The unconventional gas revolution is expanding globally, with regions outside North America aiming to replicate the shale gas boom. For energy-importing countries in the Middle East and North Africa (MENA), unconventional energy production is vital for economic growth and stability. Morocco, heavily reliant on foreign energy imports, exemplifies this situation.
Located on the northwest tip of Africa, Morocco depends on foreign sources for over 90% of its energy needs. In 2013, crude oil and coal purchases accounted for nearly 3% of the country’s GDP ($3 billion), with energy purchases making up 23% of total imports. Natural gas consumption is relatively low at around 42 billion cubic feet (bcf) per year but expected to rise as Morocco aims to reduce its energy import bill and transition to gas-fired power generation.
The government aims to meet growing gas demand by boosting domestic production. While this has been challenging, recent developments offer optimism. In late June, Circle Oil, an Irish exploration company, announced a successful exploration drill from its first gas well in the Lalla Mimouna basin, reporting a gas flow rate of 1.9 million cubic feet per day, exceeding expectations. Circle Oil is continuing exploration with a second well in the nearby Anasba ridge.
The shale gas drilling is the result of a three-year study in the Tadla Block, heavily promoted by the Kingdom’s Office National Des Hydrocarbures et Des Mines. This discovery comes amid increasing offshore gas exploration interest. However, onshore potential could be more lucrative. According to an EIA study, Morocco could hold up to 566 billion cubic meters of shale gas, about 6% of the MENA total. Algeria holds the largest shale gas reserves, with around 20 trillion cubic meters.
Auto industry success: Morocco is now Africa's largest exporter of cars
Read also: Tangier's Luxurious Villa Josephine
Morocco's Noor Solar Complex
Challenges and Opportunities
Despite initial success, Morocco faces challenges in realizing a shale gas boom. Unconventional gas production requires large quantities of water for hydraulic fracturing, a scarce resource in Morocco. The country lacks a history in oil and gas production, requiring costly infrastructure development and attracting capital investment, which has been fleeing the North African region since the Arab Spring.
The government faces difficulties in providing economic incentives for exploration efforts due to artificially low domestic gas prices, maintained as a subsidy for industrial and residential consumers. Despite subsidy phase-outs in 2014, electricity prices remain almost half the average household prices in the EU. Gas tariffs are significantly lower than the import price charged by Algeria, Morocco’s main gas supplier. Without a viable export infrastructure, energy companies are unlikely to invest billions of dollars without an adequate return.
Morocco's Energy Mix Chart
Security of Supply
Morocco faces rising electricity production needs with limited supply diversification. Domestic electricity demand has quadrupled in the past 20 years. Most power generation relies on costly diesel and coal imports, with limited natural gas and renewables. In 2014, the government announced an ambitious gas plan to increase natural gas’s role in power generation from 6% to 13% by 2025. This plan includes constructing a $1.4 billion LNG regasification plant in Jorf Lasfar.
Read also: Argan Oil for Hair
In addition to the regasification plant, the National Board for Electricity and Drinking Water (ONEE) plans to invest $800 million in a gas pipeline linking the plant and a storage facility to balance seasonal fluctuations. Two gas-fired power plants worth $245 million are expected to be online by 2021.
The long-term gas supply contract with Algeria’s Sonatrach will expire, opening Morocco to new gas options. The country will likely remain a key gas transit state but vulnerable to supply cuts due to regional instability. Diversifying imports and boosting domestic gas production would improve Morocco’s current account imbalances, ensure supply security, and boost energy investment.
Renewable Energy and LNG Development
With renewable energy plans and investments in traditional production methods, Morocco is making significant changes to its energy mix. The country is heavily dependent on energy imports, leading to capital spending and regulations to increase efficient energy use and attract private producers. As North Africa’s largest energy importer, Morocco relies on imported oil, petroleum products, coal, and gas.
The drop in global oil prices since late 2014 has allowed the government to reduce energy subsidies. Electricity consumption has increased due to economic expansion, a growing urban population, and a rural electrification scheme that connected over 37,000 villages since 1996. ONEE manages much of the production capacity and owns the transmission and distribution networks.
Private energy producers have increased capacity, with Jorf Lasfar Energy Company (JLEC) being the largest, operating under a 30-year electricity purchase agreement with ONEE. Another private carbon-fueled unit is under construction in Safi, scheduled for completion by 2018.
Read also: Architecture of Moroccan Synagogues
The 2010 Renewable Energy Law has galvanized the sector, allowing private production development. New regulations are planned to open electricity production by renewable sources for medium- and low-voltage users, making renewables projects accessible for smaller investors. Wind energy is also expected to contribute heavily, with wind farms in Tarfaya and Taza.
The government is working to establish its Gas Code to regulate the market and create an independent sector regulator. Diversification efforts will focus on increasing the use of liquefied natural gas (LNG) to support electricity production and for industrial and domestic sectors. This is part of Morocco’s LNG development strategy, including a €3.9 billion investment in infrastructure and the construction of an LNG terminal in Jorf Lasfar, expected to be operational by 2019.
Morocco is also looking to source hydrocarbons closer to home, attracting investment into exploration. Favorable fiscal conditions for exploration and untapped potential have attracted interest from small-scale oil and gas ventures and established giants.
Exploration into shale gas and oil has been ongoing since the late 1970s, and the country has the seventh-largest proven shale oil reserves in the world. However, development plans may be limited by current price trends and environmental concerns.
Morocco as an FDI Destination
Morocco's economic resilience, coupled with its strategic location, has positioned it as a competitive destination for Foreign Direct Investment (FDI). Despite the economic challenges in Europe and the Arab Spring, Morocco has maintained a stable economic environment, attracting increased FDI inflows from key trading partners.
Table: FDI Inflows into Morocco (2010)
| Trading Partner | Increase in FDI (%) |
|---|---|
| France | 49 |
| Spain | 76 |
| United Arab Emirates | 80 |
| Switzerland | 38 |
Morocco's strategic thinking and proactive policies, combined with its geographic advantages, make it a promising investment hub. With a growing middle class and a focus on diversifying its economy, Morocco is poised to make lucrative gains from refining its FDI strategy.
Amid the regional turmoil, Morocco’s plan should be to maintain its image of a safe haven with substantial but underdeveloped energy potential.
Popular articles:
tags: #Morocco
