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Oil firms step up exploration in Morocco’s Atlantic waters | ASHARQ AL-AWSAT English Archive 2005 -2017
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File photo- Mayor of Rabat Fathallah Oulalalou delivers a speech at the 4th World Summit of local and regional leaders in Rabat on October 2, 2013. (AFP PHOTO / FADEL SENNA)

File photo- Mayor of Rabat Fathallah Oulalalou delivers a speech at the 4th World Summit of local and regional leaders in Rabat on October 2, 2013. (AFP PHOTO / FADEL SENNA)

London, Reuters—Oil companies are stepping up exploration in Morocco, attracted by its stability relative to other parts of North Africa and encouraged by advances in geology and technology that indicate its potential for reserves offshore.

Independent explorers have snapped up rights to explore offshore blocks over the past 18 months, and they are now making way for big players seeking acreage in a nation once dismissed as the energy-poor neighbor of OPEC members Algeria and Libya.

Damon Neaves, managing director of Australia’s Pura Vida Energy, said 10 exploration wells would be drilled off Morocco in the next 12 to 18 months, compared with only nine since 1990, according to analysts’ estimates.

“That represents an investment of USD 500 million to USD 1 billion, and that is a big show of confidence from the industry,” Neaves told Reuters. “It is still a frontier region and is underexplored compared to other parts of the world.”

BP is the latest oil major to enter Morocco, announcing a deal with Kosmos Energy this week to take a share in three offshore blocks. Drilling will begin next year. Britain’s Cairn Energy said on Thursday it would shortly begin drilling off the Moroccan coast.

They follow Chevron, the second-largest US oil company, which said in January it had taken up three offshore blocks.

By contrast, some oil firms have recently turned away from Libya due to disappointing finds and supply disruptions and from Algeria, where security concerns have mounted since an attack on a gas plant this year killed 40 workers.

“North Africa and particularly Libya and Algeria are looking less appealing than they have done for five years,” Geoff Porter, founder of North Africa Risk Consulting, said.

“Conversely, Morocco is a quiet hive of activity.”

Pura Vida this year found a partner for its Mazagan block. Drilling is to begin next year on the Toubkal field, which it hopes could hold over 1 billion barrels of oil.

Excitement over Morocco has grown as technology has helped firms to discover new oil and gas fields over the past decade in regions that were formerly overlooked.

Huge finds deep under the seabed off Brazil’s coastline have raised hopes that similar hydrocarbon formations lie unexploited off the African coast. Early finds offshore countries including Ghana and Angola have further piqued the interest of majors with deep-water experience.

“We look at the Atlantic margin as a whole,” BP spokesman Robert Wine said. “If you look at Angola and Namibia then you can see a geological mirror to Brazil and Uruguay … Morocco is obviously a bit further north.”

Oil companies also are encouraged by Morocco’s relatively attractive fiscal terms and its infrastructure, including port and rail facilities.

That contrasts with Libya, which has some of the toughest terms in the business, and Algeria, which struggled to attract foreign bidders in its last licensing round.

“The fiscal terms in Morocco are as good as you’ll find anywhere in the world,” said Neaves. “If you compare a barrel of oil in the ground in Morocco, then it is worth more than it is just about anywhere in Africa.”

Significant finds could help ease political pressures on Morocco’s government as it raises fuel prices as part of reforms demanded by an International Monetary Fund program.

Morocco is one of the world’s most energy-poor countries, importing around 95 percent of its needs, according to the World Bank.

It has turned to Wall Street banks to hedge against oil price hikes, the Financial Times said this month.

The government also aims to attract investment in renewable power to help meet domestic electricity consumption that is rising by around 6 percent a year, so that any potential oil and gas output can be used to generate export revenue.

Such a strategy has been employed by Norway, a major energy exporter that uses dams to generate hydropower and provide most of its electricity.

Funds from the Middle East, Europe and the World Bank are being invested in projects such as the world’s largest concentrated solar power plant in Ouarzazate, in eastern Morocco.

“The plant is part of the Moroccan government’s Solar Plan … This replaces the high-carbon, coal-fired electricity of the past and will create a new source of income for Morocco, as the plan calls for export of solar electricity to markets in Europe,” the World Bank said.

But there are potential pitfalls for those oil firms whose blocks fall in the disputed waters off the Western Sahara to the south of Morocco.

This tract of desert, home to phosphate deposits and potential offshore energy reserves, has been the focus of Africa’s longest-running territorial dispute, pitting the Moroccan government against the Polisario Front independence movement backed by Algeria.

Campaigners set up Western Sahara Resource Watch over a decade ago after Morocco awarded its first exploration licenses in disputed waters. WSRW says it wants oil firms to comply with a UN legal opinion from 2002 that calls for activities to respect the wishes and interests of the Western Sahara people.

It has in the past appealed to shareholders of firms operating in disputed areas to divest or halt exploration.

Analysts say most of the blocks snapped up so far are not in disputed waters and would face no legal or political challenge.
But it will take time to develop the energy sector, even if companies do strike oil.

“Morocco does look attractive, but they have not found any major oil and gas deposits yet. Algeria is already one of the largest suppliers of gas to Europe,” Charles Gurdon, managing director at Menas Consulting, said.

“Morocco is at least a decade away from anything like that, and that is even if they find it.”