The Gambia and its offshore areas are believed to have significant potential for oil and gas exploration. In 2019, the Gambian government awarded several exploration licenses to international oil companies through the Ministry of Petroleum and Energy.
These exploration licenses have aroused interest from the international oil industry, with companies such as BP, Petronor, and FAR Ltd securing exploration rights in Gambian waters.
However, progress in oil exploration in The Gambia has been slow due to several factors. One major factor is the COVID-19 pandemic, which has led to a slowdown in exploration activities globally. Additionally, challenges related to financing and logistics have also slowed down the exploration process. There have also been delays in the processing of licenses and agreements, affecting the pace of exploration activities in the country.
Despite these challenges, there is still optimism that significant oil reserves could be discovered in Gambian waters, which could positively transform the country’s economy. The government is also committed to creating an enabling environment that attracts more investment and generates sustainable oil and gas exploration growth. Therefore, oil exploration in The Gambia remains a promising area that could significantly contribute to the country’s economy if successful.
Notwithstanding all the above economic benefits oil discovery could bring to The Gambia, I still believe we might be too late to explore this opportunity.
While the exploration of oil and gas in The Gambia and other parts of the world may have the potential to generate significant economic benefits, it is also essential to consider the potential impact on the environment. The Paris Agreement, signed in 2015, aims to limit the global temperature rise to well below 2 degrees Celsius above pre-industrial levels and aims for efforts to be pursued to limit the temperature increase below 1.5 degrees Celsius.
As a signatory to the Paris Agreement, The Gambia has committed to reducing greenhouse gas emissions and transitioning to a low-carbon economy. Therefore, the country needs to balance the potential economic gains from oil and gas exploration with environmental concerns and the need to address climate change.
In 2020, shortly after BP, one of the license operators withdrew from the drilling process due to the company’s strategy in low carbon. The statement reads, “In July 2020, BP informed the ministry that it would not be able to drill a well in the A1 Block due to a change in its corporate strategy towards low carbon energy.”
It is important to note that the global demand for fossil fuels is declining (Global Energy Outlook, 2022), and there is an increasing focus on renewable energy sources. Countries that depend solely on oil and gas as their source of income are facing economic challenges due to this trend. Therefore, countries must diversify their economies and reduce their reliance on oil and gas.
In September 2020, BP Energy’s outlook projected a decline in Oil to a share of about 8% in 2050, while renewables sources will grow to 45%. By 2050, This projection aligns with their decision to exit the Oil exploration potentials in The Gambia. BP plc said the relentless growth of oil demand is over, becoming the first supermajor to call the end of an era many thoughts would last another decade or more.
Data source: BP Energy Outlook-2020
For example, the National Water and Electricity Company (NAWEC) of The Gambia has plans to go into Solar Energy, which means NAWEC’s dependency on fossil fuels will reduce significantly. NAWEC’s fuel cost accounts for a significant percentage of its total cost. When it reduces the purchase of fossil fuel, this could create a demand gap for petroleum products.
While Senegal has already begun exploration, this disadvantages The Gambia. Considering the principle of common goods, The Gambia has no excludability but is regarded rival. This means that Senegal is at the first mover’s advantage. This creates a disadvantage to the future market for The Gambia even if demand for dirty Oil and gas grows.
In conclusion, while oil and gas exploration in The Gambia may have economic benefits, it is critical to consider the possible environmental impact and the need to transition towards a low-carbon economy as agreed under the Paris Agreement. The Gambia needs to factor in the changing global trends toward renewable energy sources and focus on diversifying its economy for long-term sustainability.
Momodou S. Fatty is a Chartered Accountant & Master of Public Policy Candidate at the KDI School of Public Policy and Management.