas reserves of 1 trillion cubic feet (TCF) and
that they already have the capacity to deliver over 300,000 CF per
day if and when the state electricity company, Senelec, has the
money to pay for it. Beall is bullish on possible petroleum
reserves both on- and off-shore Senegal, but notes that they will
not be found within traditional geologic structures. End Summary
2. (SBU) In wide-ranging discussion, Beall, who has been operating
in Senegal for more than 14 years as Fortesa, and more recently as
Africa Onshore Drilling, told Econ officers he is convinced that
Senegal has more than enough hydrocarbon reserves in the form of
on-shore natural gas deposits as well as off-shore shallow and
deep-sea oil reserves to easily meet the country's ever-increasing
energy demands. Beall reported that his 1,000 square km concession,
which ranges from the entrance into the Dakar peninsula north, up
the coast line towards the famed Lac Rose and inland towards Thies,
has one TCF of gas and that he is in the process of doing further
seismic data collection and analysis to determine where to drill
next. He confirmed, however, that expanding his production will not
be easily accomplished for his small company since there is
extremely high global demand for drilling rigs and equipment. Beall
revealed that surveys have shown that much of Senegal's coastal
geology is particularly suitable for the creation of hydrocarbons
and he is confident that at least 2-3 TCF more of gas can be found
in other blocks.
3. (SBU) Beall is an optimist on Senegal's economic potential and
believes that in a few years the country could consume all the
reserves in his block. Senegal's current and future large
industrial companies, including mining operations, cement factories,
and the large phosphates producer, are suffering from the lack of
reliable fuel and electricity, according to Beall.
4. (SBU) In our discussion, Beall claimed that his concession has
enough natural gas to give Senegal an additional 200 MW of power for
the next fifty years and that if new sources come on line that could
increase to 400 MW. He informed us that he has, on many occasions,
urged the government to switch some of the new power plants that
have recently come online to natural gas and critiqued a recent plan
by a Canadian company to build a coal-fired plant as the coal would
have to come from already energy-strapped South Africa.
GOING FROM BAD TO WORSE
-------------------------
5. (SBU) Currently Fortesa has two operational wells which can
produce close to 350,000 CF a day. The state-owned electricity
company Senelec is Fortesa's main purchaser but since it is facing
huge cash flow problems, Beall said that the faucet has literally
been turned off and that this was done upon the request of Senelec
itself. Beall added that Senelec not only cannot buy what's on tap,
they cannot pay his company for what was already provided. However,
the situation gets worse as, even if Senelec was able to pay, the
five natural gas turbines that the company runs are all in need of
repair and not currently operating. One is missing an engine block
that has yet to be delivered from the United States, two need
essential parts that are extremely expensive to replace, and the
fourth one was burnt out because Senelec ran it well above specified
recommendations. The fifth gas turbine is a relic of the French
era.
6. (SBU) Senelec's inability to generate power from locally
available natural gas is a contributing factor to the country's
ongoing and frequent power outages. Adding to the problem, Senelec
is requesting the U.S.-owned independent power producer GTI to
modify part of its operation to run on natural gas, but GTI is
apparently hesitant to move forward on such a significant capital
investment because Senelec frequently has difficulty in paying for
GTI's output. Adding to Senelec's problems, Beall confided that the
parastatal insisted that its supplier contract with Fortesa be
pegged to the global price of oil.
OIL?
----
7. (SBU) Beall said that Senegal has a mix of offshore oil reserves
that are both in deep and shallow waters, but that the shallow water
oil had been contaminated over the millennia thus leaving only heavy
crude which is very expensive to refine. He went onto say that
shallow water deposits off Senegal's coast were, at the moment,
unfeasibly expensive to extract as there is both not enough water
depth to put in an oil platform and the low quality of the deposits.
He explained that oil platforms are usually tied to down by tension
cables and that a depth of 200 meters around the platform gave it
enough space to sway and move, especially during storms. Senegal's
oil is below only 60 meters of water. Beall then explained that the
oil in the region was a result of an ancient fault line, created by
DAKAR 00000714 002.2 OF 002
the continued separation of South America from Africa, extending
from Dakar, which itself is atop an extinct volcano, all the way up
to Cape Verde and that surveys carried out in the thirties by Howard
Hughes confirmed the existence of extensive but very deep oil
deposits.
8. (SBU) According to Beal, the off-shore oil deposits are not
found in traditional cone structures, but rather in vertical strata.
Fortesa was one of the first energy companies to collect seismic
data for Senegal and Guinea-Bissau, and was at one point under
contract by the government to help attract foreign firms to bid on
exploration blocks. There is significant exploration activity in
Senegal at this time. Dallas-based Hunt Oil is preparing to drill
an initial well in its off-shore concession within the next few
months.
COMMENT
-------
9. (SBU) We cannot verify independently Beall's optimistic
assessment of Senegal's hydrocarbon potential, but with the current
increased exploration activity in the country he will soon be proven
a visionary, or simply a profitable small energy producer. However,
the GOS and Senelec's inability to solve its energy supply problems
is largely a case of poor management, especially when Fortesa's
potential production sits idle. Electricity cuts have increased to
multiple times a day and will probably get worse as the summer wears
on - at the same time that Senelec is planning to increase its
rates. Meanwhile, local Shell Oil stations have been without
gasoline for the last two weeks and the government continues to buy
petrol on the spot market. Along with rising food prices, the
energy crisis is hitting hard Senegal's frustrated businesses and
population.
SMITH