BMI View: Plains Exploration and Production ' s recent deal to assume the operatorship of the Mazagan permit generates additional interest in Morocco ' s appealing offshore acreage. Indeed, this is the latest in a series of deals over the last year to draw additional foreign investment into the country ' s nascent energy sector. However, further interest in the country ' s underexplored potential is needed, as reserves dwindle and production remains stagnant.
Plains Exploration and Production and Pura Vida Energy have signed an agreement which will see the former take a 54% stake in the Mazagan offshore permit and assume operatorship at a cost US$15mn. Plains will then fully fund up to US$215mn in exploration activities on the block, to include the drilling of two wells, one of which will target the Toubkal prospect. The country ' s national oil company (NOC), the Office National des Hydrocarbures et de Mines (ONHYM) will retain the remaining 25% stake .
Like most of Morocco ' s offshore territory, t he Mazagan permit, located 100km off the coast in the Essaouira Basin, is highly prospective yet relatively under-explored. Indeed, an independent assessment has determined that Mazagan permit h olds mean prospective net resources of 5.3bn barrels (bbl) of oil , and the Toubkal prospect alone (which Plains will drill), has a mean estimate of over 1.5mn bbl. Furthermore, according to Pura Vida, Toubkal is seen as an analogue of the billion barrel Jubilee field in Ghana, which is to-date the largest West African oil discovery in the last 10 years.
|Highly Prospective Offshore Draws Increased Investment|
|The Mazagan Offshore Area, Morocco|
The Essaouira Basin, like Morocco ' s offshore territory more broadly, has received a significant amount of attention in recent months. Indeed, companies including Genel Energy , Chariot Oil & Gas , Fastnet Oil & Gas , Longreach Oil , and Gulfsands Petroleum have all made acquisitions, as well as commitments to conduct drilling and exploration activit y in 2013 and 2014. The farm-in by Plains represents the company ' s first significant non-North American acreage holding, underscoring the potential of this highly frontier market.
A main driver of this activity is the pursuit northward of the extension of West Africa ' s regional trend, supported by Woodside Petroleum ' s discoveries in Mauritania over the last decade, as well as significant successes in Ghana and Sierra Leone. Companies like Pura Vida, and now Plains, are optimistic that similar potential exists offshore Morocco.
For its part, the September 2012 independent assessment conducted by DeGolyer & MacNaughton broke down the potential of the Essaouira Basin as follows :
|*Pg = mean probability of geologic success; Source: DeGolyer & MacNaughton Independent Resource Assessment, September 2012|
|LOWER CRETACEOUS TOETHRUST TREND|
|LOWER CRETACEOUS INVERSION ANTICLINE TREND|
An Attractive Frontier Market Badly In Need Of New Production
We have previously discussed the attractiveness of Morocco ' s fiscal terms and supportive regulatory framework, particularly when compared to those of its neighbour Algeria ( see ' Chariot To Harness Morocco ' s Underexplored Offshore Potential, ' October 26, 2012 and ' Genel Digs Again Into Active But Unproven Offshore, ' November 22, 2012 ) . Indeed, Morocco ' s taxation of oil production includes a 30% corporate tax, a 7-10% royalty on oil production and a 3.5-5% royalty on gas production, as well as a 10-year corporate tax holiday on new discoveries. Comparatively, in Algeria the state may take up to 92% in oil and gas revenue claims.
However, t he country ' s oil production to-date has been lacklustre. Oil production remained in a tight band of 5,200 to 5,500 barrels per day (b/d) between 2001 and 2011. Similarly, proven oil reserves have fallen from 2mn bbl in the earlier half of the decade to a current level of 1mn bbl. Oil consumption, on the other hand, has risen significantly over the same time period, placing a growing import burden on the country.
|Dwindling Reserves, Insufficient Production|
|Morocco's Proven Oil Reserves, Production, And Consumption|