* BP follows Chevron as majors arrive
* Cairn Energy says to start drilling shortly
* Oil companies see promising geology after Brazil finds
* Morocco at least a decade away from any energy exports
By Lin Noueihed
LONDON, Oct 18 Oil companies are stepping up
exploration in Morocco, attracted by its stability relative to
other parts of North Africa and encouraged by advances in
geology and technology that indicate its potential for reserves
Independent explorers have snapped up rights to explore
offshore blocks over the past 18 months, and they are now making
way for big players seeking acreage in a nation once dismissed
as the energy-poor neighbour of OPEC members Algeria and Libya.
Damon Neaves, managing director of Australia's Pura Vida
Energy, said 10 exploration wells would be drilled off
Morocco in the next 12 to 18 months, compared with only nine
since 1990, according to analysts' estimates.
"That represents an investment of $500 million to $1
billion, and that is a big show of confidence from the
industry," Neaves told Reuters. "It is still a frontier region
and is underexplored compared to other parts of the world."
BP is the latest oil major to enter Morocco,
announcing a deal with Kosmos Energy this week to take a
share in three offshore blocks. Drilling will begin next year.
Britain's Cairn Energy said on Thursday it would shortly
begin drilling off the Moroccan coast.
They follow Chevron, the second-largest U.S. oil
company, which said in January it had taken up three offshore
By contrast, some oil firms have recently turned away from
Libya due to disappointing finds and supply disruptions and from
Algeria, where security concerns have mounted since an attack on
a gas plant this year killed 40 workers.
"North Africa and particularly Libya and Algeria are looking
less appealing than they have done for five years," Geoff
Porter, founder of North Africa Risk Consulting, said.
"Conversely, Morocco is a quiet hive of activity."
Pura Vida this year found a partner for its Mazagan block.
Drilling is to begin next year on the Toubkal field, which it
hopes could hold over 1 billion barrels of oil.
Excitement over Morocco has grown as technology has helped
firms to discover new oil and gas fields over the past decade in
regions that were formerly overlooked.
Huge finds deep under the seabed off Brazil's coastline have
raised hopes that similar hydrocarbon formations lie unexploited
off the African coast. Early finds offshore countries including
Ghana and Angola have further piqued the interest of majors with
"We look at the Atlantic margin as a whole," BP spokesman
Robert Wine said. "If you look at Angola and Namibia then you
can see a geological mirror to Brazil and Uruguay ... Morocco is
obviously a bit further north."
Oil companies also are encouraged by Morocco's relatively
attractive fiscal terms and its infrastructure, including port
and rail facilities.
That contrasts with Libya, which has some of the toughest
terms in the business, and Algeria, which struggled to attract
foreign bidders in its last licensing round.
"The fiscal terms in Morocco are as good as you'll find
anywhere in the world," said Neaves. "If you compare a barrel of
oil in the ground in Morocco, then it is worth more than it is
just about anywhere in Africa."
NORTH AFRICA'S NORWAY?
Significant finds could help ease political pressures on
Morocco's government as it raises fuel prices as part of reforms
demanded by an International Monetary Fund programme.
Morocco is one of the world's most energy-poor countries,
importing around 95 percent of its needs, according to the World
It has turned to Wall Street banks to hedge against oil
price hikes, the Financial Times said this month.
The government also aims to attract investment in renewable
power to help meet domestic electricity consumption that is
rising by around 6 percent a year, so that any potential oil and
gas output can be used to generate export revenue.
Such a strategy has been employed by Norway, a major energy
exporter that uses dams to generate hydropower and provide most
of its electricity.
Funds from the Middle East, Europe and the World Bank are
being invested in projects such as the world's largest
concentrated solar power plant in Ouarzazate, in eastern
"The plant is part of the Moroccan government's Solar Plan
... This replaces the high-carbon, coal-fired electricity of the
past and will create a new source of income for Morocco, as the
plan calls for export of solar electricity to markets in
Europe," the World Bank said.
But there are potential pitfalls for those oil firms whose
blocks fall in the disputed waters off the Western Sahara to the
south of Morocco.
This tract of desert, home to phosphate deposits and
potential offshore energy reserves, has been the focus of
Africa's longest-running territorial dispute, pitting the
Moroccan government against the Polisario Front independence
movement backed by Algeria.
Campaigners set up Western Sahara Resource Watch over a
decade ago after Morocco awarded its first exploration licenses
in disputed waters. WSRW says it wants oil firms to comply with
a U.N. legal opinion from 2002 that calls for activities to
respect the wishes and interests of the Western Sahara people.
It has in the past appealed to shareholders of firms
operating in disputed areas to divest or halt exploration.
Analysts say most of the blocks snapped up so far are not in
disputed waters and would face no legal or political challenge.
But it will take time to develop the energy sector, even if
companies do strike oil.
"Morocco does look attractive, but they have not found any
major oil and gas deposits yet. Algeria is already one of the
largest suppliers of gas to Europe," Charles Gurdon, managing
director at Menas Consulting, said.
"Morocco is at least a decade away from anything like that,
and that is even if they find it."