Mauritania, a new player in the gas sector?

The Islamic Republic of Mauritania is poised to become one of the most important gas hubs on the African continent, as the country prepares to sell its first gas cargo in early 2024

Located ten kilometres off the coast of Saint-Louis in Senegal, the huge Great Tortue Ahmeyim gas complex will start producing gas in the first quarter of 2024. Jointly operated by British Petroleum (BP) and its partners Kosmos Energy, Société Mauritanienne des Hydrocarbures (SMH) and Société des Petroleos du Sénégal (PETROSEN), it is the largest gas extraction project in the region. Covering an area of 33,000 km², the gas field contains 1,400 billion cubic metres of reserves, giving it a production potential of 30 to 50 years. In other words, Mauritania is poised to become a major world gas producer, and one of the largest in Africa.

However, it should be noted that the Mauritanian state faces numerous weaknesses. According to a 2022 study by the Organisation for Economic Co-operation and Development (OECD), Mauritania has become a 'fragile' state, particularly in economic terms. The country is exposed to major risks on several fronts, especially in terms of resource dependence, unemployment and current account deficits.

Could the Mauritanian government's new economic strategy, focused on fossil fuel and renewable energy exports, allow it to emerge from its fragile state?

Economic growth on the rise

With a population of some 4.8 million, Mauritania is essentially a desert country, with vast tracts of pasture land and only 0.5 % of arable land. Economically, the Covid-19 pandemic has had a major impact on the labour market, living conditions and welfare of the Mauritanian population, leading to an increase in extreme poverty, estimated at 6.3 % in 2022.

However, the World Bank has observed a significant increase in economic growth in Mauritania. Thanks to an increase in exports on the demand side (market) and the expansion of the agricultural sector on the supply side, it rose from 2.4% in 2021 to 7.1% in 2022. In 2023, economic growth has slowed to 4.3%, due to lower growth in the extractive industry as a result of lower iron ore and gold production, as well as lower agricultural production.

Mauritania's new energy strategy

Mauritanian elites are aware of the vulnerability of their country's economy, especially in terms of its dependence on resources. The government has therefore turned its attention to its soils and, in particular, to the exploitation of gas following the discovery of significant reserves on its Atlantic coast. This new strategy would allow for a transition from self-sufficiency in energy to a privileged position among the largest gas exporters.

Mauritanian soil is rich in resources. According to Ousmane Mamadou Khane, Minister of Economy and Promotion of Productive Sectors, "Mauritania has enormous potential". "Gas is a transitional energy source," he continues, "and the potential for renewable energies, especially solar and wind, is one of the best in the world. We have a lot of water and a lot of mines.

In this context, two important projects will come on stream next year: the aforementioned GTA project and the exploitation of the Sangomar oil field, with a production of 100,000 barrels per day. At the same time, progress continues on the Sandiara gas-to-electricity facility.

With 700,000 square kilometres of land available for the construction of solar panels and wind turbines, and a climate favourable to the development of these energies, Mauritania could also position itself as the renewable energy hub of West Africa. According to African Business, German project developer Conjuncta signed a memorandum of understanding in March 2023 with Egyptian energy provider Infinity and Masdar of the United Arab Emirates for a $34 billion green hydrogen project in Mauritania. The project could produce up to eight million tonnes of green hydrogen per year.

Experts believe that once the country begins to exploit these gas reserves, it will become Africa's third largest gas exporter after Nigeria and Algeria.

Positioning itself as a real energy hub in the region to attract investors: the examples of the MSGBC Forum and COP28

French regional specialist Alain Antil, a researcher at the French Institute of International Relations (IFRI), believes that "Mauritania has irrefutable advantages". According to him, Nouakchott "has kept the jihadist risk under control for more than ten years, has better demographic control than its neighbours, and is politically stable, with an executive relatively open to dialogue since the election of President Mohamed Ould Ghazouani".

This openness to dialogue has translated into active participation in regional and international fora, where the Mauritanian government has sought to highlight its resources. Among the most prominent events in 2023 is the MSGBC regional forum (Mauritania, Senegal, Gambia, Guinea-Bissau and Guinea-Conakry).

Officially opened on 21 November 2023 in Nouakchott, MSGBC Oil, Gas & Power 2023 is the region's premier energy event. The opening ceremony, attended by the President of Mauritania, Mohamed Ould Cheikh El Ghazouani, set the stage for two days of dialogue and agreements, during which industry leaders made forward-looking statements on the future of the MSGBC energy market.

Through this forum, member countries sought to develop a strategy to end Africa's dependence on external sources of oil and gas finance. "We are working with Afreximbank to create an African Energy Bank. We approved the timetable a fortnight ago and this bank should be up and running in the first half of next year. We are also working on research centres in Africa," said Omar Farouk Ibrahim, secretary general of the African Petroleum Producers Organisation (APPO).

However, countries in the region are still trying to attract foreign capital and increase the competitiveness of their investments. Despite its rich soil, Mauritania remains a poor country. According to UNICEF, 2.3 million people live in multidimensional poverty. The Mauritanian government has therefore adopted a series of regulatory reforms, all of which are essential for the launch of large-scale projects, insofar as they have contributed to creating a reassuring framework for investors.

The second event was the Dubai Climate Change Conference, or COP28, which took place from 30 November to 12 December 2023 in the United Arab Emirates. At this conference, the President of Mauritania addressed the heads of state present, first of all, to remind them of Mauritania's growing potential and, in particular, its untapped resources.

The Mauritanian head of state then reiterated the importance of international support to help developing nations make the transition to energy. "It is therefore urgent and essential to significantly increase funds for adaptation and environmental transformation, and to disburse them in a way that does not exacerbate the indebtedness of developing countries," declared Mohamed Ould Cheikh El Ghazouani.

For Nouakchott, investment income is the main driver of the country's development.

Revenues will be used mainly for the country's development

According to African Business, Nouakchott expects at least $19 billion in additional revenue over the next 30 years. As a reminder, the country had a gross domestic product (GDP) of $7.6 billion in 2019, already four times higher than in 2000.

However, the Mauritanian government is well aware that new investments will not change the country's economy overnight. According to Ousmane Mamadou Kane, the money will be injected mainly into the Treasury and the Central Bank, in order to "meet the country's huge needs in basic education, road infrastructure, water, sanitation and energy".

In fact, "the country also has its weaknesses", summarises Alain Antil, "including a very inefficient education system, crony capitalism and poor infrastructure, which hampers the opening up of entire regions despite recent improvements".

The skills of Mauritanian workers, which remain low compared to those of more developed countries, are a challenge for the country. However, Abdel Boudadya, CEO of a Mauritanian company involved in the GTA gas extraction project, says the joint investments show investors that they can trust local operators.

The Mauritanian authorities are making considerable efforts on all fronts to attract the attention of large foreign investors in the exploitation of these natural resources. However, in the era of climate change, the controversy surrounding the exploitation of fossil fuels persists.

Fossil fuel exploitation and climate change

In the future, financing the development of the country's reserves will be a challenge due to the global energy transition. According to the African Development Bank, the estimated financing needed to reduce greenhouse gas emissions by 11% by 2030 is $4.8 billion per year over the period 2021-2030.

However, the country does not have a specific climate finance mechanism. Quite rightly, the private and banking sectors are hardly involved in climate finance. Moreover, most of the $1 billion received over the period 2010-2020 comes from international partners. Mauritania also faces a number of obstacles. These include a lack of awareness of the risks and opportunities associated with climate change, the high cost of investments related to climate change adaptation, and the limited availability of private resources dedicated to green investment.

Despite this, the Islamic Republic of Mauritania aims to capitalise on its natural capital (gas, green hydrogen, iron, fisheries resources and agricultural land), valued at US$24.3 billion in 2018, to support climate finance and long-term green growth. In addition, phase 1 of the Great-Tortue/Ahmeyim gas project should leave additional room for budget adjustments of at least 0.5% of GDP in 2024.

At a time when European countries are looking for alternative energy suppliers, Mauritania has acquired a new strategic importance. It is set to become a gas exporter to Europe by the end of 2023, when Phase I of the GTA project is completed. According to Mauritanian government sources in La Razón newspaper, the country is currently negotiating the export of gas and oil to Spain and, mainly in the Canary Islands.

So, in theory, its new gas export strategy could allow Mauritania to gradually emerge from its state of economic fragility. It remains to be seen whether, in practice, Nouakchott will manage to overcome the obstacles imposed by this strategy, particularly in terms of the volatility of world market prices, maintain its economic stability by diversifying its energy sources, or invest in infrastructures capable of supporting energy transport.

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