Black gold or another black eye in Morocco? |
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The ghost of the Talsinnt oil find in the Atlas Mountains has returned to haunt Morocco, highlighting the kingdom’s dependence on oil imports and concerns of a lack of transparency in its economy.
Last month, a politically charged case was filed in a Texas court by a US oil company, Skidmore Energy, which believes it was illegally edged out of Lone Star, a venture that claimed drilling success in the Atlas Mountains in 2000. Among a long list of defendants were Moulay Abdullah Alaoui, a first cousin to King Mohammed VI, Mohammed Benslimane, an adviser to the monarch, the Saudi business group Dallah al-Baraka and its founder, Saleh Abdullah Kamel, and Bandar bin Sultan, the Saudi ambassador to the US.
Skidmore and its former friends in the Lone Star venture, now renamed MPE, accuse each other of failing to honor financial commitments. But more interesting is the backdrop that Skidmore’s deposition paints. Mohammed VI is depicted as close to the affair. Not only are people near to the king defendants, but Skidmore chiefs said they met with the monarch twice “to confirm his approval of the arrangement.” When things turned sour the US ambassador to Morocco hand-delivered a note to the king from the company. Skidmore alleges the Moroccan defendants explained they were working for Mohammed VI in establishing a local shareholder in Lone Star, named Mediholding, which is described by MPE as “a group of influential individuals who agreed to utilize their contacts in Moroccan industry and government on behalf of the company.”
Another aspect of the background sketched by Skidmore is close control of the Moroccan oil industry by Saudi interests. The court papers say Saudi interests have “taken over the pipelines, refinery and related services and financing of hydrocarbon production in Morocco and, through their conspiracy against Skidmore and Geoscience, have taken control over the reserves of Morocco.”
The tale of intrigue seeking to link Saudi Aramco, Dallah al-Baraka and the Faisal Islamic Bank in a plot to “perpetuate US dependence on Saudi resources” is worthy of Hollywood. The man brought in to sort the mess for MPE is Shezi Nackvi, who works for a Dallah al-Baraka subsidiary in London. He deflates any such claims, saying he’d happily give MPE to anyone who would pay the $30 million lost in the venture. MPE denies any direct connection between Lone Star and Dallah al-Baraka or its chairman.
Mention of Osama bin Laden in the court papers may strike a chord in Texas, and the references to the monarchy or Saudi influence over Rabat are apparently intended to create embarrassment in Morocco. The control of Moroccan refining by the Saudi Corral group is already controversial. Corral won the privatization tender for local refiner Samir in 1997 and, along with it, the exclusive right to refine products until 2008. As an executive of French oil company Total said: “It is a refining monopoly. There’s no importation of refined products because of high import taxes. We have to buy from Samir: they’re the exclusive supplier.”
All this is awkward for Rabat as it struggles to convince Europe, the US and financial institutions that it is striving for more transparency. But this is not the first time Talsinnt has embarrassed the monarchy.
In August 2000, the then-recently enthroned Mohammed VI told a youth rally that drilling on the Talsinnt license area by Lone Star had revealed the presence of billions of barrels of oil. The kingdom is entirely dependent on imports for its oil – some 160,000 barrels a day and growing – leaving its balance of payments vulnerable to the most volatile of commodity markets. In 1998, Morocco paid 5.4 billion dirhams (around $540 million) for crude imports, and by 2000 the sum was 14.7 billion dirhams. In this context, the announcement was exciting, and soon there was talk of Talsinnt production alone being worth $500 million - $800 million a year.
The numbers bandied about for reserves were vast – 20 billion barrels of oil equivalent (boe) in crude and natural gas. Three years on, the assessments are much more humbling. The US Department of Energy remarks of the 20 billion estimate: “This was soon lowered to 1 billion - 2 billion barrels, then to 100 million barrels. Many oil analysts are skeptical that Talsinnt contains even this much recoverable oil and gas, and so far, Lone Star’s well … only has proven reserves of 10 million barrels or less.”
MPE plans an assessment of reserves by mid-2004, but says Skidmore “grossly exaggerated” its own estimates, basing them on unconventional technology. Skidmore’s founder, Michael Gustin, says the company in fact only claimed 50 million - 65 million boe of recoverable reserves for the discovery well, although the Moroccan state oil company offered a later estimate of 100 million. The variance between the figures results from confusion between potential reserves and recoverable reserves for different areas, by those not versed in oil industry jargon, he added. Whatever the cause, the king had egg on his face.
Rabat has done a good job in recent years of attracting international oil companies to explore off its coast. Some 40 offshore exploration licenses have been signed and Shell and Vanco both have plans to drill in the coming months. The new interest is in part due to attractive fiscal terms and in part because higher oil prices and improved technology have drawn oil companies to previously inaccessible areas. The west coast of Africa has gained from drilling activity reaching up through the Gulf of Guinea to northern Morocco. Several promising finds have been made off Mauritania, which may become an oil producer in 2005 or 2006.
Between Morocco and Mauritania lies the Western Sahara, occupied by Morocco since 1975, and it may well be there that the best prospects for oil exist. This has increased tensions between Morocco and Spain as they bicker over territorial rights in waters around the Canary Islands. It has also brought the Western Sahara dispute back into the limelight. The conflict had prevented work being done for nearly three decades, but in 2001 a combination of increased interest in Mauritania, high oil prices and a political desire by Rabat to secure indirect international recognition of its control of the Western Sahara pushed it into granting licenses to France’s TotalFinaElf and the US company Kerr-McGee. The licenses permit the companies to do reconnaissance work off the Western Sahara coast. Kerr-McGee is currently studying seismic data it has gathered.
A UN legal opinion ruled that resource exploitation in the Western Sahara must be to the benefit of its people. If the oil companies and Rabat find and begin exploiting oil reserves, the row would be enormous and inhibit a US-backed initiative to settle the broader Western Sahara issue. However, for Morocco, with its fragile economy, the discovery of significant quantities of oil would be financially and politically important. But as the Talsinnt and Western Saharan licenses show, the quest for oil may take a high toll in political embarrassment and potential diplomatic problems.
Toby Shelley, a journalist, is preparing a book on the Western Sahara. He wrote this commentary for THE DAILY STAR
© The Daily Star 2003
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