Monthly Archives: February 2013

Moroccan Downstream Offers Unclear Picture Ahead of Large Cap Entries

Recent entries by large cap actors into Morocco’s oil and gas sector over the last three months have signaled a new confidence regarding the country’s largely dormant hydrocarbon potential. With Chevron and Portugal’s Galp taking on controlling stakes in areas previously claimed by only modest, independent operators, Morocco’s push to expand their traditional energy potential appears to be gaining traction. However, with the North African nation’s domestic demand at the heart of this push, it remains unclear whether its weakened downstream potential will be able to meet expected growth.

Despite a virtually non-existent oil and gas sector, Morocco has recently made a subtle push towards appealing to foreign firms in order to explore the country’s offshore and non-traditional options. So far, efforts to broaden the country’s energy potential have included only renewable campaigns, including a 2009, $9 billion solar scheme, and attracting smaller firms to potential oil and gas fields. However, over the last two months, both Chevron and Galp have bought into controlling stakes of offshore projects. For Galp, an early December purchase from Australia’s Tangiers was driven by a 450 million barrel potential reserve, which was revised to an estimated 750 million barrels following further studies.

Making a more sizable statement as one of the world’s largest actors, Chevron inked an offshore deal with Morocco’s Offices National Des Hydrocarbures Et Des Mines to take on seismic studies of the Cap Rhir Deep, Cap Cantin Deep, and Cap Walidia Deep efforts.

However, as the country explores their domestic potential as a way of easing dependence on expensive and increasingly volatile imports, Morocco’s downstream potential does not appear to be keeping pace. As of 2011, the country boasts only a single refinery at Mohammedia following the conversion of their Sidi Kacem facility to a distribution plant. Despite a long-running modernization push as a part of an agreement between Rabat and state operator, Samir, the plant has seen partial slowdowns in output over the last year. These pauses have been the result of scheduled maintenance and expansion plans that have included upgrades to a new crude distillation unit and a jet fuel facility, which can produce 600,000 metric tons a year. This effort is a part of a broader strategy to add 4m tonnes of refined oil per year, according to Reuters.

While these efforts appear to address current domestic demand, it is far less clear whether a single plant will be able to meet an increase in local production should Galp or Chevron gain traction over the coming year or two.

Origionally Posted: Newsbase’s MEA Downstream Monitor

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Spanish Scandal Could Force Energy Strategy Change

ImageAfter a turbulent first year of cuts aimed reducing a crippling deficit, Spain’s energy sector could see a shift in direction as a corruption scandal threatens the current conservative government.

Since taking office after early elections just before the New Year in 2011, the government led by Prime Minister Mariano Rajoy has led a campaign of cuts and adjustments meant to drive down an energy sector deficit that greeted them around $30 billion.  Attributing the daunting amount to unsustainable government subsidy programs, Rajoy and his Minister of Industry, José Manuel Soria set out a series of cuts that have spurred appeals to the European Commission and lawsuits from investment firms.

However, the fate of Mariano’s party leadership in Madrid has recently been cast into doubt amid allegations that senior officials had received secret cash payments after the practice was made illegal in 2007. Rajoy denied any wrong-doing following an extensive report published in Spain’s national daily, El Pais detailing payments to him as late as 2008. The El Pais report was quickly followed by calls for Rajoy’s resignation and denials from party officials.

While it is not yet clear whether a return to the Socialist leadership that led the country for eight years before Rajoy would signal a change in pace, it is even less clear whether voters would hand the reigns back to the left should the conservatives be forced from office. Recently, both of the country’s largest political parities have seen support erode thanks to their handling of the economic crisis. On the local level, this has allowed support to shift to smaller, less centrist parties.

However, even if Rajoy remains in power – which regional observers expect he will – the government’s approach to the energy sector will likely see a change in the New Year. Despite the government’s cuts and general deficit reduction strategy, the energy sector’s deficit has continued to rise in recent months casting doubt on their approach. While Soria and company predicted a slowdown as a result of the cuts, which have focused on solar and wind subsidies; the deficit has actually grown at double the expected rate. Soria has signaled a different approach in the coming year and insisted once again that further cuts will not include retroactive actions.

This expected reversal reflects a broader trend in Spanish economic improvement, which has largely relied on cuts in spending and services across the country’s seventeen communities. With unemployment continuing to rise and economic growth stagnant, Madrid and Brussels alike have suggested an approach that does not focus so much on austerity and may include additional efforts aimed at growth.

Image: Iberosphere.com

Originally Posted: Newsbase Euroil Monitor

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