Money in oil

Will Morocco hit the oil jackpot?

By Maher HAJBI

Posted on May 2, 2022 14:52

 In Mohammedia (Casablanca-Settat), Samir, the kingdom’s only refinery, has been shut down since 2015. © Samir
In Mohammedia (Casablanca-Settat), Samir, the kingdom’s only refinery, has been shut down since 2015. © Samir

Promising prospects, attractive tax incentives, an avalanche of exploration permits… Still harbouring the ambition of becoming an oil power, Morocco is pulling out all the stops to develop black gold exploration.

“Morocco has hydrocarbon potential […] Moroccan basins are underexplored […] Now, significant investments are needed to determine its economic importance and highlight its potential, which we sense,” said Amina Benkhadra, director of the National Office of Hydrocarbons and Mines (ONHYM), in 2019.

Since then, several onshore and offshore programmes have been set up with foreign companies, which benefit from numerous tax advantages. These include full tax exemption for 10 years, exemption from customs duties on all equipment and a state share limited to 25%.

A potential to be confirmed

On 13 April, before the Parliamentary Committee on Infrastructure, Energy, Mines and the Environment, Benkhadra returned to the subject of hydrocarbon exploration activities in the kingdom, where 11 companies, including Eni (Rome), Qatar Petroleum International (Doha) and Europa Oil & Gas (London), operate. On that same day, the British company, which is active on the Atlantic coast, was propelled to the forefront by the announcement that a significant volume of oil resources – more than 1 billion barrels and easily recoverable – had been identified off Agadir.

Given that prices at the pump are rising sharply, this news is a ray of hope for Moroccans and particularly Aziz Akhannouch. The Prime Minister – who is the main shareholder of Afriquia, the local leader in fuel distribution – is under fire for conflict of interest after the price hike.

Although the Moroccan media are talking about “a major discovery”, the data put forward by Europa Oil & Gas should be taken with caution – far from media euphoria or any kind of optimism. “Now, this evaluation, based on geological data, must be proven by drilling to determine the actual existence of oil resources,” says Francis Perrin, director of research at IRIS (Paris) and associate researcher at the Policy Centre for the New South (Rabat).

The spectre of the Talsint affair

In August 2021, Europa Oil & Gas estimated the potential of this offshore area at more than two billion barrels, before revising its ambitions downwards in early 2022. In a press release published on 24 April, the Association of Spanish Petroleum Geologists and Geophysicists (AGGEP) referred to “a phantom oil discovery”, and denounced this bluff aimed at promoting Morocco’s hydrocarbon sector and arousing the oil majors’ interest.

“Europa Oil & Gas is a small oil company. It needs to attract funding to be able to start drilling and continue its activities on this offshore licence. So even though the company insists on this area’s great potential, to date a billion barrels of oil have not been discovered,” says Perrin. These uncertainties may be reminiscent of the imaginary Talsint deposit scandal that shook the kingdom in the early 2000s. At the time, Lone Star Energy Corporation made a major announcement that several billion barrels had been discovered in Talsint (Oriental region). However, the state, which was initially caught in the trap, eventually discovered the truth.

“Errors are always possible but, contrary to the information relayed, the National Office of Hydrocarbons and Mines does not use the term ‘discovery’ and treats the subject with great caution because words must be weighed. This is our guarantee to avoid a second Talsint affair,” says the associate researcher at the Policy Centre for the New South (Rabat).

A headache in prospect

However, a possible black gold windfall could raise the major issue of needing to refine the extracted resources. Located in Mohammedia, the Samir, which is the kingdom’s only refinery, has been at a standstill since 2015 and the story of its liquidation, which began in 2016, is still not over.

In the event of a jackpot, Morocco could export its raw resources on the world market to generate foreign exchange revenue. “This is an interesting option given the volatile prices. However, having a refinery would obviously increase the options,” says the oil expert.

The kingdom could also end up in the same unfortunate situation as Nigeria, the continent’s leading oil producer. Undermined by the vulnerability of its refining infrastructure, the country has been importing 90% of its fuel at world market prices and suffering a chronic shortage of refined products due to the consequences related to the war in Ukraine.

But before projections can be made, substantial investments must be made to confirm the potential of the Moroccan basins, determine their economic importance and convert the “promising prospects” into barrels of oil. “In the absence of a major discovery on its territory, Morocco will remain a massive importer of oil and refined products,” concludes Perrin.

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