The investment spotlight is set to turn back on Morocco’s potential offshore bounty in the coming months as a busy well schedule gets underway.
Cairn Energy’s (LON:CNE) signing of a rig contract is another signal of the growing momentum in this emerging oil frontier.
It is estimated that Morocco’s vast exploration area, which spans almost twice the area licensed in the Gulf of Mexico, could become one of the world’s top oil and gas provinces.
This theory gained considerable weight through 2012 as many oil firms scrambled to gain exploration projects there.
Those involved in the region range from the very large to the small, with Chevron and Total among the majors, as well as ‘mid caps’ such as Cairn (LON:CNE), Genel (LON:GENL) and Kosmos.
Meanwhile, several early moving juniors still retain valuable interests following a swathe of farm-out deals last year: the list includes Chariot (LON:CHAR), Tangiers (LON:TRL), Pura Vida (ASX:PVD), Fastnet (LON:FAST), Serica (LON:SQZ), San Leon (LON:SLE) and Longreach (CVE:LOI).
Cairn said it expects drilling will start early in the second half with the Foum Draa well, which will test a 142mln barrel target.
This will set in motion a 10-well campaign which could firmly establish Morocco’s offshore oil potential.
And for this reason, City broker Jeffries says the country offers investors an attractive frontier exploration opportunity which will have a significant number of catalysts.
“Morocco offshore emerged as one of the frontier exploration land grab hot spots in 2012 with numerous farm-ins, corporate acquisitions and new licence awards,” Jefferies analyst Laura Loppacher said in a note.
“This is expected to lead to an active drill programme of 10+ wells in 2H13/2014. We believe new technologies and play ideas could unlock significant exploration upside in this Atlantic Margin region which has been largely overlooked for the past decade.”
Cairn is carrying the first US$60mln of the well costs for the Foum Draa programme following last year’s farm-in deal which gave it a 50% stake in the area – the other partners are San Leon with 14.17%, Serica with 8.33% and Longreach with 2.5% (the state oil firm retains the remaining 25%).
The next well, Juby Maritime, is a joint venture between Cairn and Genel Energy – again the state has 25%. It is an exploration/appraisal project which is believed could host a combined 250mln barrels of oil.
Meanwhile, Kosmos could have joined the drill campaign by the end of the year, with the start of its programme on its northern acreage that will include at least two wells. This includes one in the Foum Assaka area, where it is partnered with AIM quoted Fastnet.
Kosmos also has plans for at least one well in the Cap Boujdour area in its southern acreage.
Pura Vida, and JV partner Plains Exploration, are AIMing to drill the Toubkal prospect in the first well in a two well programme starting next year.
The Galp-operated Tarfaya project will see another junior explorer in the campaign. Tangiers sealed the farm-out to Galp last year and as a result the first US$33.5mln of its well costs will be carried.
Next year will also see Genel drilling more wells - including one on the Sidi Moussa area, alongside San Leon, Serica and Longreach.
Any material successes in the initial campaigns are likely to lead to more drilling because of the sheer size of the licensed area, according to Jefferies.
“While there [are] currently only 10 wells in the firm drilling programme, in the event of success, there is very large running room possible given the acreage positions,” Loppacher.
“The average block size of blocks that will have a well drilled in 2013/2014 is nearly 10,000 square kilometres, or 2.4mln acres, which is equivalent to over 400 standard US Gulf of Mexico blocks.”
Lastly, Loppacher highlights that economically Morocco is an attractive destination for oil investment thanks to the government’s accommodating approach so far.
“Morocco has offered some of the most attractive terms available globally to incentivise investment.”