Introduction

Map of Morocco. (Source: EIA)

Morocco, located in Northwest Africa, gained its independence from France in 1956. Morocco is a constitutional monarchy, in which, King Mohammed VI possesses more authority than either the judiciary or the legislature. Since King Mohammed VI ascended the throne in July 1999, he has actively pursued various economic reforms including the privatization of state-run businesses.

In 2005, Morocco experienced real gross domestic product (GDP) growth of 2.0 percent, a decrease from the 3.7 percent GDP growth achieved in 2004. Key factors that instigated the slowdown in GDP growth included Morocco’s worst drought in 60 years, which cut agricultural output in the county by nearly 50 percent. In addition, the expiry of the Multi-Fiber Agreement in 2005 allowed for Chinese products to flood Morocco’s major European textile export market, which caused a 16 percent drop in Moroccan exports to the trade area. Finally, high oil prices negatively affected the Moroccan economy as the country’s energy import bill increased. However, 2006 forecast GDP growth is expected to increase to 4.6 percent due to the Moroccan government’s firm commitment to enforce economic reforms, which include working to decrease the country’s economic dependency on the volatile agricultural sector. Also, China made a voluntary decision to restrict its imports to the European Union until 2007.

Both the International Monetary Fund (IMF) and the World Bank have provided valuable funding to Morocco as the county continues to seek economic liberalization. In June 2005, the World Bank endorsed a $150-million loan to Morocco that the government will use to provide housing for the urban poor. The World Bank also approved a $200-million loan in December 2005 that the government will use to make several financial reforms. In the IMF’s Article VI report (released in 2005) on Morocco, the IMF noted the need for Morocco to expand output of the non-agricultural sector, but praised the country’s ability to maintain stable prices, a stable current account and stable foreign reserves. In addition, Morocco made a commitment to improve the quality and transparency of its economic statistics by joining the IMF’s Special Data Dissemination Standards (SDDS).

On June 15, 2004, the U.S. and Morocco signed a Free Trade Agreement (FTA). The FTA immediately eliminated tariffs on 95 percent of bilateral trade, with the remaining tariffs to be eliminated over the next nine years. The U.S.-Morocco FTA is the first in Africa and the first under the Middle East Free Trade Area initiative. Morocco has also signed several agreements with the European Union on economic cooperation, and one establishing a free trade zone for industrial goods over a 12-year transition period. In addition, Morocco is a partner country of the European Free Trade Agreement.

Territorial Disputes. As of March 2006, the decades-old dispute between Morocco and the Polisario Liberation Front over the Western Sahara region continues. A referendum on the future of the territory, a former Spanish colony, was scheduled for January 1992 under U.N. auspices; however, the referendum has yet to be held. A U.N.-brokered cease fire and settlement plan went into effect on September 6, 1991 although a political settlement is still absent. Recently, there has been increased interest in oil exploration contracts in areas offshore Western Sahara. The legality of these activities will likely remain in question until the status of Western Sahara is permanently settled.

Oil and Natural Gas

According to January 2006 estimates by the Oil and Gas Journal (OGJ), Morocco has proven oil reserves of 1.07 million barrels and natural gas reserves of 60 billion cubic feet (Bcf). Morocco may have additional hydrocarbon reserves, as many of the country's sedimentary basins have not yet been explored.

The Moroccan Office of Hydrocarbons and Mining (ONHYM) has become optimistic about finding additional reserves - particularly offshore - following discoveries in neighboring Mauritania. At the end of 2005, 19 foreign companies were operating in Morocco, with an estimated total investment of $56 million per year. In May 2004, China Offshore Oil Corporation (CNOOC) received a license to drill near Agadir. In April 2004, Norway's Norsk Hydro signed a 12-month exploration contract for the Safi Offshore Northwest zone, while Denmark's Maersk signed an eight-year agreement for eight blocks near Tarfaya. In March 2004, Calgary-based Stratic Energy committed to a three-year exploration program in two onshore blocks in northwest Morocco. The two concessions cover approximately 1,544 square miles. Other foreign firms engaged in exploration include Petronas, Cooper Energy NL, Shell, Total, and Tullow Oil.

Morocco produces small volumes of oil and natural gas from the Essaouira Basin and small amounts of natural gas from the Gharb Basin. Consequently, Morocco is the largest energy importer in northern Africa. The country’s total yearly costs for energy imports range from $1- $1.5 billion. However, high oil prices in 2005 increased import costs to approximately $2 billion for the year. In 2003, the Moroccan government announced that foreign companies could import oil without paying import tariffs. This followed a 2000 decision, in which Morocco modified its hydrocarbons law in order to offer a 10-year tax break to offshore oil production firms, and to reduce the government's stake in future oil concessions to a maximum of 25 percent. The entire energy sector is due to be liberalized by 2007.

Recent activity in Western Sahara, which is believed to contain viable hydrocarbon reserves, has been controversial. In 2001, Morocco granted exploration contracts to Total and Kerr-McGee, angering Premier Oil and Sterling Energy, which previously had obtained licenses from the Polisario government. In 2005, the government-in-exile of the Western Sahara invited foreign companies to bid on 12 contracts for offshore exploration, with hopes of awarding production sharing contracts by the end of 2005. Both Premier Oil and Sterling Energy received conditional exploration rights. Foreign companies operating under Moroccan concession in Western Sahara have become targets of international protest campaigns. These companies include Total, Wessex Exploration, Svitzer (the British subsidiary of the Dutch company Fugro), Wales' Robertson Research International and Norway's TGS Nopec. All have ended their operations in Western Sahara, with the exception of Kerr-McGee. As of November 2005, the company was the last to be drilling in Western Sahara, although the Polisario government has pressured it to pull out.

Morocco is a transit center for Algerian gas exports to Spain and Portugal. These are transported across the Strait of Gibraltar via the 300-350 Bcf/year Maghreb-Europe Gas (MEG) pipeline. Natural gas from the MEG pipeline will be used to power Morocco's power project in Al Wahda.

Refining. Morocco has two refineries that are owned by Saudi-company Corral Holdings Societe Marocaine d’Industrie de Raffinage (Samir). The refineries are located at Mohammedia and Sidi Kacem and have a combined capacity of 154,901 bbl/d. In 2004, the Mohammedia plant returned to near full-capacity output levels, following the completion of repairs needed after a severe flood and massive fire in November 2002. Because of the completed repairs, refinery output surged 49 percent in 2004. The Mohammedia plant currently produces 80 – 90 percent of the country's refined petroleum products. In June 2005, Samir awarded a $628 million contract to modernize the Mohammedia refinery to a consortium led by Italy's Snamprogetti SpA and Turkey's Tekefen Company. Morocco hopes the refinery upgrade will prepare the refinery for competing with foreign producers when the market is liberalized in 2009. The upgrade is expected to be complete in 2008.

Coal and Electricity

Morocco's electrical sector traditionally has been controlled by the state-owned Office National de l'Electricité (ONE), which the government reorganized in 1995 in order to regain profitability. Due to a growing population and economic development, Morocco's electricity demand is increasing rapidly. Power shortages and a desire to control public spending have led the Moroccan government to make more use of the private sector to meet the country's power needs. The state's share of electricity generation likely will decline to 40 percent by 2020. However, ONE will continue to be solely responsible for distribution and transmission of electricity in Morocco.

In 2003, Morocco had an installed generating capacity of 4.8 gigawatts (GW). The country's two largest electricity power stations at Mohammedia and Jorf Lasfar are both coal fired. Most of the coal is imported from South Africa, although Morocco purchased Polish coal for the Jorf Lasfar power plant in April 2005. Morocco produces a small and declining amount of coal from a mine at Jerada. Jorf Lasfar became Morocco's first privately operated power station in 1997, when it was taken over by a U.S.-Swiss consortium. The consortium expanded the plant’s capacity to 1,400 megawatts (MW) in 2001.

The expansion at Jorf Lasfar is consistent with a wider campaign to increase generating capacity in Morocco. In 2005, as part of the Moroccan government's plan, a $500 million, 350 - 400-MW combined cycle power plant began operation in Tahaddart. The plant is owned by ONE (48 percent), Spanish energy firm Endesa (32 percent) and German energy firm Siemens (20 percent). In addition to the Tahaddart plant, ONE awarded Endesa the development rights of a two-unit, 800-MW gas-fired power station in the Sidi Kacem Province, with a completion date set for 2008. ONE is also considering another pumped storage plant in the Azilal region south of Rabat.

Renewable Energy. Renewable energy plays a key role in ONE's $3.4 billion energy development plan, announced in January 2004. The goal is to provide 80 percent of rural areas with electricity by 2008, while increasing the share of renewable energy from 0.24 percent in 2003 to 10 percent in 2011. The plan calls for two new wind projects, as well as a 200 - 250-MW thermo-solar facility in d’Ain Beni Mathar, of which 30 MW will be generated from solar power. One of the wind power facilities (60 MW) will be located in Essaouira, while the other (140 MW) will be located near Tangiers. The Essaouira facility is scheduled to come on-line in 2007.

Morocco has additional renewable resources that could be developed, which the countries four perennial rivers and many dams with hydroelectric potential. In May 2005, ONE selected Temsol for a $27.6 million project to supply solar power to 37,000 rural homes by 2007. Similar contracts were awarded in May 2002 to a consortium led by Total Energie and in January 2004 to Apex-BP. Currently, only 55 percent of outlying villages have access to electricity.

Nuclear Energy. Morocco has expressed interest in nuclear power for desalination and other purposes. In September 2001, the government signed an agreement with the United States establishing the legal basis for constructing a 2-megawatt (MW) research reactor. Morocco signed an agreement with the U.S. company, General Atomics, to construct the research reactor east of Rabat.

Regional Integration. Morocco is gradually integrating its electrical grid with those of its neighbors in Africa and Europe. Maghreb integration has been spearheaded by the Maghreb Electricity Committee, with physical integration initiatives that began in the 1990s. In May 2003, Moroccan representatives met with the Energy ministers from other European and Mediterranean countries to discuss the feasibility of electricity market integration. Tunisia, Algeria, and Morocco acknowledged that they would like to eventually link their electricity systems to the E.U.’s single energy market. In December 2005, Morocco, Algeria, Tunisia and the European Union signed a funding agreement that will pay for costs related to studying the electricity market within the three countries and how they might integrate into the European electricity market.

Further Reading

• EIA: Country Information on Morocco
• MBendi -- Morocco Oil Industry Profile
• U.S. State Department Background Notes on Morocco