by Ian Lyall
As the geological understanding of coast of west Africa increases so there has been a migration of interest to the area.
Cairn Energy (LON:CNE) is the latest offshore explorer to beat a trail to the waters off the coast of Morocco.
It will take a 50 per cent stake in the Foum Draa Block in a US$61.5 million deal with San Leon Energy (LON:SLE),Serica Energy (LON:SQZ) and Longreach & Gas (CVE:LOI).
Prior to the deal the three held stakes of 42.5 per cent, 25 per cent and 7.5 per cent respectively. After, they will have 14.17 per cent, 8.33 per cent and 2.5 per cent. ONYHM, Morocco’s oil and mining bureau, will maintain its 25 per cent interest.
As part of the deal Cairn has agreed to pay its share of past costs – a sum of US$1.5 million – and will find the first US$60 million required to drill an exploration well on Foum Draa.
For San Leon this is the second Moroccan farm-out in the space of less than a week after sealing a deal with acquisitive Genel Energy for its Sidi Moussa block.
Chairman Oisin Fanning said: “We are delighted to welcome Cairn Energyinto this block that contains very large mapped prospects and we are now targeting our first Foum Draa exploration well in 2013.
“This is deep water exploration and this deal reduces our financial exposure but keeps our interest at a level which still offers attractive upside for our shareholders.
“San Leon committed itself to carrying out extensive work offshore Morocco over the past two-and-a-half years and this farm-in agreement concludes the farm-out of our two offshore blocks.
“We also announced the successful farm-out of our offshore Sidi Moussa block to Genel Energy last week.
“Attracting partners like Cairn and Genel on the terms achieved is testament to the quality of work we have undertaken.”
As the geological understanding of coast of west Africa increases so there has been a migration of interest to the area.
However compared with its near neighbours Morocco is chronically under-explored, although this is changing with the latest influx of oil companies.
And it has several notable advantages over petroleum producing nations nearby.
The unrest that has swept the rest of North Africa has singularly failed to threaten Morocco, which is a parliamentary constitutional monarchy, while the tax regime there for oil and gas producers is amongst the most attractive anywhere in the world.
The state receives 25 per cent of any project and a 5 per cent royalty if gas is produced, which rises to 10 per cent for oil.
An unprecedented ten-year corporate tax holiday is offered for any discovery. This means the government take is never more than 35 per cent.
Contrast this with neighbouring Algeria where the authorities take 92 per cent and you can see why foreign investment is flooding into Morocco.
Morocco has registered on the radar screen of ambitious national oil companies Total (EPA:FP) and Repsol (MCE:REP), as well as Anadarko (NYSE:APC) and Kosmos (NYSE:KOS), two of the larger and more successful exploration groups.
London-quoted Tangiers Petroleum (LON:TPET) and Fastnet Oil & Gas(LON:FAST) are targeting the country’s offshore oil and gas bounty.
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