Appealing fiscal terms and a desire to tackle emissions has made Morocco an attractive destination for investment.
The country is under explored and typically under the radar for most investors. Sound Energy, though, has found gas and is working to tie this up to the latent domestic demand.
“There’s strong commercial demand in country for natural gas,” Sound’s COO Mohammed Seghiri said.
The local market relies on higher polluting fuels such as petroleum coke. “The state has a clear long-term policy to move away from those resources. Switching to gas is much less polluting,” Seghiri continued. If that gas is domestically produced, all the better for the country.
Gas, alongside investment in renewables, is the “only way” for Morocco to reduce a large part of its power that comes from coal. “The first step is to get rid of coal in new power generation units.”
Sound has discovered 650 billion cubic feet (18.4 billion cubic metres) of gas at TE-5 Horst, in eastern Morocco. Initially, the company had planned to focus on a 120-km pipeline link to the transnational Gazoduc Maghreb Europe (GME) pipeline .
Subsequently, though, it has expanded into a micro LNG (mLNG) plan, which would involve gas being trucked to consumers, such as factories.
“It’s a virtual pipeline,” said Seghiri, “but we’re still keen to connect to the GME. Micro LNG is becoming more and more common. It’s happening in South America and Canada.”
Those receiving the gas are familiar with LPG deliveries through a similar technique. “It’s just a new form of buying fuel at a cheaper price,” Sound Energy’s executive chairman Graham Lyon said.
The chairman noted he had been involved in another mLNG project in Kazakhstan. The mLNG concept is straightforward. Installing a pipeline to move the gas 800-900 km to market would be an expensive proposition that would be hard to justify for such small volumes.
Devolved distribution
Delivery of LNG-by-truck will be straightforward, Lyon said. “We’re not in the downstream business. Our midstream partner will take the gas from us and deliver it on a truck that comes equipped with regasification capability. It’s standard technology.”
Partnering in this way allows Sound to continue its upstream focus. “We don’t want to have a drag in distribution. This is a first field that we’re unlocking and there are other fields in the basin. There’s huge exploration upside that we want to focus on, rather than seeking market share in the downstream,” Seghiri said.
Challenges thrown up by 2020 have had an impact on the company’s plans. “Contracts go a lot faster when you’re in the same room as your counterparty. Travel problems have added around 25% to the time for these discussions,” Lyon said.
Sound finished last year on a “mini high”, he continued. The company has lined up Italfluid Geoenergy to build the mLNG plant. The two sides agreed to try and reach a final contract by March 31. Sound will rent the facilities from Italfluid, assuming a final investment decision (FID) is reached on the first phase development.
“We’ve got a good line of sight on the FID to get mLNG going. There’s a couple more contracts to flesh out but we intend to take FID in 2021. That will see Sound transition from pure exploration to development and then into production,” Lyon said.
For more about Sound Energy and Morocco, and other parts of North Africa and the Mediterranean, tune in to Frontier Energy’s upcoming summit. Click here for more information.
