Mauritania: The development of the Banda gas field tested by a new experiment
The “Banda” field, containing significant natural gas reserves, was discovered in the Mauritanian coastal basin in 2002 by the Australian company Woodside Energy, with an estimated exploitable potential of 1.2 TCF. This field is located near the Chinguitti field (oil), about 60 km off the coast of Nouakchott, with a depth varying between 200 and 350 meters below sea level.
Woodside has assigned its rights to this discovery to the Malaysian company Petronas, among other smaller oil and gas discoveries in the area. However, Petronas also eventually handed over to Tullow Oil in 2011, which planned to exploit these gas reserves to generate electricity.
An unfinished experiment
In early 2012, the British company Tullow Oil began its project to produce electricity from gas (Gas to power) from the field of Banda, considered, at the time, of “promoter” from the great interest shown in its regard by industrial companies in Mauritania, and even by the Senegalese and Malian states, in their capacity as neighbors who can well benefit from this project.
A global strategy for the development and exploitation of this field has been elaborated with an estimated cost of 450 million dollars entirely paid by Tullow Oil. The World Bank has also committed $ 200 million to guarantee the investment throughout the period of operation estimated at 20 years. It was also agreed with the partners on the distribution of electricity shares to the beneficiaries of this project which are: the National Industrial and Mining Company (Snim), the Mauritanian Electricity Company (Somelec), the Tasiast Company (gold) in addition to the electricity companies of Senegal and Mali.
As soon as these arrangements for the preparation of the development of the Banda field were completed, the company selected 2016 as the year for the start of operations, under the supervision of a national company created for this purpose at the end of 2014 under the name of SPEG (company for the production of electricity from gas), which is the result of a partnership between Somelec, SNIM and KG POWER AG, a subsidiary of Kinross Gold Corporation, owner of the Tasiast Mauritania gold mine. After a year of waiting for the signature of the final investment decision (FID), the company Tullow Oil withdrew from the project of electricity production from natural gas of the Banda field, without giving any explanation for this turnaround which mortgages all that has been done so far, in a total silence of the Ministry of Oil and other contracting parties. Thus ended, even before it began, and with a whiff of failure, this first experience of the natural gas exploitation project of the Banda field.
Various factors
This first experiment to exploit natural gas from the Banda field was characterized by the interweaving of various factors that led to its resounding failure. Some of these factors are related to Tullow Oil itself, while others are related to the parties that were supposed to benefit from the execution of the project.
Among the most significant factors was the deterioration of the political and security situation in Mali, which led that country to officially announce its withdrawal from the project, despite the benefits it could have derived from it in terms of the supply of good quality, low cost electricity. It was this withdrawal that led to the repeated postponement of the signing of the agreement to share the electricity that would be produced from Banda’s natural gas, because there was no longer a guarantee of purchase of the share that was to go to Mali, which was set at 50 MW.
This year-long postponement coincided with the end of the operating permit for the field granted to Tullow Oil, but the Mauritanian government decided, exceptionally, to extend it free of charge for six months, believing that this would allow a way to finally get the project off the ground. It was during this period that the discovery of the Grand Tortue Ahmeyim (GTA) field, shared by Mauritania and Senegal, was officially announced, with proven reserves much larger than those of Banda. This discovery will, so to speak, be the coup de grâce to the Banda project, with all the mistakes it has experienced so far, and especially that Senegal no longer shows any predisposition to sign a purchase agreement for its 125 MW share, following Mali. It is also the problems encountered by a number of projects carried out by the company Tullow Oil in charge of the development of the Banda field that may explain the failure of the first attempt to exploit it, the company having mobilized about $ 700 million U.S. for the development of gas projects, between 2013 and 2014, in Mauritania and Ghana, without convincing results.
In addition to this, there are other factors at the global level, such as the drastic fall in the prices of hydrocarbons, iron and gold on the international markets, which also reduced the willingness of SNIM, iron producer, and Tasiast (gold) to initial the agreement by which they committed to purchase the shares reserved for them in the project to produce electricity from natural gas from the Banda field.
Another experiment to test
At the end of 2021, the Ministry of Energy signed a new memorandum of understanding with the U.S. company New Fortress Energy for the development and operation of the Banda field, starting in 2024, with the same specifications (production of electricity from gas) as the defunct project. The project, which will produce 300 MW, is expected to cover the electricity needs of the mining industry in Mauritania. The agreement between the two parties also includes the creation of a new gas-fired power plant with a capacity of 120 MW, which will be added to the existing one in Nouakchott with a capacity of 180 MW, in addition to the construction and equipment of other facilities needed to operate the gas field.
After the signing of the memorandum, the U.S. company has conducted, in partnership with a specialized British consulting firm, a new feasibility study to invest in the project. It was then to update the existing data on the project and this according to the developments occurred both nationally, regionally and internationally.
But despite the fact that half of the time given for the development of the project (2 years) has passed, things have remained as they were, not having yet evolved towards the final decision to invest in the development and operation of the field. Some people are now wondering whether we are not facing a new postponement or, frankly, a new flop like the first experience with Tullow Oil!
While care has been taken to avoid the mistakes that led to the failure of the first experience of exploitation of the Banda field, some observers speak of new constraints that have appeared on another level placing the new experience in a situation of great challenge. These include the non-agreement between NFE and the Mauritanian government on cooperation for the development of other energy projects in the country, which could push the company to withdraw and open the way to other options for the exploitation of natural gas from Banda in the Mauritanian coastal basin.
The time factor is crucial in the study and choice of all options to ensure the development of the said field, especially as the attractiveness of investment in fossil fuel deposits is beginning to decline drastically in the face of global trends towards renewable energy.
By: Mohamed EKA