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Oil Prices Rally On Saudi Rhetoric

Oil Prices Rally On Saudi Rhetoric

Oil prices rallied on Thursday…

Oil Majors Flock to Morocco, Excited by Offshore Potential

Technological advances, and a better understanding of geological formations, has allowed oil companies to discover reserves in regions previously thought to be empty. This has caused a boom in activity in Morocco, as explorers from around the world are attracted by its stability, and the potential for large offshore reserves.

For the past year and a half independent explorers have been scooping up the rights to offshore blocks, but now the majors have started to take an interest. Chevron moved into the country earlier in the year, and now BP has just agreed a deal with Kosmos Energy to buy a share in three offshore blocks.

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Analysts claim that since 1990 only nine offshore exploration wells have been drilled in Moroccan waters, but they predict another ten to be drilled in the coming 12 to 18 months. Damon Neaves, the managing director of Pura Vida Energy, told Reuters that it “represents an investment of $500 million to $1 billion, and that is a big show of confidence from the industry. It is still a frontier region and is underexplored compared to other parts of the world.”

Morocco has long been ignored by energy companies as the energy-poor neighbour of Algeria and Libya, but things have taken a sharp turn. Libya has lost several oil companies recently due to poor finds and ongoing stability issues, and Algeria is struggling to maintain high production levels due to various attacks against its energy industry this year, all the while Morocco’s position has only grown.

Morocco’s offshore oil blocks
Morocco’s offshore oil blocks (note, BP now has a share of Kosmos’ blocks). (energy-pedia)

Geoff Porter, the founder of North Africa Risk Consulting, said that “North Africa and particularly Libya and Algeria are looking less appealing than they have done for five years. Conversely, Morocco is a quiet hive of activity.”

Related article: Libyan Oil Production Struggles to Restart

The west coast of Africa was once joined to the east coast of South America, so recent discoveries of huge reserves off the coast of Brazil, have led to excitement that similar formations and reserves may be found mirrored along the west coast of Africa.

Robert Wine, a spokesman for BP, said, “we look at the Atlantic margin as a whole. 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 are also attracted to Morocco due to its exceptional fiscal terms, and infrastructure that cannot be matched in other parts of Africa. Damon Neaves explained that “the fiscal terms in Morocco are as good as you'll find anywhere in the world. 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.”

By. Charles Kennedy of Oilprice.com

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