Senegal's state-owned national oil company Petrosen is planning to establish a subsidiary specialising in hydrocarbon risk coverage, with the aim of capturing up to FCFA13bn ($26m) in premiums annually.
The project, still in its structuring phase, aims to provide the country with a vehicle capable of underwriting offshore fields now in production, starting with Sangomar and Grand Tortue Ahmeyim (GTA), according to a report by Seneweb. The proposed subsidiary is expected to be operational by July.
Petrosen intends to implement the initiative with the Technical Secretariat of the National Committee for Monitoring Local Content (CNSCL) and the Senegalese Federation of Insurance Companies.
At present, Senegalese insurers only benefit from 5% of the premiums despite the creation in 2024 of the Oil & Gas Risk Insurance Pool by approved insurance companies in Senegal to provide coverage for the oil and gas sector with the support of Senegalese Reinsurance Company (SEN-RE) and the international reinsurance market.
During a workshop on the insurance system in the extractive sector last week, the Director General of Petrosen, Mr Alioune Gueye disclosed that the proposed subsidiary would allow Senegal to capture 100% of the premiums in accordance with the CIMA Code, which prohibits "any direct insurance subscription abroad for risks located in a member state".
Sangomar and GTA
The start of production in June 2024 at the Sangomar oil field, operated by Australia's Woodside Energy, and the start-up in January 2025 of the GTA gas project, jointly operated by BP and Kosmos Energy on the maritime border with Mauritania, have increased the insurable base. They are seen as the catalyst for the current initiative to boost local participation in the oil and gas insurance sector.
Mr Gueye said, “The annual insurance premiums for each field are around $12-13m. As you know, we are currently developing two fields: GTA and Sangomar. So, that amounts to at least $26m (FCFA13bn) in insurance premiums paid by the companies, including Petrosen. We are in the process of creating a captive insurance company to collect these premiums.”
Challenges
While the aim is to ensure local stakeholders benefit from this windfall, the private insurance sector faces legal constraints related to its technical and financial capacity to cover large-scale risks, which are often reinsured internationally. This limits the local retention of these premiums, according to Dr Mor Bakhoum, technical secretary of the CNSCL.
“Under the local-content law, the insurance sector is part of what is called the exclusive regime, which is reserved exclusively for local companies. But what we are seeing is that most of the companies that are active at the national level are companies under Senegalese law, but which do not fully meet this criterion of ‘local company ‘which requires that nationals hold 51% of the capital,” he said.
In addition, underwriting oil and gas risks requires specialised expertise in engineering, environmental damage assessment, and complex claims management—skills still scarce in the West African market.
Petrosen is responsible for promoting, exploring and exploiting hydrocarbon resources, as well as refining, storing, marketing, distributing and transporting petroleum products, along with associated industrial activities. It negotiates all agreements and contracts related to oil and gas.