Ready, Set, Renegotiate! Senegal Reassesses Its Mining and Petroleum Contracts

Since the election of President Bassirou Diomaye Faye in March 2024, Senegal has embarked on a strategic shift by announcing its intention to renegotiate key contracts—including those signed with multinational companies in the mining, oil and gas sectors.

Since Faye’s inauguration, the government’s decision to renegotiate oil and gas contracts has evolved from an electoral promise to an active process, with the establishment this month of a special commission for the review of strategic contracts and the announcement of a sectoral audit. This reflects the new leadership’s commitment to a more transparent and effective management of natural resources.

This is not unheard of. Changes in political regime have triggered renegotiations in several countries, such as Bolivia in 2006, Liberia and Sierra Leone in 2008, and Guinea in 2011.

The success of the review and renegotiation process will depend on various legal, economic and political factors. The announcement of the review commission suggests the start of a contract review phase, allowing the government to decide whether to renegotiate and on which points. If this two-step approach is adopted, it is essential to continue rigorously assessing the potential costs and benefits.

Now is a tricky time to consider renegotiation, as several extractive projects in Senegal are entering production. Perceptions around European demand for Senegalese gas amid supply disruptions related to the Ukraine conflict, the impact of the energy transition, and the recent disengagement of companies like BP add a layer of complexity.

If renegotiations are transparent and well-managed, it could maximize long-term benefits for the state, while an opaque process could damage relations with partners, discourage future investments, and undermine citizens’ trust in the governance of their natural resources.

In this context, international experience offers several best practices. Pending specific guidance from the authorities, in this post we share five recommendations that officials and members of the renegotiation committee should consider to ensure success.

1. Build consensus on the objectives and roadmap of the process

Renegotiating extractive contracts carries risks. First, it is crucial to set realistic and achievable objectives based on a cost-benefit analysis with a clear scope. Clear objectives, covering areas such as taxation, local content, or environmental management, can limit political interference and use of discretionary power.

However, achieving consensus remains complex, as government priorities may differ in a given context. To frame the renegotiations, the government must provide the negotiation team with clear terms of reference, specifying the scope of renegotiation, and minimum requirements, particularly on specific points such as transparency, anticorruption, transfers of mining interests, taxation, environmental protection, risk management, and relations with local communities. A well-defined agreement model prepared in advance can help maintain consensus and ensure legal compliance.

The 2019 Petroleum Code allowed for the government and companies to agree to amend contracts, within 24 months of the code’s entry into force, to bring them into conformity with the new code.  However, most contracts are still governed by the 1998 code. Negotiators could aim to align these contracts with current legislation while overcoming the challenges of stabilization clauses and previous attempts at compliance in 2019. In summary, the authorities should demand that companies “do their homework” before fully committing to the process.

2. Establish an effective and transparent communication strategy

In Senegal, although the objectives and terms of renegotiation are not yet public, transparency will become crucial. Clear communication is essential lest investors perceive the process as unfair or the government as capricious, thereby maintaining a stable investment climate. Informing citizens is also important to manage expectations, avoid negative perceptions, and strengthen the legitimacy of the outcomes. Senegalese citizens expect the government to clearly show how these renegotiations will improve their daily lives, particularly in terms of infrastructure financing, job creation, and sustainable development. Senegal must strike a balance between defending its national interests and maintaining investor confidence.

Best practices in renegotiation transparency, such as those observed in Guinea and the Democratic Republic of the Congo, where information on the process and the scope covered were published, demonstrate the need to make these elements public from the outset. Additionally, Senegal’s NC-EITI (National Committee for the Extractive Industries Transparency Initiative) can play a crucial role in monitoring documents related to renegotiations, as well as publishing amendments and changes in accordance with Requirement 2.4 of the EITI Standard. An effective communication strategy must not only convey the objectives and process to shape expectations and manage the impact on the investment climate, but also ensure the integrity of the renegotiation process.

3. Find the right balance in the composition of the renegotiation team

While the composition of the team should focus on sector-specific expertise, it is essential to open up to other skills and competencies, including independent experts. This will help incorporate best practices and avoid certain mistakes. To this end, we recommend:

• Empowering the committee. Having been present in Senegal for almost a decade, companies may have a background and relationships in the country and may appeal to other officials to resolve points of friction in negotiations. The government must ensure that communications with companies are conducted solely through the negotiation team, unless part of an accepted strategy. The negotiation team must have a clear mandate to conclude agreements, subject to executive or legislative approval. The limits of this power can influence the strength of the government’s negotiating position.
• Structuring the committee to reflect technical and political expertise. Including two distinct subcommittees would be additive: a multidisciplinary technical subcommittee for contract review and a political/strategic subcommittee. A purely technical committee may lack the political weight to engage the government in its decisions, posing the risk of disavowing negotiation outcomes, which could undermine the process. On the other hand, an overly political committee can hinder negotiations, and the necessary technical skills may be lacking. Finding a balance between technical expertise and political involvement is crucial.
• Including both experienced veterans and experts with fresh perspective. Officials structuring the committee should integrate members with a deep understanding of the initial negotiations and those responsible for overseeing and enforcing existing contracts. While it may seem unusual to retain the same individuals who negotiated the initial contracts, their expertise is essential for understanding the nuances of the contract and the established relationships. However, officials should also include individuals who were not involved in the initial process, without prior affinity with relationship management, to bring a fresh perspective and foster a positive dynamic for change.

4. Be cautious with external support

Renegotiating international contracts of this scale is complex. The effective use of external support (e.g., lawyers, tax experts, environmental specialists) can lead to positive outcomes in renegotiations, but officials should not presume that their involvement is necessary, especially internationally. The government must first assess the capabilities of its negotiation team and identify the need and relevance of external assistance. If officials identify a specific need, appropriate advisors must be chosen, especially in cases of market research and international standards. However, external support, particularly foreign, should remain secondary and should not undermine the authority of the negotiation team. Interventions by external advisors should be limited as much as possible in the process, and they should not replace local authorities. We recommend consulting external experts outside the negotiation room (e.g., between negotiation meetings to formulate positions or respond to company positions). The committee should define precise needs and choose competent advisors without conflicts of interest. The government’s renegotiation leaders should ensure smooth integration with local teams and select experts sensitive to local priorities while managing the associated costs. By adhering to these criteria, officials can optimize the effectiveness of external advice in renegotiation processes.

5. Prevent risks of corruption and weakening of sector governance

Senegal, still scarred by the PetroTim affair, has experienced the corruption risks of contract negotiation processes. To prevent renegotiation processes from compromising sector governance, it is crucial to adopt robust transparency and governance measures.

In Indonesia, for example, renegotiation objectives were defined by contract amendment guidelines, reviewed by parliament, and audited by an internal controller, which introduced a level of oversight and minimized political interference. Reliance on existing laws and regulations, which required regulatory changes for any alteration, also limited political interference. Restrictions on the participation of team members in the concerned industries were put in place to avoid conflicts of interest. Senegal should likewise establish strict governance mechanisms and ensure rigorous oversight to preserve the integrity of the process and avoid corrupt practices.

The renegotiation of oil and gas contracts in Senegal represents a decisive turning point in the management of natural resources. Faced with the challenges posed by political dynamics and the need to restore trust after the PetroTim affair, a rigorous and transparent approach is imperative. The establishment of an effective and transparent communication strategy, a strong and well-structured multidisciplinary renegotiation team, and the judicious use of external support are essential to ensure the success of this process.

To achieve better results in the process, it is also crucial that the government prevents renegotiations from dragging on, as this can be a strategy used by companies to exert economic pressure. By drawing on international best practices, the Senegalese state cannot only maximize long-term benefits but also attract potential investments and strengthen collective trust in the exploitation of natural resources.

We will continue to closely monitor the evolution of this process and provide additional recommendations as objectives become clearer and developments materialize.