Morocco: The Berber Oil Barons?
by Cyril Widdershoven

Last month’s discovery of one of the largest oil fields uncovered in this decade in Morocco, estimated to contain an equivalent of 20 billion barrels, brings renewed attention to this North African country. The find could be worth up to $800 million per year. Production of the oil deposit could significantly alter Morocco’s agrarian-based economy and foster stronger ties with developed countries, including Europe and the United States. This startling discovery could dramatically alter the North African country’s economy. If it proves to be true, it will additionally save Morocco a great deal in energy import bills.

The oil discovery at Talsinnt, 500 miles south-east of Rabat, appears to be significant. According to Lone Star Energy, the US-owned  company that made the discovery, the Talsinnt area has reserves of 1.5bn – 2 bn barrels of oil-equivalent (BOE), while Morocco as a whole has potential reserves of 12bn-15bn BOE. The Moroccan government already has stated that the nation’s reserves can fill domestic requirements for the next century. The country now spends between $1 billion and $1.5 billion per year on energy imports, equivalent to 10% of all imports. Crude oil import costs soared by 151.3% to $727 million in the first half of this year. Production at Talsinnt alone, projected to be worth between $500-800 million per year, will make a big difference to the national balance sheet.

So will the inward investment, into Talsinnt and other producing areas, that the discovery is likely to spark. Energy minister Youssef Tahiri said that the investment in developing Talsinnt alone will jump form the initial $160 million to $1 billion. The government is now actively searching for investors, with already 15 agreements signed, offering a variety of financial and tax incentives, for oil exploration along the Mediterranean coast and in the southern desert. Exploratory drilling will also begin soon of Casablanca and Essaouira on the Atlantic coast.

As has been reported by several consultants and analysts, the oil sector needs more investment, especially from multinational oil companies. This will encourage stronger ties between Morocco. Europe and the United States with very positive results in the end for the Berber country.

Oil sector development also attracts foreign investment, another boost for the Moroccan economy. Few oil companies are until now involved in the domestic oil sector, and the country only has two oil refineries. In order to develop a field with the present potential, Rabat must garner additional investment for drilling, extraction and transport.

The major obstacles for development and investment will be the quantity, quality and location of the reserves. The government claim has still to be verified, and there are some reasons to doubt its veracity. For one, sedimentary basins in the country have been explored before, and no significant oil reserves were found. Second, the estimation of 20 billion barrels includes related hydrocarbons as well as potential crude reserves.

Regional constellations also may hamper the profitability of the endeavor. Morocco’s relations with Algeria and its claim on the Western Sahara territory will influence possibilities negatively.

If the reserves prove to be of high quality or easily recoverable, then the expansion of prospecting in the region could increase regional tensions directly. Although the Talsinnt field is 125 miles from the Algerian-Moroccan border, further exploration could heighten tension between the rivals. Another drawback is the obscure Skidmore Energy Inc. Skidmore is the parent company of Lonestar. Earlier this year, Lonestar agreed to invest $50 million in exploration and drilling, but the Texas based company may not have the promised money and could have rushed the announcement to attract hard needed cash. According to the Texas State Comptrollers Office, Skidmore is in danger of forfeiting its corporation privileges because it hasn’t filed its 2000 corporate franchise tax.

At the moment the future is looking bright, but wrong statements could backfire and put both parties in big trouble. Lonestar’s position is disputable and unclear, Morocco’s economy can not handle a negative result of its big publicity stunt. Its economy will not be able to handle certain developments that will for sure backfire if proven untrue. King Mohammed V will have to count on his good fortune to survive a possible crisis, oil could mean to be a very greasy substance to build an empire on.

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