Testing the waters: Offshore fields offer new possibilities and solutions to rising imports

Although exploration activity in Morocco’s offshore basin has thus far not produced commercial discoveries, a number of oil players have increased their presence in recent times. According to the country’s national oil company, the Office National des Hydrocarbures et des Mines (ONHYM), a total of 27 wells are planned for 2014, of which at least 10 are in the offshore Atlantic basin.

This is good news for a region that remains one of the world’s most unexplored at 1.6 wells per 10,000 sq km, compared to a world average of 51. In contrast, during the decade preceding 2013, only five offshore wells were drilled.

NEW ENTRANTS: A spate of new licences have been awarded recently. US-based Chevron, for example, in January 2013 won licences for the offshore basins of Cap Rhir Deep, Cap Cantin Deep and Cap Walidia Deep located 100-200 km west of Agadir at depths of 100-4500 metres. Similarly, in October 2013 BP struck a deal with US independent Kosmos for the acquisition of 45% of its share of the offshore blocks of Essaouira and Taghazoute, as well as 26.32% of its Foum Assaka licence.

The British firm announced the start of drilling activity in early 2014. Meanwhile, Kosmos will retain a 29.93% share in the Essaouira and Taghazoute blocks and a 30% operating stake of Foum Assaka. While the value of its transaction with BP remains undisclosed, the firms has announced plans to use the funds for exploration.

In early March 2014, Australia-based independent Pura Vida announced that it had closed a rig share agreement with Kosmos for the drilling of two wells on its Mazagan permit, a 1000- to 2100-metre-deep basin, located 100 km offshore of Morocco’s Atlantic coast. The company is planning to start drilling of the Toubkal 1 well in January 2015, targeting 350m barrels, while its second slot has been scheduled for the second half of that year. Pura Vida estimates the licence’s potential at around 1.5bn barrels of oil.

Meanwhile, Anglo-Turkish player Genel Energy and UK-based Cairn Energy have each bought a 37.5% share in the Juby Maritime licence with a potential reserve of 70m barrels. By the start of the second quarter of 2014, the firm announced the discovery of heavy oil in the Juby Maritime I well. In 2014 Genel Energy is also expected to launch its drilling campaign on the Sidi Moussa licence, in which it has a 60% share, although Cairn announced negative findings on its drilling campaign on the Foum Draa licence, in which it holds a 50% operating share.

LOOKING UP: While the latest exploration round has yet to produce promising results, the renewed interest of oil majors and independents marks the competitiveness of Morocco’s upstream oil landscape. The pick-up, which is much welcomed by Moroccan policymakers eager to lower an energy import bill that is seen as discouraging investment, is attributed to a number of factors. A key element is the kingdom’s comparative stability, particularly following the turbulence brought on by the Arab Spring elsewhere in North Africa, as well security concerns in onshore installations in Libya and Algeria.

The country has also benefitted from the recent succession of new finds in non-traditional producers elsewhere in Africa, including Kenya, Uganda and Ghana – all places where juniors have had success in discovering large, commercially viable deposits, spurring investors to take a closer look at less-covered territory. Duncan Holland, the Morocco country manager for Cairn, told OBG, “Morocco remains a largely unexplored frontier market for oil exploration companies, which means companies are leading an unprecedented wave of exploration.”

Another principal factor is the country’s favourable fiscal regime. Incoming companies are exempted from a 30% corporate tax rate for a period of up to 10 years. In addition, ONHYM’s mandatory minimum share in production licences is set at 25%, which is low compared to some other countries, like Algeria.