Morocco, Tunisia: Not Giving up on Oil and Gas
Eight Years After the Talsint Debacle and Morocco Continues to Hope for Oil. It has been eight years since the Talsint debacle took place. In the year 2000, the Moroccan public awakened with the news that oil was discovered in the Talsint region, only to learn later that the news was bogus.Morocco does not produce oil but never stopped making small efforts to search of the world’s most valuable commodity. Equipped with a legislation that has a series of incentives, Morocco managed to attract many foreign companies to conduct exploration. Today 29 such companies are busy looking for petroleum on and off shore Morocco. The Talsint fiasco was surely a setback for the country’s exploration efforts at first, but then interest returned and companies have been looking at Morocco’s underground areas again.
In the post-Talsint era, between 2000 and 2007, nearly MAD 4.6 billion were spent on looking for the black gold. Morocco’s own contribution to this effort accounted for 12% of the total spending, or MAD 575 million. The Moroccan exploration authority spent that money to conduct various studies and seismic reconnaissance, as well as exploratory drillings. A total of 110 exploration permits have been granted, covering 300,000 square meters of land and sea. The offshore area concerned represented 93,000 square meters. In all, nearly half of the Moroccan territory is being explored by geologists, geophysicists and other scientists in the pursuit of oil and gas.
Compared to other countries in the region, Morocco remains largely unexploited. Lack of reserves is the main reason for the existence of only 290 wells in 2005. Morocco has 0.04 wells for every 100 square kilometers, compared to a worldwide average of 10. For some, the country is under-exploited, but for more realistic voices Morocco has no oil to justify the drilling of wells beyond what it currently has. As such, activity remains far below regional standards. In 2006, seven drilling operations have been executed. In Tunisia it was 29 and in Libya 128. In the Maghreb, Algeria has been the most active with 285 wells, but Egypt in the wider North Africa zone took the lead with 403.
In Talsint, where promises of oil never materialized, two new wells were drilled in 2007. The latest of such drilling operations cost $52 million (MAD 406 million), currently taking place offshore Rabat by Malaysian operator Petronas. Further drillings are scheduled for the coming months. With the focus on offshore exploration, the costs of such operations are significant. On land, it costs between MAD 100 million and MAD 150 million to conduct drilling in Morocco. Offshore costs increase by four to eight times those figures, depending on the region and depth of the well to drill. Making a decision to drill in a region that has failed to show positive prospects is no trivial decision and requires a clear understanding of the financial risks involved.
Engineers say that once the basic science determines there is potential for hydrocarbons based on a single exploration drilling, some 10 other wells would have to be drilled to allow further confirmation of the existence of oil or gas. And that means exponentially higher costs. The costs further expand as other expensive activities are required, including seismic surveys, data mining and analysis, etc, which make the venture extremely expensive, lengthy and risky. With this in mind, the Talsint scandal led oil explorers to remove Morocco from their exploration list. Too costly, too risky and no sign of the black gold were major inhibitors in begs to differ.
Yet Moroccan officials argue that without sufficient exploration that would generate basic data, it is not fair to conclude that there is no oil in Moroccan soil. They bring the case of the Gulf of Guinea where estimated reserves are now 10 billion barrels. Few years ago, that region was not an attractive destination for oilmen. Onhym, the state exploration authority, may be somewhat right judging by the presence in its territory of some big name explorers looking to strike oil. Onhym points to some real potential using deductive reasoning and some science. The 800,000 square kilometers of Moroccan territory used to be under water, a geographical formation that is said to be fit as hydrocarbon reserves. The offshore basin near Tarfaya is the most suited area for oil reserves. In 1999 a report published in the Oil & Gas Journal by three researchers indicated the presence of geological structures similar to that of the Gulf of Mexico or the oil producing offshore regions in Canada.
Acknowledging the potential for oil, some daring foreign companies agreed to lunch exploration operations in partnership with Onhym. These companies are also required to make a down payment to the Moroccan government, equivalent to 5% of the estimated exploration cost.
In addition to Tarfaya, Onhym officials think that other regions, such as the Gharb and the Essaouira basins, as well as regions near the Rif could be home of sizeable reserves. Yet no single explorer has managed to set foot in those particular geographies.
Since Talsint, Morocco faced negative publicity about its potential for oil and gas. As such, it is the enormous duty of Onhym to make the case that the reality could be otherwise. With the prices of oil climbing, Onhym officials should not be deterred and have, instead, the opportunity to reengage with the global exploration community. Without further efforts and fresh initiatives, Morocco risks to never see a single barrel of oil lifted out of its soil.
- Tunisia Sustains Investments in Small Exploration Program
In Tunisia, Egyptian independent oil company Tigmad Energy was awarded a permit by the Tunisian government to search for hydrocarbons on the Tunisian territory. This is the fifth permit awarded to a foreign company this year. Call Kondar, the permit will cover 972 Km2 of onshore territory in the province of Sousse, some 150 kilometers east of the capital. The Egyptian company will invest $1 million for the purpose.
Tunisia’s crude oil reserves are estimated to hold 838 million barrels of oil equivalent. This year, 15 drilling operations will be conducted and 57 exploration permits will be operational.
With declining output and increase imports, Tunisia considers oil and gas exploration as a must. The investments committed in exploring for oil shows Tunisia’s focus on discovering every possible reserve. In 2005, Tunisia and its foreign partners spent $423.72 million. This year, the country’s exploration target will require more than $2.1 billion. Foreign companies are critical players in this industry. The money invested in oil and gas exploration by foreigners accounted for 60% of all foreign direct investments completed in 2007. Last year, 42 exploration and development wells were drilled, up from 15 in 2005. The results have been rather encouraging, following the discovery of 10 new fields, expanding Tunisia’s oil extractable reserves by 20%.
From an outlook perspective, the 2008/09 program calls for a sustained activity, in an effort to produce 8.4 million tons of petroleum equivalent on the crude oil side, up from 5.6 million in 2005. Natural gas production is targeted at 2.3 million tons of petroleum equivalent in the 2012 horizon.