Mauritania’s traditionally dominant mining sector has been hit by lower global prices and challenges at the state-owned mining giant. At the same time, West Africa’s largest natural gas discovery has generated momentum behind the formulation of stable long-term policies for the country’s extractive industries.
“Mauritania has succeeded in starting down the path of sustained transparency to reach the goal of making the extractive industries the driver of social cohesion and sustainable development.” – Djibi Sow, senior advisor to Prime Minister Yahya Ould Hademine and President of the Mauritania EITI National Committee.
Hit by lower global prices, the extractive industries’ share of GDP almost halved from 29% of GDP in 2012 to 17% in 2014. Their share of total exports also declined slightly, from 79% to 75%. The state-owned mining company SNIM (Société Nationale Industrielle et Minière), which accounts for over a quarter of government revenues, faces particular headwinds. The IMF estimates it spent roughly 35% of its revenue on servicing its debt in 2015 and almost three quarters of its total debt comes due over the next five years.
Game-changing gas discovery
While oil and gas remains much smaller, contributing only 2% of GDP and 11% of exports in 2014, recent gas discoveries have highlighted the sector’s potential. In total since late 2014, US-listed Kosmos Energy has announced four significant gas finds offshore, with initial resource estimates of 11 trillion cubic feet of gas (tcf) rising to over 20 tcf. The biggest field, Tortue, straddles Mauritania and Senegal’s maritime border. Whilst the biggest single gas discovery in West Africa, the two countries have started the delicate process of negotiating splits in ownership and management of the resources. Kosmos is optimistic about plans to develop an offshore liquefied natural gas (LNG) terminal in six years.
Preparing for a windfall
The sheer size of the project has raised commercial pressures to establish a stable framework for developing these resources. Managing windfall oil revenues was the initial impetus for Mauritania implementing the EITI in 2005. Ahead of first production at the country’s sole producing oilfield, Chinguetti, in 2006, the government restructured oversight of the sector and established a sovereign petroleum fund (the FNRH - Fonds National des Revenus des Hydrocarbures) to manage all revenues. Hopefully the EITI can again be useful to help prepare for the next, potentially much larger, windfall. While negotiations with Senegal and Kosmos are ongoing, Mauritania’s government has started working on developing a long-term vision for the extractive industries, with support from Germany’s development organisation GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit).
Finding the gaps
Mauritania’s decade of EITI reporting has shone light on gaps in the governance of extractive industries. It has identified the lack of auditing at the FNRH and the government agencies. Another key gap identified by the EITI has been the absence of clear rules governing the financial relationship between the two extractives SOEs and the government.
While Mauritania was initially slow to follow up on reforms, the pace has considerably quickened since an ad hoc inter-ministerial committee on EITI recommendations was established in May 2015. In October 2015, the government introduced a system of receipts for oil and gas companies’ payments to government. The General Inspectorate of Finance has started certifying government’s EITI reporting, filling the gap left by the Court of Accounts. Perhaps most significantly the government launched the first audit of the FNRH in February 2016, covering the past two years.
Mauritania’s upcoming Validation will provide a useful independent assessment of its efforts to shine more light and improve the governance of its extractive industries. Efforts to further entrench the EITI process in the government’s systems will be key to a more efficient and effective extractives sector in the long term.
 See section E.11 of Annex II (p.42) of IMF (2016), 2016 Article IV Consultation on Mauritania - http://www.imf.org/external/pubs/ft/scr/2016/cr16115.pdf
 See Kosmos Energy presentation (slide 12 in particular) at the February 2016 Credit Suisse annual energy conference - http://www.kosmosenergy.com/pdfs/CreditSuisse-21st-Annual-Energy-Summit-February2016.pdf