Activity In Western Sahara Limited By Political Realities

BMI View: Growing prospectivity offshore Morocco has led to renewed interest in the waters of f Western Sahara, which although largely claimed by Rabat remain s a territory that is the subject of an international dispute. With the uncertainty over Western Sahara's political status unlikely to be cleared up any time soon , news that offshore exploration is advancing underscores the region ' s status as an underexplored exploration frontier. However , given the prevalent political uncertainties we believe that any efforts to seriously exploit offshore acreage will be constrained by above - ground risks.

As offshore activity heats up across Africa's north - west coast, Western Sahara is one of the few remaining areas that is yet to record an uptick in activity. The political status of Western Sahara is disputed, with Morocco having annexed two thirds of the country in 1989 and the remainder controlled by a government in exile . Final settlement is unlikely , with a long - delayed , UN - backed political referendum unlikely to materialise under present conditions . The political status of Western Sahara remains highly contentious and the UN - designated legal status , which defines Western Sahara as a Non-Self Governing Territory, complicates any effort to exploit the country's natural resources.

This is particularly true for Western international oil companies (IOCs). B etween 2004 and 2005, a number foreign companies - including Total - exited or halted activity following changes to the territory's legal status and pressure from non-government organisation ( NGO ) 's that demanded exploration in the Western Sahara be ceased.

However , reports indicate that Total may be taking a second look at Western Sahara, with reports the company had subcontracted BGP , a subsidiary of China National Petroleum Corporation ( CNPC) , to survey offshore prospects in the Anzarane block. Although Total's interest in the block expired in December 2012, the company would not comment on whether it had renewed its holdings. However, u nconfirmed reports from a NGO, Western Sahara Resource Watch, dating from November 2012, indicate the French IOC signed a deal with Morocco's ONHYM for one of three offshore blocks despite uncertain ty regarding the legal status under international law.

Indeed , a review of data available on ONHYM's website shows that a number of prospective onshore blocks are clearly demarcated , with no discernible indication that such blocks are in disputed Western Sahara. However, with activity intensifying across Morocc an waters, and promising potentially commercial prospects already identified, tapping Western Sahara 's resources would offer Rabat a way to ease the financial burden it must shoulder when claiming the territory as its own .

Total is not alone in possibly reassessing the region 's potential ; Kosmos Energy has identified its interest in the Cap Boujdour block as a highly prospective target with 'multiple independent play fairways' as among the ' remaining frontier exploration provinces offshore Africa' . The company's website s tates exploration drilling in the area could begin in late 2013, yet the presence of the block in Western Saharan waters could be problematic for the US - based independent.

Although ties between Rabat and other western governments mean that political pressure on oil companies entering the area will be limited , the UN's legal findings and pressure from civil society organisations will make it difficult to conduct business , and will thus pose downside risk to exploration. Indeed , with super major's like Chevron moving into Morocco's offshore areas , the re is the prospect of further investment in the underexplored region ( see 'Chevron's Moroccan Acquisition Underscores Frontier Potential' January 25 2013 ) . Yet , despite bu rgeoning interest that is reasonably expected to extend in to southern the waters of Western Sahara and its potential Atlantic Margin plays, we believe the political and reputation al risks associated with such acreage will make it difficult for robust exploration activity to take place.

Offshore Frontier Heats Up
Kosmos Offshore Acreage Morocco & Western Sahara
This article is tagged to:
Sector: Oil & Gas
Geography: Morocco

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