Moroccan Shale Shows Potential, Just In Time

This past week, it was reported that San Leon Energy produced the first oil shale from its Timahdit license, roughly eight months after it signed an MoU with Chevron Lummus Global related to technologies needed to “produce synthetic crude oil from raw shale oil” in the area. The news comes just as investors in the country’s untapped energy sector have begun to express frustration with the progress of exploration and production.

San Leon also announced the spudding of an offshore well.

For Morocco, a domestic production future is vital to creating some level of economic independence. While sharing the North African coast with some of the continent’s largest oil and gas producers, Morocco currently imports about 95 percent of its energy needs, putting it in a precarious situation where energy prices can, and have, skyrocketed overnight.

Meanwhile, for foreign firms, Morocco represents a stable, if unproven, frontier in North Africa. This reality has become especially clear over the last three years. In the case of Libya, the country’s new government has struggled to retain control over its energy assets and export facilities under the pressure of local militias. In neighboring Algeria, a legacy of underperforming projects, institutional corruption and political uncertainty has made it difficult to pique the interest of new investors. While the country largely escaped the kind of broad political unrest experienced in Tunisia, Libya and Egypt, they have encountered some spillover, including a direct attack on a BP-Statoil held gas facility in January 2013. Leaving scores dead, including foreign staff, the attack rattled both firms, forcing a reevaluation of their presence in the country. By comparison, Morocco seems quaint, even if it doesn’t provide the potential of its neighbors.

However, Morocco’s serene landscape is not the only thing drawing firms to its Atlantic shores. Larger outfits like Chevron and BP have joined firms like Kosmos and Carin in enjoying a potential 75% revenue share, with the remaining 25% reserved for the Moroccan government.

Still, analysts have expressed concern that the lack of real progress and difficulty presented by some of the country’s viable domestic options may prove too taxing for needed foreign investors.

Adding further challenges to the country’s energy development, Morocco has had to cope with political stress related to the country’s Western Sahara region, which is home to some of its new energy options, including both traditional hydrocarbons and renewables. Earlier this year, Norway’s $850 billion Sovereign Wealth Fund announced that they would be reviewing their connection to France’s Total due to their involvement in exploration efforts in the Western Sahara region of Morocco. Charged with investing Norway’s oil and gas revenue, the fund has made it a point to invest only in ethical companies, excluding controversial investments like tobacco, weapons and landmines, according to a recent Reuters report.

Norway’s fund holds a 2 percent stake in Total, making them the company’s 4th largest investor. France’s Total was awarded an exploration licence by the Moroccan government in 2011, putting them alongside a growing number of international firms with an eye on the northwest African coast.

The Norwegian announcement came shortly after other potential European lenders expressed their concern about becoming involved in projects in the area. According to a Reuters report from January 2nd, German state-owned bank KFW, the World Bank, the European Investment Bank, and the European Union all said they would not financially support solar projects in the Western Sahara, with one official saying such an investment would be an endorsement of the Moroccan position on the region.

via Moroccan Shale Shows Potential, Just In Time.