Morocco invests in exploration
Morocco has announced a record breaking $1bn exploration budget
Inspired by enormous offshore discoveries in Ghana, Morocco has announced a record breaking $1bn exploration budget for 2014
The Moroccan government has recently announced that the country will drill 30 oil and gas wells in 2014 as part of plans to increase its modest oil and gas production levels. The announcement represents a sizeable increase in drilling activity for the North African nation.
“Since Moroccan independence in 1956, we have drilled only 300 wells. In 2014 alone we are planning 30 wells,” Abdelkader Amara, Energy and Mines minister, said in a recent interview.
Morocco has issued numerous exploration permits in since 2007 and is drafting legislation to streamline bureaucracy and encourage foreign investment.
“Morocco is a frontier area that currently has favourable fiscal terms and is open to foreign investment. The oil industry is looking to replicate the success of offshore projects in Ghana since 2007,” said Katherine Flynn, senior analyst at energy research firm IHS.
To facilitate sizable exploration projects in 2014, Morocco has invested heavily, according to Wafae Benhammou, new business and cooperation director of Moroccan NOC National Office of Hydrocarbons and Mines (ONHYM).
“The year 2014 should be an important time for exploration across Morocco, with wells being drilled both onshore and offshore and a record annual exploration budget exceeding $1 billion,” she said.
Morocco is currently ranked 98th in the world in terms of proven oil and gas reserves, with 0.7 billion barrels. However, many analysts believe that Morocco may have significantly higher unexplored oil reserves in its Atlantic offshore fields, hence the sizable exploration budget for 2014.
“The Gargaa prospect alone has a Pmean resource estimate of over 1 billion barrels,”
Such significant reserves have tempted IOCs to bid for exploration permits in Morocco. BP is the most recent IOC to enter the country. The company is set to explore three offshore blocks with Kosmos Energy in the coming months.
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“We hold three blocks in the offshore Agadir basin: Essaouira, Foum Assaka and Tarhazoute. Agadir is an underexplored basin with a variety of exploration plays, including our core geological theme in the late Cretaceous formation. In addition, it is a salt basin that provides significant hydrocarbon trapping opportunities,” said a spokesperson for Kosmos Energy.
Kosmos and BP are expected to commence drilling operations using the semi-submersible, Maersk Discoverer rig at the Gargaa prospect.
One of the biggest challenges facing IOCs in Morocco is the country’s territorial dispute with Western Sahara.
“Companies with acreage in the disputed Western Sahara territory issued by the Moroccan government believe that they have the legal right to the acreage but it remains to be seen what happens after Kosmos drills its first wells in late 2014 with results due in early 2015. Kosmos’ well will be significant to see what happens with the conflicting acreage going forward,” said Flynn.
Morocco currently imports over 90% of its energy and any new discoveries would likely go towards satisfying domestic demand rather than being exported to other countries. That being said, a host of IOCs are now coming into Morocco to explore the countries oil prospects, including Chevron, Cairn Energy and BP.
IOCs are being drawn to Morocco by good financial incentives for exploring the Moroccan coast, as well as a stable political situation, according to a Cairn company spokesman.
“The fiscal terms for exploration in Morocco are favourable. Terms include state participation of 25% through the ONHYM, 5% royalties on gas and 10% royalties on oil,” a spokesman for Cairn Energy said.
This incentive is in stark contrast to the situation elsewhere in North Africa, most notably Egypt, where under-exploration caused by low price incentives has left the country crippled by gas shortages.
By investing in exploration and by offering substantial financial incentives to IOCs, Morocco is attempting to safe guard its own future, at least. In the case of a sizeable discovery of oil and gas reserves, Morocco could even look to increase its role as an exporter of oil and gas products. This would require a sizable investment however, said Flynn.
“There is currently very little infrastructure in place and it would require significant capital expenditure to get it up and running, primarily for domestic use but eventually for export purposes,” she said.
With European nations looking to reduce their dependency on Russian gas, Morocco could find itself ideally placed, if its own oil and gas discoveries should coincide with a rise in demand in Europe.
- 300 offshore wells in Morocco
- 98th in the world in proven oil reserves
- $1 billion The amount Morocco will invest in exploration in 2014