Showing posts with label Morocco. Show all posts
Showing posts with label Morocco. Show all posts

Friday, January 11, 2019

Moroccan perspective on natural gas market

The current situation in the natural gas market has several variables as we enter the first quarter of 2019. But before anything else, what price levels we are at would be a good conversation starter. Using the US Henry Hub as a benchmark, it remains stuck around $3/mmbtu. For Europe, adding an average $2+ mmbtu would be about par.

After a late December collapse, natural gas prices were seemingly being held down by higher than normal winter temperatures, before a big freeze hits several parts of Europe and North America. As for the market itself, most of the chatter these days is about how US LNG - both small and large scale - will add to the global supply pool with the country's capacity tipped to cap 40 million tonnes per annum (tpa) in 2019. 

As the Americans increasingly tussle with other major LNG exporters such as Qatar, Malaysia and Australia for a slice of the global market, Morocco - a net energy importer, albeit with substantial natural gas reserves - is in a reasonably positive position. 

The country has proven reserves of some 1.44 billion cubic meters (bcf) of natural gas, according to the CIA World Factbook, but domestic production is not even a tenth of that volume. Rabat is attempting to alter that dynamic via several independent upstarts led by SDX Energy, and accompanied by the likes of Sound Energy (which recently said it would focus exclusively on Morocco) and Chariot Oil & Gas. 

Seeing potential, the government is offering attractive terms to exploration and production companies (refer to the Oilholic's previous post on the subject). But until Morocco meaningfully discovers its domestic production mojo, the US shale gas bonanza couldn't have come at a more opportune time, as Rabat looks ensure security of supply over the medium-term. In October 2018, Energy Minister Aziz Rabbah confirmed that Morocco is preparing to invite bids for a LNG project in Jorf Lasfar worth $4.5 billion.

It includes construction of a jetty, terminal, pipelines and gas-fired power plants, ultimately leading to the import of up to 7 billion cubic metres of gas by 2025, in a very competitive global gas buyers' market. 

The announcement follows state-owned power utility ONEE announcement in 2017 that it had picked HSBC Middle East as a financial adviser for its plan to boost imports of LNG. The scenario provides plenty of talking points, which is why the Oilholic is heading to Morocco in February to speak and deliberate at the 2nd Morocco Oil & Gas Summit in Marrakesh, February 6-7, 2019, being organised by IN-VR Oil & Gas

It's all set up nicely, and this blogger early awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photos: Cairn Energy / IN-VR Oil & Gas

Wednesday, December 19, 2018

Moroccan promise: Emerging oil & gas market beckons

By any stretch of the imagination 2018 is coming to a very volatile end for the oil and gas markets. The month of November saw three declines of over 7% in a short space of 10 sessions, and the OPEC summit in December has (so far) failed to calm the market. Of course, oil and gas investment has never been about the here and now, but rather about the longer term. 

Wider market expectations are that oil, using Brent as benchmark, will continue to oscillate in the $50-70 per barrel range, while natural gas markets will benefit over the medium-term courtesy of the power sector's need for a bridging fuel in its inexorable march to a low-carbon future. Among investment hubs on the market's radar is Morocco. The country's Office of Hydrocarbons and Mining (ONHYM) is optimistic about oil and gas reserves both onshore and offshore. 

Furthermore, as a country of around 40 million people, Morocco is also a healthy energy consumption market that imports over 90% of its hydrocarbon needs. Align the two, and upstream and midstream opportunities become clearer. 

Unsurprisingly, as is often the case with nascent energy hubs, independent exploration and production (E&P) companies are leading the Upstream charge – including London-listed ones such as SDX Energy, Chariot Oil & Gas and Europa. That said majors such as Eni are also rubbing shoulders with the upstarts.   

With an aim of reconciling thoughts over global market permutations and ongoing developments in the Moroccan oil and gas sector, the Oilholic is delighted to be speaking at the 2nd Morocco Oil & Gas Summit in Marrakesh, February 6-7, 2019, being organised by IN-VR Oil & Gas

Holistically speaking, Rabat – given its eagerness to develop the domestic oil & gas industry – offers some some of the most cost competitive fiscal and commercial terms in the global market. ONHYM, which by Moroccan law is a partner in the licences usually via 25% general carried interest in phase one explorations, offers reliable partnerships and the operating climate is underpinned by a stable regulatory regime. 

During the exploration phase 100% of the costs are paid by the contractor without any reimbursement from ONHYM, while during the exploitation period the costs are shared between the parties in accordance with their participation interest in the production concession. There is no corporation tax for the first 10 years of production. Operators also benefit from solid infrastructure. 

Of particular significance is the ONHYM pipeline system with a total length of 213 km in the Gharb basin and 160 Km in the Essaouira Basin. Capacity increments have followed via a new pipeline project of 55 km in the region of Gharb. Overall, a destination to watch out for, and this blogger early awaits the summit. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Photos: Royal Dutch Shell / IN-VR Oil & Gas

Tuesday, February 22, 2011

Shell Divests, BP Invests and Libya Implodes!

Earlier on Monday, oil giant Shell announced its intentions to sell most of its African downstream businesses to Swiss group Vitol and Helios Investment Partners for US$1 billion adding that it will create two new joint ventures under the proposed deal.

The first of these JVs will own and operate Shell's existing oil products, distribution and retailing businesses in 14 African countries, most notably in Egypt, Morocco, Kenya, Uganda and Madagascar.

The second JV will own and operate Shell's existing lubricants blending plants in seven countries. The move is in line with Shell’s policy of divesting its non-core assets. It sold US$7 billion of non-core assets in 2010. While Shell was divesting in Africa, BP was investing in India via a strategic oil & gas partnership with Reliance Industries.

Both companies will form a 50:50 joint venture for sourcing and marketing hydrocarbons in India. The agreement will give BP a 30% stake in 23 oil and gas blocks owned by Reliance including 19 off the east coast of India. Market feedback suggests the deal is heavily weighted towards gas rather than the crude stuff.

In return for the stake, BP will invest US$7.2 billion in the venture and a further US$1.8 billion in future performance-related investments. The combined capital costs are slated to be in the region of US$20 billon with local media already branding it as the largest foreign direct investment deal in India by a foreign company.

Switching focus to the Middle Eastern unrest, what is happening from Morocco to Bahrain is having a massive bearing on the instability premium factoring in to the price of crude. However, the impact of each country’s regional upheaval on the crude price is not uniform. I summarise it as follows based on the perceived oil endowment (or the lack of it) for each country:

• Morocco (negligible)
• Algeria (marginal)
• Egypt (marginal)
• Iran (difficult to gauge at the moment)
• Tunisia (negligible)
• Bahrain (marginal)
• Libya (substantial)

Of these, it is obvious to the wider market that what is happening in Libya is one of concern. More so as the unrest has become unruly and the future may well be uncertain as the OPEC member country accounts for around 2% of the daily global crude production.

Italian and French oil companies with historic ties to the region are among those most vulnerable, though having said so BP also has substantial assets there. Austria’s OMV and Norway’s Statoil are other notable operators in Libya. A bigger worry could be if Iran erupts in a similar unruly way. Given the international sanctions against Iran, oil majors are not as involved there as they are in Libya. However, the question Iran’s crude oil endowment and its impact on the oil markets is an entirely different matter.

Finally, the ICE Brent crude forward month futures contract stood at US$108.25 per barrel, up 5.6% in intraday trading last time checked. I feel there is at least US$10 worth of instability premium in there, although one city source reckons it could be as high as US$15. The "What if" side analysts (as I call them) are having a field day - having already moved their focus from Iran to Saudi Arabia.

© Gaurav Sharma 2011. Photo: Vintage Shell gasoline pump, Ghirardelli Square, San Francisco, California, USA © Gaurav Sharma, March 2010

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