Firms turn to Morocco in hunt for oil

LONDON: Middle East turmoil has given a fresh spur to energy companies looking for big finds further afield with more stable and inviting hosts Morocco, Malta and Spain.

Close to known reserves and large markets, they offer tempting terms for explorers without the risks to production in Syria, Libya or Egypt.

Morocco has lured companies with the promise of a link to the energy-rich formations of West Africa, while in Malta there are hopes of an extension of Libya and Tunisia’s geology.

Off Spain, Cairn Energy sees geological similarities with Israeli waters, home to two of the largest offshore gas fields found in the past decade.

“You either have to go to the technical frontiers or the political frontiers. In Morocco and Malta we’re dealing with much more technical risk than political risk,” Genel Energy’s chief executive Tony Hayward, the former boss of oil major BP, told Reuters.

From Chevron, the second largest US oil company with a market capitalisation of $231 billion (R2.4 trillion), to Fastnet, worth $80 million, firms have flocked to Morocco over the last 18 months.

Gulfsands Petroleum typifies the trend. It was pumping about 10 000 barrels of oil equivalent per day in Syria before the civil war. It shut up shop there in 2011, losing more than 90 percent of its production, and has moved to Morocco.

“As you might imagine, after Syria what we’re looking for is some stability, and Morocco’s got terrific political stability, but it also has the best fiscal terms of any country in the Middle East and North Africa region,” Gulfsands’s commercial director Ken Judge said.

Morocco defused Arab Spring-style protests in 2011 through social spending, harsh policing and constitutional reforms.

Over 10 discovery wells are due to be drilled off its coast in the next 18 months, compared to analyst estimates of nine since 1990.

Genel will start drilling off Malta in the first quarter of next year while Britain’s Cairn will start a well in Morocco in September. Cairn says on its website it could also start drilling in Spain in 2015.

“Given some of the challenges you’ll find in some of the more established (hydrocarbon-producing) countries in North Africa, you’d say it was worth taking a punt on Morocco at this point in time,” Femi Oso, an analyst from energy consultancy Wood Mackenzie, said.

The punt comes at a cost of around $80 million to drill an average well off the coast of Morocco, according to one company.

Modern technology has helped discover huge new oil and gas fields over the last decade in Ghana, Uganda and Mozambique, prompting a scramble for new acreage.

What the countries have in common, and what executives agree is key to nurturing new drilling, is attractive tax terms.

“Because of fiscal terms in Morocco, even a modest discovery of say 20 million barrels… would be phenomenally lucrative for our company,” Gulfsand’s Judge said, referring to the company’s solely onshore presence there. – Reuters