Industry Trend Analysis - Activity Uptick To Pave Way To Commercialisation - OCT 2017

BMI View: Growing exploratory activity in Morocco highlights the expanding potential of gas resources in the North African country. Independent operators will look to progress positive exploratory results into commercialisation of gas volumes .

Moroccan Prospects Growing

While it has little in the way of extensive hydrocarbon reserves, we have seen increasing interest by a wide variety of players due to an attractive above-ground environment (Morocco scores above the global average in our Country Risk Index) as well as its geological potential. Specifically, we note that Morocco's attractive fiscal framework - more favourable than neighbouring Algeria's burdensome tax requirements - as well as the country's relative economic and political stability is likely to be a driver bolstering drilling activity. Similarly, the success seen on Morocco's conjugate geological margin - with oil and gas already being produced on the opposing margin of Canada's east coast - is also likely to buoy hopes for Morocco's below ground potential.

We note particular momentum to be driven by Sound Energy and SDX E nergy , which have both expanded activity in the country over the last few quarters. In particular, the recent acquisition of the Gharb Centre license in the north of the country by SDX Energy will connect existing acreage and facilitate a greater understanding of the resource base, which is likely to translate into an increase in exploratory and appraisal activity.

Recent Exploration Activity

  • Sound Energy, one of the most prolific companies operating within the country, has made significant progress at its Tendrara and Sidi Moktar licenses. At the Tendrara license in the north-east of the country, the company is currently evaluating test results from its latest well (TE-8) which has already been confirmed to have encountered gas. Over the remainder of 2017, the company plans to re-enter the TE-1 well to further delineate the discovery. In Sound's other Moroccan license in the south of the country, Sidi Moktar, reworking of the Koba-1 and Kamar-1 wells will take place over the middle of 2017.

  • Over the longer term, Sound aims to commercialise both the Tendrara and Sidi Moktar assets. The Tendrara license will target connection to the Gas Maghreb Europe Pipeline, which currently links several Moroccan power stations, albeit which currently rely on Algerian imported gas. The Sidi Moktar license will target domestic phosphate plants, located close to the site, where growing demand for gas is expected.

  • SDX Energy a purely North Africa focussed independent, has accelerated and expanded activities in Morocco over 2017. SDX own three licenses in the north of the country including the Sebou, Lalla Minouna and the most recently acquired Gharb centre. The Sebou concession was acquired by SDX in January 2017 as part of the acquisition of Circle Oil , and currently produces from several resource bases, supplying approximately 6mn cubic feet/day to the nearby Kenitra Industrial Zone.

  • Over the second half of the year, SDX plan to embark on an extensive drilling campaign. Five wells will be drilled in the Sebou concession - three development and two exploration, with aims to increase gas volumes to existing customers and supply volumes to new customers. The company will also drill two exploration prospects in H2 2017 within the Lalla Minouna asset.

  • Over the longer term, as part of the contract regarding the most recent acquisition of the Gharb Centre license acquired in June 2017, the company will drill a minimum of two wells to 2021.

Newly Connected License Acreage
SDX Energy's Northern Moroccan Licenses
Source: SDX, BMI.