Key takeaways:
Sierra Leone has historically lacked significant energy infrastructure. However, with the Nant Energy Project, renewable solutions for rural power, and an emerging natural gas sector, the country's power generation capabilities may improve in the coming decade.
KSG assesses that Sino-American competition in Sierra Leone is likely to intensify, particularly in infrastructure and energy. The US may continue to counter Belt and Road Initiative investments with American projects through institutes like the World Bank, and look to Sierra Leone to supplement its iron ore supply.
Hurdles to Western investment include prevalent Chinese influence, meagre infrastructure, and Sierra Leonean fiscal troubles. While not insurmountable, these challenges present risks that may hinder investor confidence and complicate development projects.
KSG identifies strategic business opportunities for Western firms in Sierra Leonean offshore hydrocarbon blocks for large corporations like Shell, ExxonMobil, and Chevron. Further opportunities include partnering with Nigeria's Innoson Oil & Gas to develop their natural gas discovery and participating in major energy infrastructure like the Nigeria-Morocco Gas Pipeline Project (NMGP).
Sierra Leone Energy Overview
1 - Electricity
Only 27.49% of the West African nation’s population had access to electricity as of 2021, roughly 24.06% lower than the corresponding Economic Community of West African States (ECOWAS) average. Sierra Leone’s energy woes stem partly from a current lack of petroleum production and a reliance on fuelwood biomass, which accounts for 80% of energy consumption. However, the US International Development Finance Corporation’s (DFC) has provided roughly a total $629 million USD to support Sierra Leone’s electricity supply shortage in 2021 and 2024 agreements. The financing specifically includes further backing for the Nant Energy project, a power plant in the capital city of Freetown, as well as risk insurance funding in attempts to attract private investment to the energy sector. The plant is expected to fulfil 24% of demand for electricity and has a completion date of mid-2027. The project is also bolstered by a $40 million USD loan from the ECOWAS Bank for Investment and Development (EBID). The project is sponsored by Milele Energy and TCQ Power, the former of which will own and operate the plant once built. Milele Energy is a Kenyan-based power company seeking to expand access to electricity on the African continent through renewable and clean gas sources. Milele is backed by Gemcorp Capital, a UK-based investment firm, which shows just one instance of UK-Sierra Leonean cooperation. TCQ Power is an Emirati power development company run by Karim Nasser, and charged with developing the Nant Energy Project.
2 - Natural Gas
In 2022, Nigeria’s Innoson Oil & Gas made a gas discovery of 8 trillion cubic feet. While Innoson’s offshore blocks sit on the commercially challenging offshore Southern Shelf/Slope area, the natural gas discovery shows promise and does not require the advanced deep sea drilling capabilities that other regions of Sierra Leone’s offshore blocks necessitate. In regards to Sierra Leone’s long term natural gas needs, Freetown has signed a Memorandum of Understanding with the Nigerian National Petroleum Company (NNPC) through ECOWAS regarding the Nigeria-Morocco Gas Pipeline Project (NMGP). The NGMP Project proposes a gas pipeline running from Nigeria to Morocco and Spain along the coast of West Africa, allowing it to supply nearly all coastal ECOWAS countries. The NMGP will likely take at least a decade to become operational however, leaving Sierra Leone in need of a natural gas supply from 2027 to roughly 2034. The pipeline will augment the West African Gas Pipeline (WAGP), which supplies countries as close to Sierra Leone as Ghana and is partially owned by several firms including Chevron, Shell and the NNPC.
3 - Oil
While Sierra Leone has had 4 significant oil discoveries since 2009, they have not yet been commercialised. The American firm, Anadarko, was the first to make a offshore discovery in Sierra Leone and would do it again the next year, followed by Canada’s Talisman in 2012 and Russian firm Lukoil in partnership with Nigeria’s Oranto Petroleum in 2013, but all would eventually exit citing a lack of commercial viability. Africa Petroleum also exited in 2018, citing the ultra-deep nature of drilling required to commercialise its offshore interests in Sierra Leone. While deep-drilling technology has improved in past years, the ultra-deep nature of many offshore blocks remains a hurdle to firms looking to capitalise on Sierra Leone’s offshore wells. Sierra Leone is also looking to establish a National Oil Corporation. Many Western companies that are active in Nigeria could benefit from engaging in the exploration of Sierra Leone’s offshore reserves alongside Nigerian FAMFA Oil. FAMFA Oil was awarded six offshore blocks about 100 kilometres southwest of Freetown in April 2023. These blocks straddle the border between Sierra Leone’s offshore Northern Shelf and Northern Ultra-deep regions.
Sierra Leone entered the twenty-first century embroiled in civil war, but since 2014, the country’s Fragile State Index (FSI) score has decreased by 7.3 points. Lower FSI scores signify more stability, although a coup attempt in November 2023 stands as a reminder of the country’s capacity to descend into turmoil, which would almost certainly hinder the development of Sierra Leone’s petroleum industry.
4 - Renewables
Sierra Leone has large potential for both solar and hydropower energy, a solution that may help solve the crippling lack of electricity access in rural areas (5% have electricity access). Entities like the UK Foreign Commonwealth and Development Office (FDCO) have contributed to solving this lack of rural energy infrastructure with its Rural Electrification in Sierra Leone initiative. According to the Sierra Leone Ministry of Energy’s evaluations, the nation has a hydropower potential of 1,513 MW, as well as bioenergy potential of 500 MW. It also has a solar potential of 240 MW, much of which is in the nation’s northern province, which has historically received little attention.
Challenges to Western Investment
1 - Limited Infrastructure
Lacking infrastructure is also a principal contributor to the country’s energy deficiency with the World Economic forum grading Sierra Leone 2.6 on a scale of 7 in its 2017 Global Competitiveness Index. According to the IMF, many regions of the country have unpaved roads and limited access to electricity or a water system as the result of a devastating civil war that occurred between 1991-2002. Efforts have been made to rectify this hurdle to economic expansion, especially under the current President, Julius Maada Bio. For example, projects like the newly-completed EU-funded Mabang bridge and the Chinese-backed Regent-Kossoh Road showcase Bio’s commitment to improving infrastructure. However, KSG assesses that the lack of an effective institutional pipeline for Sierra Leonean infrastructure projects will likely hinder progress towards a more developed nation and even contribute to the country’s debt as proposals undergo insufficient assessment and are not integrated well into long term budgets. Firms looking to invest in Sierra Leone in any capacity, but especially energy, should be mindful of the nation’s underdeveloped infrastructure. By investing in development, strategic inroads can be made at the benefit of the investing entity, like how the Chinese One Belt One Road Initiative has contributed to increasing Chinese imports of Sierra Leonean iron ore.
2 - Chinese Influence
Beijing’s ties to Freetown have increased in recent years with President Bio signing a Memorandum of Understanding regarding Sierra Leonean participation in the Belt and Road Initiative. Bio was also the first President from the African continent to visit China in 2024. China’s participation in Sierra Leone’s development spans across several sectors including healthcare, fisheries, infrastructure and mining.
China has a large presence in Sierra Leone’s mining industry, chiefly in its iron ore operations. The Chinese firm, Kingho Mining Company (KMC), operates the Tonkolili Iron Ore Project, which reached full production capacity in 2021. Iron ore exports to China make up 41.6% of Sierra Leone’s total exports. China has been the only substantial importer of Sierra Leone’s iron ore since about 2012, when Chinese investment in the Western African nation began to take off. China has leveraged the inroads it has made in Sierra Leone through consistent investment spanning decades to help de-risk its iron ore supply. Iron ore is a key ingredient in China’s lead in global steel production, generating more than 50% of the world’s steel as of 2022. However, China is currently dependent on Australia, which makes up 70.2% of its iron ore imports. Canberra and Beijing have clashed economically before, following a 2020-21 trade war that saw Australia successfully de-risk from China in a variety of key sectors. China may be concerned that Australia could weaponize its share of Chinese iron ore imports to harm the Chinese steel industry in efforts to deter further Chinese expansion without much loss to itself. Therefore, China has been branching out to other members of the Global South like its fellow BRICS members, India and Brazil, as well as West African countries like Sierra Leone and Mauritania to diversify its iron ore import portfolio.
China’s influence in Sierra Leone is high, especially economically, as China consumes 54.3% of Sierra Leone’s exports and provides for 33.4% of its imports. China is also financing the critical Lungi Bridge project, which connects Sierra Leone’s sole international airport to Freetown, a journey that currently takes 3 hours by ferry. Despite China’s seeming monopoly on all aspects of Sierra Leone’s development, it has historically made limited investments into public energy development, a trend KMC’s power plant may soon reverse.
China has shown little interest in Sierra Leone’s offshore hydrocarbons despite its consistent presence in the country over the past two decades. This could likely be due to other Chinese hydrocarbon commitments in West Africa in recent years, such as the signing of a Memorandum of Understanding by the China National Petroleum Corp (CNPC) and Niger regarding the sale of $400 million USD worth of crude oil to China in April 2024. Further Chinese involvement in West Africa includes CNPC’s $1.17 billion USD financing of the Niger-Benin Oil Pipeline, as well as deep Nigerian-Chinese ties embodied by investments like the Bank of China’s $2.45 billion loan for the Nigerian National Petroleum Company’s (NNPC) Ajaokuta-Kaduna-Kano Gas Pipeline Project and Chinese investment in Nigerian oil refineries.
Western countries have dominated Sierra Leone’s offshore hydrocarbon exploration thus far, apart from a 2013 joint discovery by Oranto Petroleum and Lukoil. However, following the establishment of a Chinese Heavy Fuel Oil power plant to power the Chinese Tonkolili Iron Ore Project in early 2025, KSG assesses a medium likelihood that Chinese interest in Sierra Leone’s hydrocarbon market will increase. Such a trend is even more likely with the establishment of the Chinese Innovation Consortium for Deep and Ultra-deep Oil and Gas Exploration and Development by CNPC and Sinopec in July, which would advance Chinese capabilities to drill in Sierra Leone’s promising ultra-deep offshore blocks.
3 - Financial State of Sierra Leone
Sierra Leone’s debt problem will continue to challenge foreign investors, with Freetown’s debt at high risk of external debt distress according to the World Bank. The World Bank estimates Sierra Leone’s foreign debt to be 87% of GDP, roughly $3.4 billion USD. This accumulated debt is largely due to a lack of institutional government scrutiny in regards to infrastructure projects. For example, the cost of the Lungi Bridge Project has been conservatively valued at $1.1 billion USD, consequentially augmenting Sierra Leone’s aggregate debt. Debt to China due to loans for infrastructure projects has also become an issue, with Freetown owing $78 million USD to China as of early 2024. KSG expects the true value of Sierra Leone’s debt to China to be substantially higher as the previous value does not include potential sources of debt in public-private partnerships like China Railway Engineering Corporation’s $194.83 million USD Wellington-Masiaka Toll Highway Project. While international economic support institutions like the World Bank have attempted to mitigate the debt crisis, without public investment regulatory reforms, it is unlikely that Sierra Leone will alleviate its debt.
Corruption also remains an issue within Sierra Leone, exacerbating the nation’s fiscal woes. While regulations have been put into place to counter institutional corruption, bribery rates have risen, affecting public services like law enforcement, education and healthcare. Embezzlement of large sums of public money is also a problem, particularly in the mining sector. Overall, Sierra Leone scored a 35 on the Corruption Perceptions Index (CPI) in 2023, improving 1 point from 2022, and displaying improvement from the nation’s lowest score of the 2010s: 29. The score places it above Sub-Saharan Africa’s regional average of 33, but below the global average of 43. While improving, the widespread presence of corruption decreases confidence levels for foreign investment into Sierra Leone, and foreign firms are forced to keep a close eye on how their investments are managed.
Looking forward:
As the Nant Energy Project will greatly increase Sierra Leone’s natural gas consumption, KSG assesses that there are business opportunities for domestic offshore natural gas production, the construction of Liquefied Natural Gas (LNG) infrastructure and the importing of LNG to Sierra Leone. An example of a corporation primed to take advantage of this opportunity is the American firm ExxonMobil. Sierra Leone’s Director General of the Petroleum Directorate compared the nation’s basins to Guyana’s, a nation where ExxonMobil plays a crucial role. ExxonMobil LNG Senior Vice President stated that “Government engagement, partnership and support is key” to launching natural gas projects, and Sierra Leone’s government, according to the US International Trade Administration, is “inviting private independent power producers to enter the sector [oil and gas].” While many other Western energy firms like TotalEnergies, Chevron and Eni would also be well-suited to develop Sierra Leone’s offshore hydrocarbon resources, Shell may be particularly advantageously positioned, with the UK having strong partnerships with both Sierra Leone and Nigeria, coupled with Shell’s extensive offshore drilling experience in Africa and partial stake in the WAGP. KSG assesses that the most lucrative path for Western hydrocarbon companies would be engaging with Nigeria’s Innoson Oil & Gas, who are looking for a partner with advanced drilling capabilities to capitalise on their 2022 gas discovery.
KSG assesses several incentives to further Western-backed projects focused on bolstering Sierra Leonean energy capacity. With ECOWAS diminished by recent exits of the community by Sahelian nations, investment by Western governments aimed at attracting private investment or “crowd-in investing” could help reshape the group. ECOWAS could become an entity that uses cooperation to solve the underdeveloped nature of West African infrastructure. The US has seen crowd-in investing flourish domestically under the current Biden administration as it works to upgrade its infrastructure, clean energy and semiconductor capabilities. Due to Sierra Leone’s membership in ECOWAS, key partnerships with nations like Nigeria through joint investment into Sierra Leone could advantageously strengthen the US’s position on the African continent as Nigeria remains one of the most economically and militarily powerful countries in the African Union.
Furthermore, KSG assesses that the Nant Energy Project will be a cornerstone in President Bio’s plan to develop Sierra Leone and improve the quality of life of its citizens by 2035, following the project's completion in mid 2027. Unlike the proliferation of infrastructure projects such as the Chinese One Belt One Road, the Nant Energy Project represents industrialization that will generate long term employment of local populations. Through a combination of continued Chinese development projects and sustained US commitment to habilitating Sierra Leone’s electricity capacity, KSG assesses that Sierra Leone can become an asset, rather than a liability, to ECOWAS in the late 2030s.
KSG assesses that as the US seeks to increase its presence on the African continent, industrialization projects rather than infrastructure development will become more prevalent as African nations are forced to find ways to combat the long term debt infrastructure projects often generate. However, due to the unskilled proportion of African labour forces in countries like Sierra Leone (90%), industrialization requires not only substantial material investment in development, but also investment in populations through vocational training.
KSG assesses that Sierra Leone will remain a challenging investment environment for Western firms, in part due to the high likelihood of continued Chinese economic, political and cultural influence. Financial complications, from macroeconomic issues like supply chain shocks and high inflation, to more institutional hurdles like high foreign debt and corruption, will continue to hinder investment feasibility.
While Sierra Leone’s renewable energy sector does not create massive business opportunities, due to the rural market it would benefit most, the nation’s potential for hydropower and alternate renewables creates openings for further energy cooperation in the West African Power Pool, especially with fellow Mano River Union nations.
Finally, KSG assesses that Sino-American competition in Sierra Leone is likely to increase with the US using institutions like the World Bank to match Chinese infrastructure investments with projects like the Connectivity and Agricultural Market Infrastructure Project. China is also building its own Heavy Fuel Oil 43.65MW power generation plant. Therefore, KSG assesses the move to be motivated by upgrading Chinese iron ore extraction capabilities rather than developing Sierra Leone’s energy access. The US seeks to bolster the capacity of its steel industry, due to the necessity of steel in green technology and its role in keeping up with Chinese shipbuilding capacity. KSG assesses that by expanding to partners on the African continent, the US could likely benefit from diversifying its iron ore imports, which are currently heavily dependent on Brazil and Canada. The US should take advantage of the favourable perception it holds in Sierra Leone as well, according to a study by the research network Afrobarometer. Conversely, public awareness regarding the increasing weight Chinese infrastructure projects have on Sierra Leone’s debt like the controversial China-Aided Fish Harbour Project have likely contributed to hardening Sierra Leonean perceptions of China.