Tag Archives: Morocco

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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Morocco Offers Up Incentives for First Wave E&P

Dismissed by oil and gas majors for the last decade, Morocco is working to renew interest in their hydrocarbon potential through incentive and tax programs aimed at smaller operators in hopes of laying a foundation for future energy development.

The country’s efforts are driven by Morocco’s traditionally heavy dependence on outside energy resources, making the development of local production energy efforts all the more important for the country’s economic stability. Morocco is currently dependent on imports for 97 percent of its energy needs and has long aimed to reduce its dependence on foreign sources through the development of domestic projects, including exploring newly-found traditional reserves, shale projects and more recently, alternative energy plans.

Last week, Zac Philips, an oil and gas analyst at Fox Davies noted that while the country had largely been ignored by large capital operators in the past, Morocco’s incentives had provided significant opportunities for smaller firms like Circle, Longreach Oil and Gas, San Leon and Pura Vida to stake out claims in the Northwest African nation.

According to reports from companies active in the country, the Moroccan energy efforts have helped create one of the most hospitable in the region for outside firms, includes rules dictating that the state receive just 25 percent of any project, with a 5 percent royalty for a gas discovery and 10 percent for an oil find. Furthermore, the government offers a 10-year corporate tax holiday following a discovery. Compared to countries like Algeria, which can claim up to 92 percent of energy production efforts, the Moroccan experience has proven favorable to small capital firms in search of new frontiers.

While these incentives mean little without actual reserves, these openings have allowed the more modest operations to introduce both traditional and novel E&P strategies to blocks located on and off shore in what Philips believes to be an opportunity to clear the way for larger capital interest down the road.

Much of the renewed interest in Morocco’s oil and gas potential stems from shale potential and reports suggesting offshore similarities between the east and west Atlantic. Based on the fact that the continents were connected millions of years ago, the assumption is that they share similar natural resource reserves.

That potential has allowed a certain degree of confidence among firms active in the country, including Pura Vida who revised their resource estimates at the offshore Mazagan permit at the end of April, increasing from 2.6 to 3.2 billion barrels of oil following further analysis of the site.

Meanwhile, onshore, San Leon has worked to expand on its shale efforts in Poland with efforts in Morocco’s Zag and Tarfaya Basin licenses, reporting substantial potential reserves and an eagerness to seek out production partners for expansion, according to a January company release. Longreach Oil and Gas also reported strong progress this spring, with efforts at their Sidi Mokhtar licenses at the fore of their expanding presence in the country.

Despite the progress allowed by the country’s incentive and tax programs, it is unclear how long the country’s incentive and tax schemes will allow smaller capital firms to hold leadership positions in Morocco. Eventually, strong production levels will invite increased interest from majors like BP and Shell, casting companies like Longreach and Pura Vida as a first wave of progress rather than long-term partners.

A Broader Approach

The efforts also reflect a broader, more far-reaching approach to domestic energy production in Morocco that also entails substantial support for both traditional hydrocarbons and renewable energy, placing them at the forefront of such alternative sources in the region. As southern Europe’s green energy sector continues to slip under the pressure of the economic crisis and spending cuts, Morocco has worked to etch out a leadership position amid growing interest in solar and wind development, including a flagship 500MW solar plant, scheduled to begin construction this year.

In addition to encouraging energy production efforts, the Moroccan government has worked to increase their transport role in North Africa in hopes of establishing a stronger leadership role in the region. In February of this year, Morocco opened the country’s second oil terminal in the northern coastal town of Tangiers, increasing domestic storage and allowing greater access to busy shipping lines at the mouth of the Mediterranean.

The effort was the product of a group put together by Emirati Horizon Terminals Ltd., Moroccan company Afriquia SMDC and Kuwaiti firm Independent Petroleum Group, the $180 million terminal will hold 3.2 million barrels, with 53 percent dedicated to gas and diesel and 43 percent set aside for fuel oil and fuel additives, according to a Reuters report.

The country plans to further expand its importing reach with the development of a LNG terminal near Jorf Lasfar. The project has been under discussion since 2007, but was recently mentioned in remarks by the newly appointed Minister of Energy, Mines, Water and the Environment, Fouad Douiri.

One region, this energy focus is unlikely to reach is the contested Western Sahara, home to large potential oil and gas reserves, as well as a 36-year old dispute over authority. Despite reported progress earlier this years related to talks between Morocco and the Algeria-backed Polisario Front, this week saw Rabat dismiss United Nations efforts after losing confidence in envoy Christopher Ross, according to a Reuters report.

Image: Proactive Investors

Originally Published in Newsbase Afroil. All Rights Reserved

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Tangiers Terminal Expands Moroccan Reach

Morocco continued its push towards easing its heavy energy dependence with a sharp increase in domestic storage and distribution with the opening of the country’s second oil terminal in the northern coast city of Tangiers. Central to the country’s energy strategy in terms of both capacity and location, the Tangiers terminal will increase Moroccan oil storage abilities by a third and allow greater access to providing fuel to the busy shipping lines through the Strait of Gibraltar. Last week’s opening has positioned the Moroccan port city to compete with similar efforts in Ceuta and Algeciras in competing for the business of the more than 70,000 ships that pass through the Mediterranean gateway each year.

Moreover, the opening of the terminal has moved the Moroccan energy market closer to a goal of greater autonomy and diversification. Currently, Morocco depends on imports for 95 percent of their energy needs and has recently experienced the effect that price fluctuations can have on overall costs. To remedy this situation, political and energy leaders in the country have been pushing for greater storage capabilities and diversification. These have included both efforts to initiate new offshore and shale projects, as well as offering support for renewable projects on a community and large-scale level.

The opening of the Tangiers terminal this month has served to boost the country’s storage abilities, making it less susceptible to the kind of price increases seen over the last year as regional trade partners struggled with economic and political uncertainty. During conversations with a government energy official in Rabat last week, the sharp increase in energy costs in Morocco seen in the last two years was cited as the reason for the country’s new energy strategy.

The product of an effort by a HTT, a group put together by Emirati Horizon Terminals Ltd., Moroccan company Afriquia SMDC and Kuwaiti firm Independent Petroleum Group, the $180 million terminal will hold 3.2 million barrels, with 53 percent dedicated to gas and diesel and 43 percent set aside for fuel oil and fuel additives, according to a Reuters report. The project’s storage capacity will provide enough space to provide for 60 days of Moroccan demand, adding to the capacity of the only other such terminal, located in Mohammedia; home of the country’s single refinery, Samir. The group was awarded a 25-year concession, that included the responsibilities to conduct the design, financing, construction and commissioning of the terminal structure, as well as develop the project’s commercial activity. According to a report in Morocco Tomorrow, the terminal will provide a deep-water post that can host 280 linear meter tankers and boasts 35km of pipeline and 19 storage tanks.

Image: Gulf News

 

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Shale, Energy and North Africa’s Future

As countries across North Africa work towards rebuilding both customer confidence and hydrocarbon operations following the political and financial instability of 2011, some are looking past traditional options to test the limits of the region’s shale potential.

First initiated in Tunisia in the Spring of 2010, North Africa’s shale efforts have slowly spread across the region, adopted by both established oil and gas producers and those who see little potential for traditional measures. The push towards exploring the area’s deep-set shale reserves came as the success of such efforts in the United States and studies showing widespread potential across the globe began to spur investor excitement. As time allowed closer inspection of the geological variances of the Maghreb states and their true shale potential, a clearer picture of what shale deposits could mean for the region has emerged.

These efforts come just as similar efforts in more mature shale markets are running into often debilitating challenges. Building on environmental worries related to the practice of fracking, public and political movements have successfully stalled efforts in the United Kingdom, France and parts of Germany as the uncertainty about the effects of the practice have added to concerns about project costs. This environment led European Union Energy Chief Gunther Ottenger to suggest the possibility of a community–wide regulatory system on shale efforts, inviting a pledge to veto any such legislation from Poland’s government, who has led the way towards introducing shale projects to the European marketplace. Meanwhile, in the birthplace of the fracking process, US President Barack Obama accompanied his support for further shale projects with an appeal for energy companies to disclose the ingredients of fracturing fluids, which have been protected information until now. However, these worries and protest movements have done little to damper enthusiasm among North African actors, as they continue to move shale projects forward.

Building on the region’s first shale effort in March 2010, Tunisia are continuing to work with early partners France’s Perenco and Canada’s Cygam in their exploration efforts, though last year’s political transition slowed the effort’s momentum. While both firms have worked to assure their Tunisian partners of their intent to stay put, lingering questions of instability, including the recent kidnapping of a mayor near the vital Ghadames Basin do little to help calm project partners.

Hailed as the country with the most shale potential thanks to the accessibility and quantity of reserves in the Ghadames Basin it shares with Tunisia and the Illizi Basin, Algeria has moved to attract foreign partners for shale efforts. According to Reuters, estimates suggest up to 1,000 trillion cubic feet of natural gas, trapped in shale rock about 1000 meters beneath the ground.  Facing a steady decline in the production levels of more mature oil and gas options, Algeria’s actions suggest a long-term approach to energy alternatives that included a heavy dependence on non-traditional resources such as shale.

Algeria and their state-backed firm Sonatrach have worked to secure working partnerships to help move their shale efforts forward, beginning with the signing of a MOU with Italy’s Eni last year. The Spanish giant has also looked to expand their resource base after Libya’s production all but halted amid political violence last year. Eni’s MOU with Sonatrach is meant to both lend the company’s shale extraction expertise to Algeria and help the company ensure a more dependable natural gas source for export-heavy Italy. After investing billions in hopes of solidifying Libya as a consistent source of oil and gas for the domestically barren Italy, the country lost nearly a third of their energy imports as political protests turned into violent conflict earlier this year. While Eni stands as Algeria’s largest shale partner, Sonatrach have announced that they will continue seeking shale partnerships with other international firms.

Even in Morocco, where domestic energy resources have remained elusive to the leadership of King Mohammad VI, one company has bet that the company’s true potential lies far deeper. Following four years of testing and coming in the latter half of a 3 year Memorandum of Understanding with the government of Morocco, London-based San Leon announced this month that they were ready to begin production at a site in the southern part of the country. Hoping to replicate their efforts in Poland, San Leon entered the northwest African nation five years ago to begin initial testing in the Tarfaya Oil Shale Field Pilot Project. San Leon recently announced that they had achieved “connectivity” between two wells in their Tarfaya oil shale project, suggesting progress in the country, though the Irish firm’s pace has worried some as their share price shrunk 59 percent over the last year. Despite overlapping basins deemed positive, Libya is the only country in the region to receive little attention by shale actors, as alternative efforts have been overshadowed by the substantial promise of traditional energy projects.

The Obstacles that Remain

For all the interest in the region’s predicted shale potential, a number of obstacles towards profitable operations remain, which have undoubtedly increased with the political instability of the last year. In addition to countries now faced with re-building confidence among foreign investors following the ousting of long-standing governments in 2011, many face significant funding deficits needed to support the high infrastructure costs associated with shale efforts. Largely lacking the access to the equipment, technology and personnel needed to reach and exploit shale projects, North African states will need the support of international partners to move these projects forward. In addition to signing cooperation agreements with firms from across Europe, some states are looking to the US State Department’s Global Shale Gas Initiative for guidance and aid, though political divisions and uncertainty about regional stability have kept that support

Image: Arabian Oil and Gas

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Morocco Sees Energy Boost with Circle But Wants and Needs More

 

This month’s announced completion of the Sebou (DRJ)-Kenitra pipeline by Circle Oil signals the Irish company’s continuing focus on Morocco despite weak interest in the country from many other international firms. The natural gas pipeline, which spans 55kms and has a capacity of 23.5 million standard cubic feet per day, connects the country’s Rharb Basin with consumers across the country. Allowing for greater connectivity between the efforts of Circle’s wholly owned subsidiary, Circle Oil Maroc Ltd, and local customers, the pipeline was hailed by the company as a positive next step in promoting projects in the Lalla Mimouna and Sebou permits. Circle’s local partners hold a 75 percent stake in the pipeline, with the remaining 25 percent controlled by Morocco’s National Office for Hydrocarbons and Mining (ONHYM).

Despite strong efforts by the ONHYM recently to garner further international attention to oil and gas efforts in Morocco, including the promotion of 22 new blocks for development in the final months of 2011 and support for offshore exploration investment, many companies have kept their distance. Most recently, the ONHYM has sought to promote the country’s offshore area as potentially similar to wells off the coast of Nova Scotia, suggesting that since the areas once sat next to each other millions of years ago, they likely share geological characteristics.

However, Circle has sustained its local presence with their efforts in the Rharb Basin, a 60 percent interest in the Oulad N’zala Permit Concession and a new push towards exploiting the country’s shale projects in Tarafaya over the last year.

The Sebou (DRJ)-Kenitra Pipeline announcement comes after the successful completion of 2-D and 3-D seismic acquisition programs in the Lalla Mimouna and Sebou permits, signaling further intent to expand the company’s local presence. According to a company release, the pipeline has been connected to seven of the area’s ten wells with the potential to produce, most of which date back to drilling efforts in 2008-9 and 2010-2011. The eight-inch pipeline is currently under-going pressure testing and is expected to be online by early February.

Image: Arabian Oil and Gas

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Aftershocks of the Revolution Pt. 2: LGBT Human Rights and Foreign Aid to MENA States

After coming across a Christian Science Monitor map displaying the treatment of LGBT citizens in each country in Africa earlier this week, I thought back to the speech recently delivered by U.S. Sec. of State Hillary Clinton. Delivered at the Palais des Nations, Geneva, Switzerland, the speech called for greater support for the human rights of LGBT citizens across the world and, in so many words, making it clear that State Department personnel would be advised to consider treatment of LGBT populations when making decisions about foreign support, including foreign aid. The message seemed clear – countries that tolerated or supported the abuse or lack of equal rights for LGBT citizens would run the risk of aid reviews and/or cancellations.

While we are still some time away from seeing just how the US State Department will follow up on Clinton’s speech, its worth exploring how closer attention to LGBT rights could impact much needed aid packages to countries emerging from the Arab Spring. This is especially relevant in countries that have seen more conservative parties make significant strides during recent elections, such as Egypt, Morocco and Tunisia. According the CSM summary, all countries in North Africa have policies of imprisonment from one to ten months for LGBT citizens. Further, every one of those countries receives some level of foreign aid from the United States, led by Egypt with $1.5 billion in support as of last year. According to the US government releases, Egypt is followed by Morocco with $43.6 m, Tunisia with $6.5 million, Algeria with $2.8 million and Libya with $1.6 million though that is likely to change after the country holds planned elections in the Spring.

There is little reason to believe that the US will base all or any of their attention on LGBT rights when making final aid decisions over the coming months given the weight of other factors in the region, including security and political stability. Furthermore, it may not even be advisable at this point to interfere in how foreign aid is spent at all so early in the process of building new governments, according to regional observers.

“The best thing is probably to just give the money to the governments and then encourage them to use it in ways that make sense and monitor it,” Frank Anderson, president of the Middle East Policy Council, told the International Business Times.”History has shown that there’s great sloppiness and opportunity for corruption when you give governments money, but attempting to manage the system ourselves has failed miserably in place after place after place.”

Still, given the timing of Clinton’s speech, it is worth being aware of the elevated status of the issue as countries across the region struggle to find a new political and social balance and what, if any, role does the State Department intend to play in that process.

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Morocco Sets Path for Reform but Questions of Impact Linger

Morocco’s monarchy spent the better part of 2011 touting new political reforms. Now, following the first national elections under a new constitution, the country’s leadership is faced with the challenge of finding a stable way forward and the means to pay for its new spending plans.

Echoing the actions of governments across the region, Morocco’s King Mohammed VI responded to a growing wave of public protests in Tunisia, Egypt and Libya earlier this year with a two-tiered pledge of political reform and increased financial aid to the local population. Although the country had largely escaped the kind of large-scale demonstrations that filled city centres in Cairo and Tunis, Morocco’s February 20 movement of reform-minded groups and members of the Justice and Development Party (PJD) garnered support as the country’s version of the Arab Spring.

After nearly tripling food and fuel subsidies and increasing government worker salaries, the king introduced a new constitution that would be the subject of a public referendum during the summer. Among other changes, the new document placed greater authority in the country’s parliament, guaranteed the appointment of a prime minister from the party with the chamber majority and promised an overhaul of the judiciary. The constitution also removed the monarch’s sacred status, though what that means in practice remains unclear. Passed with 98.5-percent approval on July 1, the constitution and the subsidies helped calm the reform movement to a degree and set the stage for the November 25 elections.

The elections themselves produced substantial gains for the moderate Islamist PJD, earning 100 of the possible 395 seats available. The results ensured that the new prime minister would be chosen from their party, but still required them to pursue a parliamentary coalition to govern. However, as welcome as the election results and constitutional reforms have been at home and abroad, it is far from clear how this year’s changes will impact the country’s economic and political futures, if at all.

Furthermore, while a boycott on election participation by the February 20 movement was viewed as mostly a wash, the country’s low voter turnout (45 percent of registered voters) and even lower registration suggest that many in Morocco still feel the government has little authority to act beyond the reach of the monarchy.

“Few believe the new parliament will solve the many problems plaguing nearly 35 million Moroccans, where one in three young, urban males are unemployed and poverty is widespread,” noted Yale Associate Professor Ellen Lust in a Christian Science Monitor editorial.

Suggesting that the king’s actions amount to little more than window dressing, Shadi Hamid of The Atlantic argued that they were actually part of an effective, if not terribly sustainable strategy to calm the protest movement.

“Where Egypt, Tunisia, and Libya resorted to flagrantly rigged elections, monarchs in Jordan, Morocco, Bahrain, and Kuwait hold reasonably free polls and permit legal opposition,” he wrote. “It just so happens that these elections determine relatively little of real importance. Decision-making authority remains with the king and the cabinets that he appoints. These regimes have been able to create the illusion of reform even as they strengthened their grip on power.”

Inside the country, both the new constitution and election results were greeted by the February 20 movement with ambivalence, insisting that both were created and conducted by appointees of the king and did not warrant recognition. The movement pledged to continue demonstrating against the government.

Even if Mohammed VI’s promoted reforms come to be seen as valid, it remains to be seen how comfortable he will be in his newly reduced role or how far he is willing to bend to meet the demands of an increasingly organized and vocal reform movement.

Further complicating the monarch’s approach is a significant budget deficit brought on by reduced trade from the European Union and the costs of the king’s raised subsidies earlier this year. This deficit and a lack of the kind of oil and gas revenues that have allowed other monarchies in the region to continue to increase public spending, have left Morocco with few options other than finding new revenue streams or speeding the process of real political reform.

Despite the clear economic challenges facing both the monarchy and the new parliamentary leadership, the government has insisted it will be able to reduce the budget deficit in the first quarter of 2012, despite slower than expected growth among its main trading partners. According to a Reuters report, the government is aiming to cut its budget deficit to 4 percent of GDP even as it forecasts its growth rate slowing to 4.8 over the coming months.

Beyond regional trade and the country’s phosphate industry, Morocco has laid out several other projects meant to raise revenue over the coming year, including the announcement that sovereign wealth funds in Kuwait, the United Arab Emirates and Qatar have pledged €2 billion towards supporting the country’s tourism industry.

Further, the country has set about changing its reputation as one largely free of oil and gas reserves by embracing less conventional energy endeavours, including new offshore projects and launching geological surveys of the country’s deep-set shale potential.

In November, the country’s Office National des Hydrocarbures et des Mines (ONHYM) began distributing literature at a hydrocarbon conference in South Africa, promoting 22 blocks available for exploration efforts, though it stopped short of announcing any formal rounds of bidding. Representatives of the ONHYM have promoted the geological similarities between the Moroccan coast and the oil-rich area off Nova Scotia, noting they likely stood next to each other millions of years ago as reason enough to promote the area’s hydrocarbon potential.

Vital to keeping the country moving forward and frustration under control while the new government takes shape, these revenue streams may just be the key to both keeping the king in place and the reform movement in motion.

Originally Posted on Iberosphere.com

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