According to the provisions of Article 5 of Law No 2019-03 of 1 February 2019 on the Petroleum Code (the “Petroleum Code” or PC), all petroleum resources belong to the Senegalese people.

The Ministry of Hydrocarbons and the Société des Pétroles du Sénégal (PETROSEN) are the government bodies responsible for implementing the national hydrocarbons policy, in addition to the Institut de Promotion du Bassin Sédimentaire National. They also represent the interests of the State in the hydrocarbons sector (Articles 3 and 4, PC).

In addition, in October 2016, the government created the Comité d’Orientation Stratégique du Pétrole et du Gaz (COS-PETROGAS) by decree, the aim of which is to support the optimal exploitation of oil and gas resources for the benefit of the population.

The Ministry of Hydrocarbons

The Ministry of Hydrocarbons is the supervisory body responsible for implementing and monitoring government policy in the oil and gas sector. According to the Petroleum Code, the Ministry is responsible for the operation of the oil and gas sector and is in charge of:

• granting exploration and production licences;
• authorising all construction work for the transport of oil and gas;
• opening up oil and gas exploration areas to competition;
• accepting or rejecting applications for petroleum exploration areas; and
• signing oil agreements, including production sharing contracts, following the recommendations of the Minister of Finance on financial and tax requirements.

PETROSEN

PETROSEN is responsible for implementing Senegal’s oil policy. In collaboration with the Direction des Hydrocarbures, PETROSEN prepares and negotiates all oil contracts with oil companies applying for mining titles or service contracts. These companies then negotiate and sign a partnership agreement with PETROSEN.

PETROSEN is also responsible for the technical monitoring and control of petroleum operations.

COS-PETROGAS

This committee is responsible for providing strategic guidance, defining and supervising policies relating to the exploitation of hydrocarbons. It is part of the Office of the President of the Republic of Senegal. Its main roles and responsibilities are to define, monitor and verify the implementation of national oil and gas policy, implement hydrocarbon project development programmes, approve local content, mobilise funds and ensure compliance with good governance practices.

The Petroleum Code provides that the State undertakes petroleum operations on its own behalf, either directly or through the national petroleum company, or through several persons or companies of its choice. To this end, Senegal created PETROSEN in May 1981, in which the State holds a 99% stake.

PETROSEN reports to the Ministry of Energy, Petroleum and Mines and is responsible for implementing Senegal’s oil and gas policy. It is active in the upstream, midstream and downstream oil and gas sectors. In the upstream oil and gas sector, its mission is to evaluate the country’s hydrocarbon resources, promote the exploitation of these resources by international oil companies, supervise oil exploitation and monitor compliance with contracts. PETROSEN is therefore responsible for drawing up and negotiating all the oil agreements signed by the Ministry of Energy, Petroleum and Mines and the oil companies. PETROSEN is entitled to a contributory stake in any exploitation project within a range of 10%, up to the maximum rate stipulated in the oil agreements (generally 20%). To this end, it is a signatory to joint operating agreements (JOA) with oil companies active in Senegal. In the downstream oil and gas sector, PETROSEN is a strategic player in the refining process.

The Petroleum Code has taken on board all the positive aspects of the previous code of 1998 and has made other improvements, particularly with regard to the following points:

• transparency requirements in the governance of extractive resources, in accordance with the Extractive Industries Transparency Initiative (EITI) standard;
• the definition of a new regulation on petroleum operations to be annexed to the 2019 code;
• the strengthening of regulations relating to the transport of oil and gas products from production sites to areas of high consumption, and to the storage and wholesale of pre-processed or liquefied oil and gas products (midstream), in particular through the introduction of authorisation applications for natural gas storage and liquefaction operations;
• taking into account the Law on the distribution of revenues from the exploitation of hydrocarbons;
• the extension of local content provisions to allow private national investors, with the technical and financial capacity, to participate in oil risks and operations; and
• strengthening environmental regulations in line with international oil industry standards and practices.

In addition, on 24 January 2019, the National Assembly adopted Law No 2019-04 on local content in the hydrocarbons sector. This law refers to all initiatives taken to promote the use of national goods and services, as well as the development of national labour, technology and capital throughout the oil and gas industry value chain. Various implementing decrees that came into force at the beginning of 2021 specify the local content concepts introduced in the new regulations.

However, certain areas related to the oil sector – such as labour, the environment and health and safety – are governed by specific regulations that are independent of the Senegalese Petroleum Code.

The most important legal source for the upstream oil industry is the Petroleum Code and its implementing decree, although the latter is not yet available.

Under Article 3 of the Petroleum Code, the Ministry of Hydrocarbons is the competent authority to issue petroleum contracts.

Subject to compliance with the provisions of the Petroleum Code, the State may authorise one or more natural or legal persons of its choice to undertake the initial upstream phases by means of a prospecting authorisation or an exploration licence.

Authorisation to Prospect for Hydrocarbons

A hydrocarbon exploration licence confers on its holder the non-exclusive right to carry out preliminary hydrocarbon exploration work within the limits of its area, excluding drilling to a depth of more than 200 m, unless otherwise stipulated in the exploration licence (Article 15, PC).

As the rights associated with the prospecting licence are subject to the non-exclusivity limit, several prospecting licences or a mining title may therefore be granted concurrently over the same area (Article 16, PC).

Authorisation to Explore for Hydrocarbons

A hydrocarbon exploration licence confers on its holder the exclusive right to carry out any work within its area, including drilling, with a view to exploring for and discovering hydrocarbon deposits, in accordance with the terms of the petroleum contract attached to the licence (Articles 17 and 18, PC).

Hydrocarbon deposits are exploited on the territory of the Republic of Senegal by means of a temporary exploitation authorisation granted by order of the ministry responsible for hydrocarbons, or an exclusive exploitation authorisation granted by decree (Article 26, PC).

Provisional Authorisation to Operate

The provisional operating licence issued by the Ministry of Hydrocarbons authorises one or more legal entities to operate production wells on a temporary basis for a maximum period of six months, during which time they must continue to delineate and develop the predetermined deposit (Article 27, PC).

Exclusive Operating Licence

An exclusive exploitation licence issued by the State allows one or more legal entities to carry out hydrocarbon exploitation activities on an exclusive basis in a given area: the exclusive exploitation zone. Any commercial discovery of hydrocarbons made by the holder of a hydrocarbon exploration licence gives it the exclusive right, if applied for before the licence expires, to obtain an exclusive exploitation licence covering the area of the commercial discovery.

The exclusive exploitation authorisation is granted to the holder for an initial period which may not exceed 20 years. On expiry of this initial period, the authorisation may be renewed once, by decree, at the request of the contractor, for a further period not exceeding ten years. Renewal is not automatic (Article 29, PC).

Granting of Titles for Hydrocarbons

The award of hydrocarbon rights is accompanied by the signing of a petroleum contract that sets out the rights and obligations attached to the hydrocarbon rights. The holder of a petroleum contract is subject to the payment of a signature bonus, to the benefit of the State, non-recoverable in respect of petroleum costs and corporation tax, the terms and conditions of which are set out in the contract (Article 7, PC).

The oil contract must take the form of a production sharing contract or a service contract.

Production and Service Sharing Contracts

A production service contract is a contract between the State, via the national oil company (in this case PETROSEN) to which the hydrocarbon titles required for petroleum operations are delivered, and a contractor who carries out activities in an exploration zone or one or more exploitation zones, in the name and on behalf of the State, at its exclusive risk and at its financial and technical expense. In the event of the discovery of a commercial deposit, the contractor will receive a fixed or determinable amount as remuneration, payable in cash or in kind.

The production sharing contract allows the contractor, in the name and on behalf of the State, to carry out activities in a given area at its exclusive risk and at its financial and technical expense. In return, the contractor receives a share of the production from any commercial hydrocarbon deposits located within each exploitation zone for which it has been granted an exploitation licence.

Depending on the case, the production sharing contract may take the form of a contract for exploration and production sharing or a contract for exploitation and production sharing (Article 2, PC).

Allocation and Authorisation

The allocation of blocks opened by decree for petroleum operations on which hydrocarbon mining titles may be granted is carried out by invitation to tender or by direct consultation. The terms and conditions are laid down by decree. The petroleum contract for the allocation of blocks is negotiated by the Ministry of Hydrocarbons (Article 12, PC).

Authorisation to prospect for hydrocarbons is granted by order of the Ministry of Hydrocarbons, in areas not covered by a hydrocarbon title, for a maximum period of two years.

The authorisation to prospect for hydrocarbons is granted to the holder by decree for an initial period not exceeding four years.

Hydrocarbon exploration permits

At the request of the licence holder, a hydrocarbon exploration licence may be renewed, by decree, no more than twice, for a period not exceeding three years each time. Exceptionally, at the end of the initial period or the first renewal period, the licence holder may be granted an extension of no more than one year by decree, provided that the holder has started work and provided the required technical evidence. The second renewal period may be extended, by decree, for the time required to continue work on evaluating a discovery (Article 19, PC).

Provisional operating permit

A provisional operating licence is issued by the Ministry of Hydrocarbons for a period of six months. The provisional operating licence automatically lapses when the exploration licence expires, unless an application for an exclusive operating licence is submitted. The procedures for examining applications for provisional operating licences and for their withdrawal are laid down by decree (Article 27, PC).

Nationality criteria

In addition, the granting of a provisional or exclusive operating licence is subject to a nationality criterion, as these licences are only issued to one or more legal entities governed by Senegalese law (Article 7, PC).

Production sharing contract

The production sharing contract attached to the exploration licence is sent by the Ministry of Hydrocarbons to the Ministry of Finance for an opinion on the financial tax and customs provisions. The latter are deemed to be in compliance if no action is taken on the request within 21 days of the date of receipt of the request. The production sharing contract will be signed by the Minister for Hydrocarbons, PETROSEN and the applicant(s) for the hydrocarbon exploration licence. The contract is approved by decree and published in the Official Gazette (Article 20, PC).

The typical tax conditions for upstream licences are as follows.

• The payment of a signature bonus to the State – this is applicable to any holder of an oil contract who stipulates the terms and conditions.
• Payment of the application fee, in a single instalment of USD50,000, non-refundable and non-recoverable in respect of petroleum costs (this fee is payable for all applications for the granting, renewal or extension of hydrocarbon mining rights).
• The payment of a surface royalty – provided for in Article 47 of the 2019 Petroleum Code, the surface royalty is due from the date of signature of the petroleum contract, the renewal of the hydrocarbon mining title or the extension of its period of validity, with the terms and conditions for its collection set out in the petroleum contract.
• Social expenditure commitments – during the exploration and production period, oil contract holders are subject to social expenditure commitments for the benefit of the population, which are not recoverable (the amounts of these funds are set out in the oil contract concluded with the holder).
• Minimum exploration expenditure obligations – the holder of a hydrocarbon exploration licence must undertake to carry out a minimum programme of exploration work set out in the petroleum contract during the initial period and, where applicable, during each renewal period. Exploration and production sharing contracts may provide for expenditure of UDS37 million for the initial exploration period, USD20 million for the first renewal and USD20 million for the second renewal. These amounts may vary. In addition, the licensee will put in place a guarantee from a bank of international repute covering the minimum work commitments for the exploration period.

Taxes on Upstream Transactions

The tax regime applicable to income from upstream transactions is as follows.

Corporate income tax

In accordance with Article 43 of the Petroleum Code, the holder of an oil contract and its associated companies are subject to corporation tax on their oil revenues. The rate of corporation tax is set at 30% and is not recoverable in respect of oil costs. The resulting tax is calculated separately for each prospecting, exploration or production zone. Since the entry into force of the Amending Finance Act for 2019, capital gains resulting from the disposal of corporate rights abroad, relating directly or indirectly to hydrocarbons in Senegal, are subject to corporate income tax.

Other taxes

Upstream operations carried out by holders of hydrocarbon mining rights and the companies associated with them are subject to the other taxes and duties provided for in the General Tax Code, under the conditions of ordinary law.

Royalties on hydrocarbons produced

Under the terms of Article 42 of the Petroleum Code, the holder of a provisional or exclusive hydrocarbon exploitation licence is required to pay a royalty calculated on the basis of the total quantities of hydrocarbons produced (crude oil and natural gas) within the exploitation perimeter and not used in petroleum operations, as follows:

• onshore liquid hydrocarbons – 10% ;
• shallow offshore liquid hydrocarbons – 9% ;
• deep offshore liquid hydrocarbons – 8% ;
• liquid hydrocarbons in very deep waters – 7%; and
• gaseous hydrocarbons exploited onshore, in shallow, deep and very deep waters – 6%.

The new Petroleum Code also introduces an export tax of 1% on production destined for export.

Exemptions

The Petroleum Code and the General Tax Code provide for a number of exemptions and other tax and customs benefits, such as exemption from the flat-rate employer’s contribution, the flat-rate minimum tax, the property tax and the local economic contribution. There is also an exemption from VAT on imports, deliveries and services provided to the holder of the petroleum title or its subcontractors.

With the exception of the statistical royalty and community levies, the holder of an oil contract and its subcontractors are exempt from all customs duties and taxes during the exploration, evaluation and development periods, including the Senegalese Shippers’ Council (COSEC) levy, for the import of certain goods listed in Article 49 of the Petroleum Code. They also benefit from the suspension of import duties and taxes for goods that can be re-exported or transferred after use.

PETROSEN acts in its own name or on behalf of the State in the field of hydrocarbons. Its missions include:

• to undertake, at the request of and on behalf of the State, exploration, research, exploitation, transport and marketing of liquid and gaseous hydrocarbons in their raw state, alone or jointly with any other company, whether a subsidiary or not, within the framework of an association or any form of grouping; and
• to hold, at the request and on behalf of the State, the State’s interests in hydrocarbon deposits and in the capital of companies holding oil contracts (Article 4, PC).

On this last point, the State, through PETROSEN, reserves the right to participate in all or part of the oil operations, by joining forces with the holders of an oil contract or exploration licence.

The terms and conditions of participation are specified in the petroleum contract or exploration licence. However, the national oil company has a minimum stake of 10%, held by the other joint holders of the hydrocarbons title, in the exploration and development phases, including redevelopment, with the possibility of increasing this stake to a further 20% in the development and exploitation phases not held by the other joint holders of the hydrocarbons title (Article 9, PC).

The Petroleum Code allows private national investors with the technical and financial capacity to participate in petroleum risks and operations, as well as in all subcontracting, supply and service contracts relating to petroleum operations.

Senegalese companies will also be able to benefit from oil operations as holders of oil contracts, and companies working on their behalf under local content provisions are subject to obligations that include:

• technology transfer through an annual training programme defined in the applicable oil contract; and
• a preference for all construction, supply or service contracts, under equivalent conditions in terms of quality, quantity, price, delivery times and payment.

Senegalese employees with equal qualifications may be recruited on a priority basis to carry out oil operations on Senegalese territory.

In addition, holders of oil contracts must provide a guarantee deposit to a leading financial institution for the rehabilitation and restoration of sites, under the conditions set out in the oil contract (Article 58, PC).

All these provisions are developed by Law No 2019-04 of 24 January 2019, on local content in the hydrocarbons sector.

The hydrocarbon mining licence is issued exclusively to legal entities demonstrating the required technical and financial capacity (Article 10, PC).

Any commercial discovery of hydrocarbons made by the holder of a hydrocarbon exploration licence entitles that holder to an exclusive licence to exploit the perimeter of the commercial discovery, so long as the holder applies for this before the expiry of the hydrocarbon exploration licence (Article 29, PC).

The application for exclusive exploitation authorisation must be accompanied by a development and exploitation plan for the commercial discovery in accordance with the model development plan report defined by order. The development plan submitted by the operator is approved by order of the Ministry of Hydrocarbons.

The holder of an exclusive exploitation authorisation must also undertake to diligently carry out the development work on the commercial discovery concerned and to exploit this discovery in accordance with international standards and practices in use in the petroleum industry and with the regulations governing petroleum operations in force in Senegal (Article 32, PC).

When the boundaries of a commercial deposit overlap several exploration authorisations, the holders who each have an exclusive exploitation authorisation for a given deposit area must sign a unitisation agreement, which will be communicated to the Ministry of Hydrocarbons together with the corresponding exploitation programmes within 15 days of the date of signature. Holders of exploitation authorisations have one year to draw up a joint exploitation programme (Article 60, PC).

The holder of an exploration licence may renounce its rights at any time, in whole or in part, subject to three months’ notice and in accordance with the provisions of the production sharing contract.

The contractor must carry out all abandonment work necessary to protect the environment. If the contractor relinquishes its rights over the entire exploration area without having carried out the entire minimum work programme, it must pay the state, within fifteen days of the relinquishment, compensation for the cost of the work remaining to be carried out during the current exploration period.

The holder of an exclusive licence may relinquish all or part of it after giving one year’s notice. In the event of partial or total relinquishment, the holder of a production sharing contract must carry out the abandonment work. The holder must take all necessary measures to safeguard the environment in accordance with the environmental and social impact study (Article 33, PC).

The products from the exploitation of hydrocarbon deposits are intended either for local consumption or for export. Under the conditions set out in the petroleum contract, holders of exclusive exploitation authorisations must give priority to allocating the proceeds of their exploitation to cover the country’s domestic consumption needs. In this case, the transfer price reflects the international market price (Article 59, PC).

The petroleum contract may include a clause to stabilise the legislative and regulatory context on the date it comes into force, allowing the contractors and the State to demand either the non-application of new financially aggravating legal provisions, or an adjustment to the contractual provisions. This stabilisation clause does not cover the additional costs caused by a change in regulations concerning the safety of individuals, environmental protection, the control of oil operations or labour law, unless these changes do not comply with international practice or are applied to a contractor in a discriminatory manner (Article 72, PC).

Under the conditions set out in the Petroleum Code, hydrocarbon titles are assignable and transferable to legal entities that have the technical and financial capacity to carry out petroleum operations. Deeds of assignment or transfer of titles are sent to the Ministry of Hydrocarbons for approval, in accordance with the following procedures.

• In the event of the transfer of a shareholding from one of the members of the contracting group to a company affiliated to that member, only a prior declaration addressed to the Ministry of Hydrocarbons is required (Article 61, PC).
• The transfer of shares of a member of the contracting group or of a company directly or indirectly controlling a member of the contracting group will be treated as a transfer of interest for the purposes of the Petroleum Code if it results in a change of control, unless the change of control is the direct result of a transaction on an official stock exchange. Any change of control must be notified to the Ministry of Hydrocarbons within ten days of its effective date (Article 62, PC).

There are no legal or regulatory restrictions on production rates. However, there are restrictions on the distribution of production insofar as the obligation to supply the local market set out in Article 59 of the CP gives priority to the local market for the products of exploitation by holders of exclusive authorisations.

The legal framework applicable to the midstream and downstream sectors in Senegal is governed by Law 2020-06 of 7 February 2020 on the Gas Code (the “Gas Code” or GC) and Law 98-31 of 14 April 1998 on the import, refining, storage, transport and distribution of hydrocarbons.

The 2019 Petroleum Code governs only upstream activities in the oil and gas sector. Only a few midstream provisions relating to transport are included in this code.

Hydrocarbons

The import, refining, export, storage, transport, distribution and marketing of hydrocarbons are governed by Law No 98-31 of 14 April 1998.

The provisions of the Petroleum Code also specify the nationality and capacity requirements for access to the Senegalese upstream and downstream markets.

The authorisation to transport hydrocarbons provided for in Article 35 of the Petroleum Code may only be issued, by order of the Ministry of Hydrocarbons, to a legal entity under Senegalese law that can demonstrate the technical and financial capacity required to carry out the activity of transporting hydrocarbons.

The Gas Sector

The Ministry of Hydrocarbons implements the policy defined by the President of the Republic of Senegal for activities in the intermediate and downstream segments of the gas sector (Article 4, GC).

A licence must be obtained to import, export, re-export, aggregate, process, store or supply natural gas, and to transport and distribute liquefied and compressed natural gas (Article 7, GC).

This licence is also only granted to any Senegalese legal entity that can demonstrate the necessary technical and financial capacity. The licence is awarded to legal entities incorporated under Senegalese law by invitation to tender or by direct consultation by order of the Minister responsible for hydrocarbons in accordance with procedures to be laid down by decree. The licence is granted by order of the Minister responsible for hydrocarbons and is accompanied by specifications defining the operator’s obligations (Article 8, GC).

The transport or distribution of natural gas by pipeline must be the subject of a concession (Article 10, GC). This licence is also only granted to a legal entity under Senegalese law that can demonstrate the necessary technical and financial capacity.

There is no national monopoly for downstream activities.

The Gas Code provides for a system of licences or concessions, depending on the gas operations envisaged. These licences or concessions are granted by order of the Ministry of Hydrocarbons. The procedures for issuing invitations to tender and direct consultations are laid down by decree, as are the conditions governing the admissibility of applications. These decrees have not yet been published.

The granting of a permit or concession for downstream gas activities, including the construction of gas infrastructure, is subject to the completion of a prior environmental assessment and the obtaining of an operating authorisation under the regulations on installations classified for environmental protection. With regard to liquefied and compressed natural gas (Article 7, GC), intermediate and downstream activities such as import, export, re-export, storage, transport and supply require a licence from the Ministry of Hydrocarbons.

Upstream and downstream transmission and distribution activities are subject to obtaining a concession awarded to any legal entity under Senegalese law in the case of natural gas distribution by pipeline (Article 10, General Terms and Conditions) or a concession awarded to legal entities under Senegalese law by means of a call for tenders or direct consultation (Article 11, General Terms and Conditions).

For hydrocarbons, Law No 98-31 of 14 April 1998 requires a permit from the Ministry of Hydrocarbons for downstream activities and a licence for downstream activities such as the transport, import and storage of crude oil and/or derived products.

Downstream distribution to supply the national market also requires a licence from the Ministry of Hydrocarbons.

Unlike upstream operations, downstream and midstream operations do not benefit from a special tax regime. Article 2 of the Petroleum Code defines “petroleum operations” as all activities and operations relating to the prospecting, exploration, evaluation, development, production, storage, transportation or marketing of hydrocarbons, including the processing and liquefaction of natural gas, but excluding the refining, distribution and marketing of oil and gas products. It is therefore possible to deduce from this definition that the refining, distribution and marketing of oil and gas products would constitute a second phase, which is the downstream phase.

With regard to commercial arrangements, Article 38 of the Petroleum Code stipulates that the holder of a hydrocarbon transport licence must accept the passage of hydrocarbons from other depots, in return for payment of an amount set by order of the ministry responsible for hydrocarbons.

The Petroleum Code does not provide for any special regime for midstream and downstream operations, so the ordinary law regime remains applicable. By way of example, but not exhaustively, the following taxes and duties apply:

• corporation tax – the holder of an oil contract and its associated companies are subject to corporation tax on their oil revenues, the rate of corporation tax being set at 30% and not being recoverable in respect of oil costs (Article 43, PC);
• tax on petroleum products – provided for in Articles 443 of the Petroleum Code and subsequent Articles of the Tax Code, tax on petroleum products is levied on premium petrol, ordinary petrol, canoe fuel and diesel; and
• other taxes and duties – upstream transactions carried out by holders of hydrocarbon securities and their associated companies are subject to the other taxes and duties provided for in the tax code, under the conditions of ordinary law.

No special rights are granted to national companies for intermediate and downstream activities.

Activities in the intermediate and downstream segments of the oil and gas sector are subject to compliance with the rules set out in the law on local content in the hydrocarbons sector and its implementing decrees.

Legal Requirements

The law on local content in the hydrocarbons sector applies to all activities in the Republic of Senegal relating, directly or indirectly, to:

• the prospecting, exploration, development and exploitation of hydrocarbons;
• the transport and storage of hydrocarbons;
• the processing and optimisation of hydrocarbons; and
• the distribution of oil and gas products.

Under these provisions, preference is given to the use of national goods and services, such as services and supplies from Senegalese companies and the employment of Senegalese staff where they have the required skills, as well as residents of local communities or those in the vicinity of oil and gas operations for unskilled jobs.

In addition, the local content plan of each contractor, subcontractor, service provider and supplier must specify the measures taken to enable Senegalese nationals to acquire the qualifications and expertise needed to gradually replace non-national employees (Article 7, PC).

Goods and services related to oil and gas activities are supplied by Senegalese companies if there are companies capable of doing so; if not, a foreign company may be hired.

Any investor wishing to act as a subcontractor, service provider or supplier must register with the Trade and Personal Property Credit Register and set up a company under Senegalese law.

Classification by Plan

Oil and gas activities are classified under three regimes: exclusive/mixed/non-exclusive. Classification in a regime determines the percentage of share capital held by nationals and the percentage of national employees.

Article 4 of Decree No 2020-2065 setting out the terms and conditions for the participation of Senegalese investors in companies engaged in oil and gas activities stipulates that at least 51% of the share capital of companies classified under the exclusive regime must be held by natural persons of Senegalese nationality or by legal entities controlled by natural persons of Senegalese nationality. In addition, more than 80% of the management of these companies must be carried out by natural persons of Senegalese nationality and at least 51% of the staff working in these companies must be natural persons of Senegalese nationality.

Foreign companies wishing to operate under the mixed regime must form an association under Senegalese law in the form of a company with a local company (meeting the criteria for a company under the exclusive regime set out above). The terms of the association are governed by the directives of the National Committee for Monitoring Local Content (CNSCL) in the Hydrocarbons Sector. A minimum of 5% of the capital of a company created in this way is held by a local company. It is important to note that this rate is likely to evolve according to the revisions that the CNSCL may make, in particular following an evaluation of the socio-economic fabric of the hydrocarbons sector in Senegal.

Finally, the non-exclusive regime is open to free competition between foreign and local companies.

Decree No 2021-249 establishes a classification table for oil and gas activities that assigns a regime to each type of activity, specifying, depending on the case, the minimum percentage of the company’s share capital held by nationals and the minimum percentage of national employees.

Decree No 2023-990 on the organisation and operation of CNSCL requires all contractors, suppliers, subcontractors and tier 1 and tier 2 service providers (ie, suppliers of the final service and subcontractors to them) working on an oil project to submit a local content plan that meets the CNSCL’s specific requirements, as well as an annual procurement plan.

If the activities are subject to a prior licence, this is granted by decree or approved by decree in the case of a concession. Applicants for a licence or concession must provide information on the company’s beneficial owners.

Consequently, the granting of a licence or concession for intermediate and downstream gas activities is subject to a prior environmental assessment and the obtaining of an operating permit under the regulations on installations classified for environmental protection.

In accordance with the Gas Code, the licence may be renewed by the Ministry of Hydrocarbons, on the advice of the regulatory body, and the concession may be renewed by decree at the request of the holder.

Licence or concession holders may assign or transfer their licences or concessions to legal entities with the capacity required under Senegalese law (Article 18, GC).

In Senegal, there are no provisions relating to the “right of condemnation/land tenure” other than those applicable in the event of expropriation in the public interest.

However, the Petroleum Code contains provisions relating to the regulation of relations with owners. Relations with landowners and occupiers are therefore governed by the regulations in force in Senegal.

The holder of an oil contract must obtain prior authorisation from the competent land authority to occupy land and carry out oil operations, and the operations may not take place on land:

• located less than 200 m from a cemetery, religious buildings or sites used for religious or cultural purposes;
• less than 100 m from dwellings, buildings, reservoirs, streets, roads, railways, water mains or sewers or, in general, in the vicinity of all public utility works and engineering structures;
• within 1 km of a border, airport, aerodrome or security facility; or
• declared military or classified property, including nature reserves, national parks and areas of hunting interest.

The 2019 Senegalese Petroleum Code, together with its implementing decree and the Merchant Marine Code, set out the provisions governing the transport of hydrocarbons.

The transport of hydrocarbons is subject to authorisation – ie, the issuing of an administrative act by which the State authorises one or more legal entities to carry out hydrocarbon transport and associated storage activities, by pipeline, gas pipeline or any other means, in a specified area: the hydrocarbon transport zone. During the period of validity of an exclusive exploitation authorisation, the contractor holds the exclusive right to transport the production resulting from its exploitation activities.

The authorisation to transport hydrocarbons is issued by order of the Minister responsible for hydrocarbons. It is issued exclusively to any legal entity governed by Senegalese law that can demonstrate the technical and financial capacity required to carry on the business of transporting hydrocarbons.

The hydrocarbon transport authorisation order allows the holder to build and operate hydrocarbon transport infrastructure. The order issued by the Minister responsible for hydrocarbons sets the duration of the hydrocarbon transport licence.       

However, for transport facilities in maritime areas, the authorisation to transport hydrocarbons is issued by a joint order of the minister responsible for hydrocarbons and the minister responsible for maritime affairs.

Access to Infrastructure

The Gas Code contains provisions on third-party access to infrastructure.

It stipulates that operators of gas transmission and distribution networks and storage facilities must guarantee free access for third parties and comply with the principles of tariff transparency, equal treatment and non-discrimination (Article 27, GC).

The holder of a hydrocarbon transport permit must accept the passage of hydrocarbons from other fields, subject to compatibility with the conditions of use of the transport infrastructures referred to in Article 35 of the Petroleum Code and within the limits of the surplus capacity available.

The use by third parties of the transport infrastructure held by a transport licence holder gives rise to the payment of a tariff set by order of the Ministry of Hydrocarbons.

Joint Installations

A case of joint installation has also been anticipated. If several hydrocarbon discoveries are made in the same geographical area, the operators must join forces to build and/or use joint facilities and pipelines to evacuate all or part of the production from these discoveries.

In the absence of an agreement, the Ministry of Hydrocarbons must ask operators to join forces to carry out these activities (Article 38, PC).

Senegalese legislation places restrictions on the sale of gas products, with priority given to domestic consumption. Article 59 of the Petroleum Code sets out an obligation to supply the local market.

Although the proceeds from the exploitation of hydrocarbon deposits may be intended either for local consumption or for export, the holder of an exclusive exploitation licence must give priority to using the proceeds from its exploitation to cover the country’s domestic consumption needs.

The transfer price must reflect the international market price.

Once the country’s domestic needs have been met, free export is possible after payment of a customs duty on exit, set at 1% of the value of the said share of production.

Any legal entity intending to carry out export activities must first obtain a licence from the Ministry of Hydrocarbons, which is granted for a period of five years (Article 38, GC).

Re-export activities also require a licence from the Ministry of Hydrocarbons.

The Petroleum Code provides that the share of production accruing to holders of exclusive exploitation authorisations, after meeting the country’s domestic needs, may be freely exported after payment of an exit customs duty, set at 1% of the value of the said share of production, deductible in determining the profit subject to corporation tax (Article 59, PC).

Holders of licences or concessions carrying out activities in the intermediate and downstream segments of the gas sector are subject to the taxes, duties and levies for which they are liable in accordance with the provisions of the General Tax Code (Article 63, GC).

In addition, licence or concession holders operating in the intermediate and downstream segments of the gas sector are subject to the payment of taxes in accordance with the provisions of the Customs Code (Article 64, GC).

Law No 98-31 of 14 April 1998 also stipulates that any company planning to carry out oil storage activities to supply the national market or for export must first obtain a licence from the Ministry of Hydrocarbons.

The Gas Code contains provisions relating to the assignment or transfer of licences or authorisations or assets for downstream activities. Under Article 18 of the Gas Code, licence or concession holders may assign or transfer their licences or concessions to legal entities that have the required capacity under Senegalese law, in accordance with the provisions of the Gas Code.

The deeds of assignment or transfer, together with all the agreements between the parties, are sent to the Ministry of Hydrocarbons for approval, by decree, after receiving the opinion of the supervisory body.

The Ministry of Petroleum may refuse to approve any assignment or transfer that may directly or indirectly affect the public interest or public safety.

Taxation applicable to sales and transfers is governed by the provisions of the General Tax Code.

Any assignment or transfer made in breach of the provisions of Article 18 of the Gas Code is null and void.

Measures to encourage and protect investment in general have been taken to support investors, particularly in the extractive industries sector.

Measures Provided for in the Investment Code

The investment incentives provided for in the Investment Code are as follows:

• economic and competitive freedom;
• full ownership of all movable and immovable property, and a guarantee against any measure of nationalisation, expropriation or requisition throughout the country, except for reasons of public utility, under the conditions laid down by law (compensation will be provided otherwise);
• no restrictions, in particular on the settlement, transfer and movement of capital;
• freedom of transfer of income or proceeds of any kind resulting from the operation, from any transfer of assets or from its liquidation (guarantee benefiting foreign investors, entrepreneurs and partners, whether natural or legal persons);
• guaranteed treatment equal to that accorded to nationals, subject to reciprocity or any other special measure; and
• guaranteed access to raw materials.

The process for granting advantages to foreign investment is as follows:

• an application for approval is submitted to the national agency responsible for promoting investment and major works (APIX) or to the competent authority;
• the file contains precise information on the investor and its programme, as well as on the company’s tax clearance in the event of expansion; and
• approval is granted in two phases (a first phase covering benefits granted during the implementation phase and a second phase covering benefits granted during the operating phase).

Disputes arising from investment contracts may be settled by international arbitration or conciliation, as provided for in agreements between the parties or in bilateral investment treaties.

An investor has a free choice of jurisdiction and laws in its individual agreements with its partners.

The following benefits are available:

• a three-year customs exemption for equipment and materials that are neither produced nor manufactured in Senegal and that are specifically intended for production or operation under the approved programme;
• customs exemptions for commercial vehicles; and
• the possibility of concluding fixed-term contracts with employees for a period limited to five years.

Investors are required to do the following:

• comply with Senegalese legislation;
• comply with the rules and standards already required for products in the investor’s country of origin;
• provide any information deemed necessary to verify its obligations;
• facilitate the control and monitoring of activities by APIX or the competent authority at project implementation level;
• keep the company’s accounts in accordance with the West African Accounting System (SYSCOA);
• adhere strictly to investment programmes and receive authorisation from the competent authority for any substantial change; and
• submit financial statements at the end of each financial year to the Single Information Collection Centre (CUCI).

Benefits Arising From the Petroleum Code

The following benefits are derived from the Petroleum Code:

• the right to take out loans abroad to carry out activities in Senegal;
• the free movement of funds for payments on current transactions;
• the right to transfer the sums required for the contractual amortisation of debts relating to operations in Senegal;
• exemption from customs duties and taxes and from the Senegalese Shippers’ Council levy during the exploration, evaluation and development period;
• the right to transfer income, in particular interest and dividends from invested capital, subject to prior approval of the business plan by the Minister for Hydrocarbons and the Minister for Finance, with the exception of the transfer of operations between subsidiaries of the same company;
• opening foreign currency accounts abroad or in the books of approved intermediaries for financial flows resulting from activities in Senegal;
• foreign employees resident in Senegal may transfer to their country of origin all or part of their employee savings and pension contributions paid on their behalf, subject to payment of taxes and other contributions; and
• a stabilisation clause.

Incentives and Benefits Provided by the Tax Code

The incentives and benefits provided by the Tax Code include the following:

• Exemption from VAT on imports, supplies and services provided to holders of a prospecting or exploration licence for hydrocarbons or an exploration licence for mineral or petroleum substances;
• exemption from the flat-rate contribution payable by the employer (CFCE); and
• exemption from the local economic contribution.

With the exception of countries under oil embargo or international sanctions, Senegal has no sanctions in place regarding investment in oil and gas assets in foreign jurisdictions, or conducting business in the oil and gas sector with foreign counterparties or governments, or in foreign jurisdictions.

Senegal’s environmental regulatory framework is based mainly on two texts:

• Law No 2023-15 of 02 August 2023 on the Environmental Code; and
• Decree No 2001-282 of 12 April 2001, implementing the Environment Code, pending new decree.

In addition to these two main texts, Senegal has introduced a number of decrees to complete the legal framework in the environmental sector:

• Order No 9469/MJEHP/DEEC on the operation of the technical committee;
• Order No 9470/MJEHP/DEEC, setting the conditions for issuing a permit to carry out environmental impact assessment (EIA)-related activities (environmental impact studies);
• Order No 9471/MJEHP/DEEC, on the content of the EIA specifications;
• Order No 9472/MJEHP/DEEC on the content of the EIA report;
• Order No 8998 of 17 October 2008 creating a National Commission for Sustainable Development; and
• Order No 009468/MJEHP/DEEC, regulating public participation in EIAs.

The environmental regulators are as follows.

Ministry of the Environment and Ecological Transition (METE)

The METE prepares and implements the policies defined by the President of the Republic of Senegal in terms of environmental monitoring, pollution control and the protection of nature, fauna and flora. It is also the authority responsible for environmental protection and, as such, takes measures to prevent and combat pollution of any kind. It also ensures the safety of potentially polluting facilities.

Environment and Classified Facilities Department (DEEC)

DEEC reports to the Minister for the Environment and is responsible for implementing the government’s environmental policies, including the protection of nature and people against pollution and nuisance. The DEEC comprises several divisions, including the Environmental Impact Division, which is responsible for the following tasks:

• validating the terms of reference for project EIAs, strategic environmental assessments of policies and programmes, and audits;
• assessing the admissibility of EIAs;
• monitoring the implementation of environmental management plans;
• giving a technical opinion on the projects submitted and preparing the decision on the environmental compliance certificate for the Minister for the Environment; and
• acting as secretariat for the technical committee for environmental assessments, public hearings and the accreditation commission for activities related to environmental assessments.

Regional Directorates for the Environment and Classified Installations (DREEC)

The Environment and Classified Facilities Directorate is represented at regional level by the DREEC.

Environmental Assessment

Any development project or activity likely to harm the environment will have to undergo an environmental assessment, as will regional and sectoral policies, plans, programmes and studies.

This environmental assessment, which is compulsory, makes it possible to anticipate and manage the negative impacts of the project, but also to examine the consequences, both beneficial and adverse, that a proposed development project or programme will have on the environment, and to ensure that these consequences are duly taken into account in the design of the project or programme.

It includes environmental and social impact assessments, strategic environmental assessments, initial environmental analyses and environmental audits.

Environmental Compliance Certificate

The environmental compliance certificate is an order issued by the Minister for the Environment after validation of strategic environmental assessments, environmental impact studies or initial environmental analyses. This certificate is valid for a renewable period of five years (Article 25.2 of the Environment Code).

Prospecting, exploration, hydrocarbon production and decommissioning operations may only be carried out once an environmental compliance certificate has been issued, setting out the terms and conditions for implementing the environmental and social management plan.

The aim of this procedure is to obtain a certificate of environmental compliance (ministerial order) issued by the Minister for the Environment after receiving the opinion of the technical committee (unit responsible for administering and managing the environmental impact study).

Environmental Impact Studies

Environmental and social impact studies are carried out by accredited consultancies.

Prior to the examination of the environmental and social impact study reports by the Technical Committee, the Ministry in charge of the Environment may, if necessary, call upon approved pre-assessment offices, taking into account the technical specificities of the project.

Public Hearing

If the EIA report complies with the specifications, the Department of the Environment and Classified Establishments (Direction de l’Environnement et des Etablissements Classés) organises a public hearing in collaboration with the project promoter and the administrative authority of the locality concerned.

Following this public consultation, a report on the public hearing is prepared by the secretariat. The project proponent examines the public’s concerns and submits a final report to the Technical Committee, which incorporates the environmental and social management plan.

If the project is rejected following the public hearing, the Technical Validation and Monitoring Committee (Comité technique de Validation et de Suivi des Evaluations environnementales) will rule on the merits of the decision.

Final Documents

The order relating to the certificate of conformity is submitted to the Minister for signature, together with the endorsements of the public enquiry report, the opinion of the investigating commissioner appointed by order of the Governor, the opinion of the Regional Development Committee (CRD) and the report of the Classified Installations Inspectorate, and is intended for examination of the application for authorisation.

Offshore operations are governed by the regulations governing facilities classified for environmental protection (ICPEs). ICPEs are industrial, small-scale or commercial facilities operated or owned by any natural or legal person, public or private, and all other activities, factories, workshops, depots, building sites and quarries that present either a danger to health, safety, public health, agriculture, nature or the environment in general, or a nuisance to neighbours.

ICPEs are divided into two classes.

• The first class includes facilities that may only be authorised on condition that measures are taken to avoid danger or inconvenience to health, safety, public health, agriculture, nature and the environment in general, or inconvenience to neighbours. These facilities must be located away from dwellings.
• The second category includes facilities that do not present the kind of serious disadvantages indicated in the point above, and which are subject to general requirements designed to ensure the protection of these interests.

ICPEs are therefore subject to control by the administrative authority and to the declaration and authorisation system specific to ICPEs.

An application for authorisation for a first category facility must be the subject of a public enquiry.

Class 1 installations, defined as presenting a risk of “danger or serious disturbance” to “health, safety, public health, agriculture, nature and the environment in general”, are subject to the authorisation system. An in-depth environmental assessment study is carried out to determine the environmental consequences in the economic analysis of the project.

Offshore oil and gas facilities  are subject to the ICPE authorisation regime, class 1/A1100 and A1200.

Facilities classified for environmental protection are subject to duties and taxes.

Petroleum operations are also carried out in compliance with the Environment Code, as well as other national and international legislation relating to the hygiene, health and safety of workers and the public, and to environmental protection.

Companies carry out their work using tried and tested techniques from the oil industry and take the necessary measures with regard to the following elements:

• preventing and controlling environmental pollution;
• waste treatment;
• preserving the natural heritage of a site;
• soil and groundwater conservation; and
• applicable health and hygiene regulations.

The costs of any work required to protect the environment shall be borne by the oil contract holder in accordance with the regulations in force (Article 53, PC).

In accordance with Article 64 of the Petroleum Code, if the State does not take back the installations and equipment on expiry and termination of the petroleum contract, the holder must, at its own expense, dismantle and remove them, as well as carry out all other site abandonment and rehabilitation work. If it fails to do so, the Ministry of Hydrocarbons will order the necessary measures to be taken at the holder’s expense from the funds deposited.

Similarly, in the event of partial or total relinquishment, the holder of a production sharing contract must carry out the abandonment work, taking all necessary measures to safeguard the environment in accordance with the environmental and social impact study.

The main laws on climate change are as follows:

• Law No 2023-15 of 02 August 2023 on the Environment Code;
• Act No 2016-19 of 6 July 2016 authorising the President of the Republic to ratify the Paris Agreement under the United Nations Framework Convention on Climate Change, adopted on 12 December 2015;
• the Law on agro-sylvo-pastoral policy of 4 June 2004;
• Decree No 2000-73 regulating the consumption of substances that destroy the ozone layer; and
• Law No 2018-25 of 12 November 2018 on the forestry code.

However, these laws do not contain specific provisions on oil operations.

As far as the authors are aware, the authorities are not imposing any limits on oil and gas development.

However, all oil operations in Senegal are subject to authorisation by the Senegalese authorities. The rules governing these authorisations are set out in the Petroleum Code.

The regulatory framework for energy in Senegal is based mainly on one text, namely Law No 2010-21, the Renewable Energy Orientation Law, which aims to promote the development of renewable energy (RE) throughout the country, and specifically to:

• establish a regulatory framework for the development of renewable energies;
• put in place an incentive framework favourable to the purchase and remuneration of electricity generated from renewable sources;
• reduce the use of fossil fuels;
• promote all means of production, storage, distribution and consumption for domestic and industrial needs in both urban and rural areas;
• contribute to improving the security of energy supply;
• diversify production sources;
• promote the distribution of equipment linked to renewable energy technologies; and
• reduce greenhouse gas emissions.

In addition, Senegal has put in place a number of strategies to complement the legal framework in the energy sector:

• the Emerging Senegal Plan (PSE);
• the Energy Sector Development Policy Letter (ESDPL);
• the Energy Efficiency Policy (PEEC) in the Economic Community of West African States (ECOWAS);
• the Renewable Energy Policy (PERC), ECOWAS; and
• the Regional Initiative for Sustainable Energy (IRED) of the West African Economic and Monetary Union (UEMOA).

These policy laws show a clear desire on the part of the authorities to pay close attention to renewable energy.

Senegal finds itself in the midst of oil and gas development, while also taking into account the energy transition. Energy transition means moving from a system dominated by the use of fossil fuels to an energy mix based mainly on renewable energies.

Oil and gas assets help to finance renewable energies. The funds generated by this activity can be used to build solar or wind power stations. With the development of infrastructure (bridges, roads), they also facilitate the logistics and distribution of energy.

Senegal is making considerable efforts in the field of renewable energy, which now accounts for 30% of the energy mix.

Upstream oil and gas operators, to mitigate greenhouse gas emissions, are adopting technologies and practices to reduce flaring of natural gas during oil production, they are also using low-emission drilling equipment and, most importantly, they are implementing environmental management plans to mitigate the negative impacts of operations. Downstream, operators are improving refinery efficiency and engaging the public to promote sustainable practices.

However, much remains to be done in terms of implementation and transparency in the management of resources from the extractive industries in Senegal. Monitoring and control mechanisms are needed downstream.

Under the National Renewable Energy Action Plan (PANER), Senegal is actively developing its oil and gas resources with the Sangomar and Grande Tortue Ahmeyim (GTA) projects. The development of these resources is aimed at reducing dependence on heavy fuel oil for electricity generation, which will cut costs and greenhouse gas emissions while strengthening the country’s energy security.

Senegal also plans to use its natural gas to fuel power stations, replacing the old oil-fired plants. This strategy is part of its integrated least-cost plan (PIMC), which includes the construction of new gas-fired facilities and the development of gas infrastructure and transport.

The Senegalese government is striving to balance the exploitation of hydrocarbons and the energy transition by putting in place policies and regulatory frameworks for the responsible exploitation of fossil resources, while investing in renewable energy and promoting energy efficiency.

By increasing the share of renewable energy, Senegal is reducing its dependence on imported fossil fuels, thereby enhancing its energy security and stabilising energy costs.

The energy transition requires significant investment in new infrastructure such as gas-fired power stations and liquefied natural gas (LNG) storage facilities. Energy diversification is also attracting international and local investment. This creates economic and industrial development opportunities beyond the fossil fuel sector.

To date, there are no regulations governing the regulation of non-conventional upstream interests. Consequently, there is no specific regime in this area.

The Gas Code regulates activities on the national territory, in the intermediate and downstream segments of the gas sector, including the following:

• the gathering, processing, storage, import, export, re-export and supply of natural gas in gaseous or liquid form;
• transmission and distribution of natural gas by pipeline;
• liquefied natural gas transmission and distribution; and
• transport and distribution of compressed natural gas.

This law also regulates the conditions for obtaining licences to operate, produce and market liquefied natural gas.

The Local Content Act also applies to this sector (see 3.7 Local Content Requirements: Midstream/Downstream).

As part of its development strategy, the Republic of Senegal wishes to attract investors, particularly foreign investors. To this end, incentives and advantages have been introduced to facilitate the installation, exploration, exploitation and marketing of oil and gas resources throughout the country. It is in this context that the Petroleum Code, the Local Content Act of 2019 and, more recently, in February 2020, the Gas Code were put in place. Senegal has joined the Extractive Industries Transparency Initiative (EITI).

The oil industry has a coherent social policy, with the implementation of a sector-specific collective agreement, and it has measures in place to ensure that companies and workers comply with workplace safety and environmental regulations.

A major recent change is the entry into force of Law No 2023-15 of 02 August 2023 on the Environmental Code.

Another major recent change was the entry into force in early 2021 of several decrees implementing the Local Content Act 2020:

• Decree No 2020-2065, establishing the terms and conditions for the participation of Senegalese investors in companies involved in oil and gas activities;
• Decree No 2021-249 establishing the classification of upstream oil and gas activities under the exclusive, mixed and non-exclusive regimes;
• Decree No 2023 -991 setting the terms and conditions for the funding and operation of the Fonds d’Appui au Developpement du Contenu Local dans les secteurs des hydrocarbures et des mines (FADCL); and
• Decree No 2023-990 on the organisation and operation of the National Committee for Monitoring Local Content in the Hydrocarbons and Mining Sector.