Following pressure from the UN and pro-Sahrawi activists, most serious oil companies pulled out of Moroccan-occupied Western Sahara. But now, a new group of fortune hunters is eying great financial opportunities in the probably oil-rich territory, ignoring international law. Investors from Ireland, Saudi Arabia, South Africa, the US and Sweden hide behind a jungle of interwoven small companies.
Published 10 June 2007
9 June 2007
Moroccan authorities currently have granted two oil exploration licences on the disputed territory of Western Sahara, despite a legal notice from the UN in 2002 questioning the legality of such exploration and concluding that further oil exploitation in all circumstances would be illegal as long as Western Sahara remains occupied.
Offshore, most exploring companies gave up their Western Sahara activities a few years ago, following the conclusion that their legal base was questionable. But TGS-Nopec and Kerr-McGee nevertheless managed to produce detailed maps on potential oil deposits off the coast of Western Sahara.
These data and their processing have now been sold to the US-based Kosmos Energy for around US$ 2 million. Kosmos Energy on 3 May 2006 signed an agreement with the Moroccan government, assuming operatorship of the Boujdour offshore blocks 1-23 and last month, the company is_is_published its plans for its Boujdour concession, shocking pro-Sahrawi activists with an announcement it was to install a first-ever exploration well offshore Western Sahara in 2009.
The geological and seismic mapping of the Boujdour blocks had revealed the best possible chances of finding large oil reservoirs offshore Western Sahara. Data showed Jurassic and Cretaceous "potential source rocks" that have proven oil-rich on other locations, in addition to a great number of potential oil catchment areas and "very large structural closures" potentially hosting large oil reservoirs.
Kosmos Energy, in its search for investors, presents its operations as a "company-making frontier exploration opportunity," saying the Boujdour operations involve a "high risk" but potentially a "very high reward."
Currently, Kosmos Energy has its own peculiar assessment of the political risk of exploiting Western Sahara offshore oil reservoirs. The company points to "substantial recent progress in resolving the political situation" in the UN, where all other analysts speak of a deadlock between Moroccan and Sahrawi positions. But other - larger - companies are constantly assessing the balance of political risk contra potential revenues.
Sources from the Spanish offshore sector that spoke to afrol News on conditions of anonymity say that companies that were forced to withdraw from Western Sahara offshore operation in 2003-05 due to international pressure have signed secret agreements with the Moroccan oil company ONHYM (formerly Onarep). These agreements would allow for their quick return as soon as the political situation improves or as major operations by other companies start on these fields. Especially Total (formerly TotalFinaElf), which withdrew in November 2004, was mentioned as a company having secured contracts assuring their quick return to Western Sahara.
Sector insiders do not rule out that the small and rather unknown companies operating in Western Sahara are indeed acting on behalf of the more established oil multinationals. While pro-Sahrawi activist Ronny Hansen warns that "the moment Kosmos starts drilling, it will probably have to face legal action", some insiders assume that this is exactly what the sector wants to achieve. Kosmos and its investors may thus be the legal test case for larger companies. This may be where the company's "high risk/very high reward" announcement has its base, as analysts agree that the oil potential of the Boujdour block is already proven.
Onshore, the situation is even more dominated by small and interwoven companies and fortune hunters - or "reckless cynics" as Mr Hansen, chairman of the Norwegian Support Committee for Western Sahara calls them.
In December 2006 three companies were awarded an exclusive 12 month reconnaissance licence in the Zag Basin (also known as Tindouf Basin) close to the Western Sahara desert town of Smara. The three are Ireland-registered Island Oil & Gas, Moroccan-registered San Leon and the rather unknown, Jersey-registered GB Oil & Gas Ventures. Among these three mini-companies, Island Oil is the main player, controlling most activities by the two other partners.
The Smara area is "virtually unexplored," according to the companies. But San Leon confirms that there has been made one gas discovery and some "strong oil shows" in the area - although it is unsure whether these discoveries are located on the Moroccan or Sahrawi side of the dysfunctional border. On the Algerian side of the border, gas and oil discoveries have been made under similar geological conditions.
Compared to the renowned potential of the Zag Basin, the players are small and odd. GB Oil is generally unknown to the sector and does not even have a website. San Leon only presented itself to investors on the Internet a few months ago but remains virtually a one-man company, run by Philip Thompson.
Mr Thompson, a US businessman, registered San Leon in Morocco in 2002. But Sahrawi activists researching the experienced geophysics' background hold San Leon is only a stooge for Island Oil. Mr Thompson is said to be "employed by and reports directly to Paul Griffiths, CEO of Island Oil." He is also the one who signed Island Oil's contract in Morocco.
But also the Island Oil & Gas - which only was registered in Ireland in 2003 and has offshore interests in Ireland and the Netherlands - is full of surprises. Carl Kindinger, the company's non-executive director, is based in Saudi Arabia and Island Oil's main Saudi backer, Badr Al-Aiban, owns around 30 percent of company shares. Mr Al-Aiban is known for his earlier dealing with Afghanistan. Platinum Petroleum controls 34 percent of Island Oil and is also based in Saudi Arabia.
Equally surprising is the South African and Swedish involvement in Island Oil, given the strong pro-Sahrawi support by the governments of those two countries. RMB Resources, part of the First Rand Group of South Africa, directly financed Island Oil's expansion into Western Sahara in December 2006. Meanwhile, Sweden's Lundin Petroleum holds a 5.3 percent stake in Island despite the Stockholm Foreign Ministry's insistence on the respect for international law in Western Sahara. Sweden opposed the EU fisheries agreement with Morocco in 2006 on such grounds.
As the new engagements in Western Sahara start to get known, the Western Sahara solidarity movement and the exiled government of Western Sahara are planning their next moves. Mr Hansen of the Norwegian Support Committee for Western Sahara said that the first priority of the international network Western Sahara Resource Watch (WSRW) is to inform the public and the governments of Sweden and South Africa to assure disengagement from Lundin and RBM Resources, and that other investors also would be contacted. He would not rule out that legal steps might be taken against all or any of the involved foreign companies.
Ahmed Boukhari, the Representative of the Sahrawi government to the UN, today told afrol News that "we condemn any attempt of any foreign companies to get involved through the Moroccan occupying power in the exploitation, extraction or commercialisation of Western Sahara resources." He pointed to the UN's 2002 legal opinion, considering illegal any exploitation of Western Sahara resources.
The exiled Sahrawi government has also started issuing exploration licenses to foreign oil companies for future engagement in the territory. But "we prefer that any potential interest in our resources be delayed until the legal, just and lasting resolution of the conflict, so as to know which authority is legal and legitimate to engage in signing contracts with foreign companies," Mr Boukhari concluded.