U.K. firms spearhead Morocco’s natural gas ambitions

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While Europe struggles to secure enough natural gas supplies for its factories, businesses and homes, a neighboring country is aiming to increase its own gas production.

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As Morocco’s domestic demand for gas grows, the country aims to expand its production while reducing its reliance on coal energy, which gives exploration companies tax breaks.

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Several UK firms currently have projects in place to develop the African nation’s gas wealth. Potentially, some of that production may be able to be supplied to the old continent via the Gazoduk Maghreb-Europe pipeline, which crosses Morocco and the Mediterranean Sea to Spain.

Today, Morocco is far from being a major player in the gas market. It consumes about 30 billion standard cubic feet of gas per year, compared to Spain’s 1 trillion scf. In addition, it has to import most of the gas it uses, as current production is small.

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About 70% of domestic production is produced by SDX Energy plc SDX,
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At present it is the only international company producing gas in the country.

But Peer Sound Energy Plc SOU, listed in London,
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Rath Ltd. and Predator Oil & Gas Holdings Plc PRD,
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There are plans to dramatically increase Morocco’s gas production, meet domestic demand and potentially export the surplus to Europe. US oil major ConocoPhillips COP,
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Has recently landed in Morocco to explore hydrocarbons.

The state is offering very favorable financial terms for companies, including a 10-year tax holiday, and is expected to grow its domestic market, driven by industrial energy consumption. In addition, it aims to replace coal-fired power generation with gas plants to reduce carbon emissions.

In the summer of 2021, the Moroccan government unveiled a national road map for the development of the country’s gas market, which assumes domestic demand will triple by 2040.

“Natural gas, being a clean fossil energy, is well suited to be used as a lever for Morocco’s energy transition,” the government said. Although it still releases pollutants, natural gas results in fewer carbon emissions than coal.

As part of this roadmap, the government introduced new regulation for the downstream gas sector and announced plans to deploy additional gas transport and storage infrastructure.

“Morocco is energy-hungry, power-hungry. Their industrial needs are growing dramatically,” Chariot’s chief executive officer Adonis Poroulis told Dow Jones Newswire.

Rath owns the Anchois gas field, which is located on the west coast of Morocco. The deposit was discovered by Repsol SA REP,
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in 2009. Now, with gas prices rising substantially, Rath is working to turn Anchois into the nation’s first offshore gas development.

On Monday, the company announced that a valuation well in Ancoise had confirmed the presence of “significant gas accumulation,” including new discoveries, which caused the company’s shares to jump 44%.

Rath has said it plans to develop Anchoice to produce 25 billion scf of gas a year by the end of 2024. The project will require capital expenditures of approximately $300 million, and the company has already agreed to a 20-year sales contract. 15 billion for SCF annually.

“We can sell products locally, either for power or for industry. And any additional gas we can connect to the GME pipeline and ship it down the Mediterranean to Spain,” says Mr. Poroulis.

The Gazoduk Maghreb-Europe pipeline can transport more than 400 billion SCF of gas a year. It has been used by Spain to import gas from Algeria since 1996. In 2020, 139 billion scf of gas reached the Spanish grid through it, enough to meet 38% of the country’s total Algerian imports and 11% of Spanish consumption.

However, in the autumn of 2021, after breaking diplomatic relations with Morocco, Algeria decided to stop sending gas to Spain via the GME pipeline. The pipeline has been lying unused since 1 November, but this could change in the future if Morocco develops a substantial gas field.

“The fact that Anchois sits very close to Spain and Europe, and that you already have an existing pipeline that goes down the Mediterranean to Spain, is very beneficial to us,” says Mr. Poroulis.

Sound Energy also intends to capitalize on that existing infrastructure to bring gas from its Tendra project in the east of the country, where the population is sparse, to customers in the northwest.

First, Sonic plans to develop a small liquefied-natural-gas project to truck the fuel by road, thereby unlocking cash generation. The company has already signed a sale agreement with Afrikaia Gaz SA for up to SCF 3.5 billion of LNG.

The second phase of the Tendrara development is larger and involves the construction of a gas pipeline with a capacity of 24 billion SCF per year to connect the wells with the GME pipeline, which runs 120 kilometers to the north. This phase of the project is estimated to cost around $250 million.

Back in November, Sonic shares surged when it announced a 10-year sales contract with Morocco’s national electricity company for 12 billion scf of gas a year.

“What we are seeing in Tendrara is the mainstay of the energy transition that Morocco is promoting at the moment,” Sound’s chairman, Graham Lyon, told Dow Jones Newswires.

The company is now focusing on arriving at the final investment decision for the micro LNG project at the earliest. “I expect gas to be produced at the end of 2023,” Mr Leon said.

Sound is also working to complete a financial package for the second phase of the project this year. This could allow production to begin by the end of 2024, with it flowing through the GME pipeline.

“We are very excited to be working in Morocco. There is a huge demand and there is a huge need for energy generation,” said Mr. Leon.

Write to Jaime Llinares Taboada at [email protected]

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