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Geologists, engineers and company executives are new visitors to the country. And they are part of the transformation of Morocco, which has become a magnet for some of the world’s most savvy oil explorers
Casablanca and the tourist traps of Marrakech are probably the first things that spring to mind when you think of Morocco. Oil definitely is not.
But fighting through the hordes of holidaymakers that throng the airports of Agadir, Rabat and Tangier are new visitors to the country – geologists, engineers and company executives.
They are part of the transformation of Morocco, which has become a magnet for some of the world’s most savvy oil explorers.
The country is host to Total (EPA:FP), Anadarko (NYSE:APC), Kosmos (NYSE:KOS) and Repsol (MCE:REP) as well as some of the smaller, more entrepreneurial groups such as Pura Vida (ASX:PVD), Tangiers Petroleum (ASX:TPT, LON:TPET) and Longreach Oil & Gas (CVE:LOI).
Fastnet Oil & Gas (LON:FAST), which is essentially the team behind Cove Energy’s (LON:COV) huge successes in Tanzania, this week announced it had farmed into offshore acreage in Morocco, while the acquisitive Genel Energy (LON:GENL), which is active currently in Kurdistan, another of the world’s oil hotspots, is reported to be on the cusp of closing a deal there.
Morocco
Despite its hydrocarbon wealth and ready market, Morocco is chronically under-explored, although that is changing with the latest influx of oil companies.
However, the real pull internationally seems to be the nation’s offshore assets.
Tangiers reveals the Atlantic waters off Morocco could harbour a rich bounty. It estimates the unrisked recoverable resource from its concession on the Tarfaya block could be anywhere from 156 million barrels to an eye-popping 5 billion barrels. Pura Vida’s Mazagan permit area, meanwhile, could contain 3.2 billion barrels.
It bought Mazagan for A$3.5 million last October, and in doing so acquired some of the last remaining open acreage. This was quite a coup.
“Morocco needs to develop its oil industry, particularly its deepwater potential,” said Pura Vida managing director Damon Neaves.
“To do this they need to attract the big companies into the country. They saw us as having the technology and expertise to do this: the modern seismic reprocessing techniques in particular.
“They saw us as a conduit to bringing in the big, deepwater operators to make the big investments required to pursue deepwater drilling.”
The country’s burgeoning hydrocarbon wealth is obviously a pull, but there are other reasons why companies are flocking to Morocco.
The unrest that has swept the rest of North Africa has singularly failed to threaten the country, which is a parliamentary constitutional monarchy.
Meanwhile, the fiscal terms there for oil and gas producers are amongst the most attractive anywhere in the world.
The state receives 25% of any project and a 5% royalty if gas is produced, which rises to 10% for oil.
An unprecedented ten-year corporate tax holiday is offered upon discovery.
This means the government take is never more than 35%. Contrast this with Algeria, where the authorities take 92% and you can see why foreign investment is flooding into Morocco.
And under this regime, the economics of the smaller projects look very attractive.
Earlier this month the explorer said it expected to complete its work programme on the Mazagan permit in September, which is more than 15 months earlier than expected. The pending deployment of the Geoexplorer vessel to test the sea bed for oil seeps will be one of the last elements of the programme – along with the completion of desk-top work reprocessing 3D seismic gathered over 3,000 square kilometres. With the early completion of the work programme it is now expected that a formal farm-out process will be begin in October.
This is significant because it comes at a time when industry interest in the area is high. “There has been an unprecedented level of transactional activity occurring offshore Africa recently, which suggests we are commencing this farmout process at an ideal time,” said Neaves.
The group holds a 75% stake in the Tarfaya concession (the remaining 25% is held by the state national oil company). It has an un-risked prospective resource of 867 million barrels, with a high-end estimate of almost 5 billion. “It is not one prospect, it is multiple prospects and they are different types of prospects,” says chairman Mark Ceglinski. The major event in Morocco will be the farm-in deal, with the partner expected to drill two wells before the year-end at an estimated “$25 million per hole”.
The company was one of the first movers in Morocco and has five licences covering seven offshore blocks and 21 onshore blocks. That adds up to a huge land position covering 13 million acres containing 70 leads and prospects with significant hydrocarbon potential.
The newly listed firm, backed by members of the Cove Energy team, is paying an initial US$8 million to acquire an 18.75 per cent stake in a venture led-by Kosmos in the Agadir basin. The acreage contains 23 identified prospects that are said to be consistent in scale with producing West African fields. And interpretation of new seismic, shot this year, is expected to add ‘significant additional resources’. Fastnet says there is an opportunity for near-term ‘high impact’ drilling with the first well is slated for next year. And it also says that industry interest in the region provides the company with a ‘prudent option’ to farm-out some of its acquired stake. For a newly listed firm, valued just shy of £20 million, the acquisition is seen to be a significant and potentially transformational deal.
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