Untapped gas reserves may be Morocco's economic lifeline
Unlike other North African countries, Morocco has so far failed to produce vast quantities of primary energy and is a net importer of hydrocarbons.This could change, as the kingdom may hold greater gas reserves than previously thought - taking cue from the growing number of foreign energy companies flocking to Morocco to tap into this potential energy bonanza. Morocco's appetite for energy has nearly doubled in less than a decade:energy use per capita in the country has grown from 483 kilowatt-hour (kWh) in 2002 to 795 kWh in 2011, according to the Moroccan Ministry of Energy.
Furthermore, the ministry estimates that, based on demographic trends and increases in the standard of living, the demand for primary energy will triple between 2010 and 2030, reaching 43 million ton of oil equivalent (toe) in 2030.
Faced with this growing appetite, the country has to import up to 95.5% of its energy. Most of the gas Morocco imports flow in from neighboring Algeria through the Maghreb-Europe natural gas pipeline (MEG), which links the country to Spain. As part of its strategy to curb its reliance on energy imports, Morocco is encouraging local production and has struck a series of deals with foreign oil and gas explorers to help it unveil what they hope to be enough onshore and offshore gas reserves to help the country reduce its soaring energy bills, which have climbed from MAD 19 billion in 2002 to MAD 87 billion in 2011.
SIGNIFICANT DEPOSITS A 2013 assessment by the US Energy Information Administration (EIA) of shale oil and gas resources indicated that Morocco has 20 trillion cubic feet (or 0.2 billion barrels) of technically recoverable shale oil and gas resources, with the great majority located in the Tindouf basin, and smaller amounts in the Tadla basin.
In a recent report on the oil sector, Citigroup said momentum is building in the country.
"We see Morocco as an under-explored hydrocarbon province that offers high-impact exploration opportunities across multiple play-types. The material resource potential coupled with attractive fiscal terms has seen a recent pick-up in corporate activity in the region with larger independents (Genel Energy and Cairn Energy) and IOCs (Chevron, Total and Galp) securing offshore acreage," the US bank said.
Fastnet Oil & Gas, an independent oil & gas explorer from the UK, is one of the smaller companies attracted by the country's untapped reserves.Paul Griffiths, the group's managing director, believes there is "very high potential" for more gas discoveries in Morocco.
"Morocco has a long history of exploration but interestingly it is very much under-explored relative to Algeria, Libya and most of the other countries in North Africa.
"You have all the conditions to find conventional gas -petroleum systems, reservoirs, traps - but you also have the opportunity to find unconventional gas: shale gas. Morocco has one the world's best source rocks: ante-Devonian and carboniferous. The shale gas resources of Morocco are completely untapped, potentially hundreds of tcf (trillion cubic feet) because of the size of the basins and the quality of the source rock," Griffiths explained.
He also stressed that there is a "very strong" ability to monetize the gas."The country has a very favorable fiscal regime, no production sharing contracts,5% royalty on gas,30 corporation tax but with a 10-year holiday so the bcf of gas is worth more in Morocco than in Algeria or Nigeria for example."
'INTERESTING' MARKET
From a strategic point of view, Griffiths believes Morocco is interesting because a lot of the infrastructure is already in place, and because the country is not utilizing the capacity rights derived from the gas pipeline linking Algeria to Spain.Furthermore, he sees a strong political will to develop the local gas industry.
"Demand for gas has increased 54% over the last 10 years, there's a desire by the government to complete electrification of the entire area of Morocco. With a population of 33 million, they are one of the largest consumers of energy in Africa. The national strategy is to build more gas-to-power stations to replace coal and oil. The next one to be built will be a 400-megawatt power station in the next couple of years, so clearly you have the drive domestically for gas to power," he says.
It may not be the next Algeria or Egypt, but watch this space, as Morocco looks like it has the potential to become a significant gas player in the future.
