There are reasons that lead to the belief that the future of Spanish and Moroccan relations may be based on mutual profit and cooperation, generating a reasonable degree of harmony between both nations.  But this hypothesis is burdened by a considerable number of factors that lead the two countries to taking unilateral decisions, which generates discord and confusion.

Aside from the notorious problems such as illegal immigration or drug trafficking, there are others that are less public but just as relevant.  Among these are the Morocco energy shortages. According to the U.S. Department of Energy, in 1999 Moroccan energy consumption per capita was 13.6 million Btu, compared to 132.6 in Spain or 355.8 in the U.S. (www.eia.doe.gov/emeu/cabs/maghreb2.html). This shortage creates new factors to be added to the discord between the two countries, such as the Moroccan nuclear program (its first reactor will soon be connected) or the efforts undertaken by Rabat to locate oil in its territory, all of which verges on what is international acceptable, according to a report issued by the UN.  Spain, on the other hand, has acted with equal interest and identical unilateralism with regard to oil, but always within the strictest international legality.  The autism of both countries on this matter has generated two risky situations that will put bilateral relations to an arduous test.

The first problem

The first of those two situations began brewing in March of 2000, when the U.S. oil company Conoco obtained an oil "reconnaissance license" from Moroccan authorities to its territorial waters in the Mediterranean.  According to a map of the area offered by the Moroccan Office National de Recherches et d'Exploitations Pétrolières (Onarep, www.onarep.com) this area, known as “W”, includes the waters that encircle Ceuta, Melilla, the Rock of Alhucemas and even the island of Alboran, situated 29 miles to the

 north of Melilla and 65 miles to the south of Almeria and, therefore, an indisputable right to twelve miles of territorial waters.  On March 23, 2001, Conoco obtained a one-year extension to this permit, which obligates it to acquire two-dimensional seismic data on the area and to undertake geological studies for determining oil potential as well as the most favorable drilling sites (1)¹.

Source: www.onarep.com

The Spanish Government, far from expressing its disagreement with this broad interpretation of the concept of "territorial waters", granted the same company (BOE, October, 19, 2001) four hydrocarbon prospecting permits known as Alboraneo Bryce, Alboraneo Cristobal, Alboraneo David and Alboraneo Eric. All of these are adjoining and located on the Spanish section of the Alboran Sea, opposite the coast of Marbella.  These permits are valid for six years and oblige the U.S.

 company to effect a total investment of 17.5 million Euros between seismic, geological and drilling studies.

Source: self-prepared.  The map lacks cartographic precision and was prepared on an electronic chart from the Navy Hydrographic Institute.
(http://www.armada.mde.es/ihm/cat/IHM_C_FrameENC.htm).

This means that the same company holds oil rights to both sides of the Spanish-Moroccan border, which suggests that Conoco is after an "oil system" which would extend to both sides of the marine border between the two countries.  The area, which occupies the Western portion of the Alboran Sea, is considered by the oil industry as frontier (scarcely explored and about which there is only antiquated data). Historically the area's depth (over 2,000 meters) has attracted scarce interest, which would make the extraction of hydrocarbons difficult. Difficult weather conditions add to this, where force-6 winds and significant marine currents are not unusual.  All of this has led to the fact that there is scarcely any background for establishing the probability of finding an oil deposit.

This gives the impression that Conoco became interested in the Western Alboran because these territories were easily obtainable. On the one hand, since there was not much demand from other companies, Conoco was able to sustain low access costs; the tax conditions offered by Morocco and Spain are attractive and, lastly, it obtained the areas in exchange for very reduced commitments (the Moroccan permit does not require drilling, the most expensive part of exploration, while the Spanish one grants it with land for six years in exchange for one drilling only).  A priori, it appears that Conoco has decided to obtain as much "inexpensive" territory as possible.  In any event, the company appears optimistic with respect to the area's possibilities and the “Oil and Gas in North Africa” conference, to be held in Tunisia next October (www.oilgasnafrica.co.uk) includes a presentation in its program by its directors entitled "Oil systems and the exploration potential of the Western Alboran Sea".

Is there any oil in Alboran?

If hydrocarbons were sited in the area and if these were located on the border, demarcated approximately by parallel 36, negotiations would be initiated for its exploration among the holders of oil rights and the Spanish and Moroccan governments.  Since Conoco is the holder of the rights on both sides of the border, negotiations would be greatly simplified, since only three parties would be involved.

The situation would be more complicated if the discovery were to take place opposite Ceuta, Melilla or Alboran, since it does not appear that Morocco recognizes territorial waters for these locations.  In reality, the Onarep has a very broad concept of Moroccan territory.  In November of 2001 it attracted attention by granting two permits similar to those of Conoco, which divided the waters of the Sahara between the U.S. oil company Kerr MacGee and the French company Total Fina Elf.

To date, Conoco has performed various preliminary tasks in the Western Alboran.  In evaluating these it is necessary to explain that, contrary to popular belief, hydrocarbon deposits are not "underground lakes".  There is oil infiltration in the rocks, more or less like the juice inside an orange and the deposits usually have the structure of this fruit; a layer of sealed rock that envelopes another layer of rock which contains oil.  Seismic studies provide knowledge as to where these types of geological structures exist, but there is no guarantee that they hold hydrocarbons.  Once identified, drilling is the only means of verifying what lies beneath.  Usually there is nothing or the hydrocarbons lodged therein lack commercial value.  Thanks to modern prospecting technologies, it is possible to identify geological formations with such precision that success is obtained in one out of every four exploration wells drilled. 

Therefore, to date, Conoco has performed almost all the preliminary studies for the area.  It contracted the seismic study in 2D from the Norwegian company, Fulgro Geoteam, in addition to a depth range campaign and geochemistry study entrusted to TDI Brooks in October of 2000. This chemical study sought methane fumes (natural gas) that could reveal the existence of deposits.  The results obtained are now undergoing computerized expansion and interpretation.  Once Conoco combines them on a map, it will be possible to identify the areas that are the most likely to contain hydrocarbons.  The most promising ones will be the subject of a detailed study and, eventually, drilling for the inspection of their contents.

If Conoco goes so far as to drill the area, and does so near the Spanish regions in Africa, there is scarce doubt about the strong reaction that Rabat will have, especially after the Perejil conflict. But the real problems will begin if Conoco finds a deposit, albeit modest, that is similar to those existing in the north of the Spanish Mediterranean.  It would not be an exaggeration to affirm that relations between Spain and Morocco will depend on where this well is located and its results. This would of course be leaving aside any other problems that a drilling in full view of tourist towns like Fuengirola or Marbella could pose.

The second problem

The other risk to the future of bilateral relations generated by oil is better known by the overall public.  These are the explorations underway on the Canarian and Saharan coast.  This situation originates some 1,000 miles to the southeast of the Canary Islands, right on the Mauritanian coast. There a consortium of oil companies has been operating since 1997, of which the Australian company Fusion Oil is a member.  In May of 2001 this consortium found Mauritania's first marine oil deposit. The consortium announced the discovery of "a 90-meter column of oil" in the Chiguetti-1 well, drilled 80 kilometers out to sea off the Mauritanian coast.  Until that time, no deposits had been found off the Mauritanian coast, and this unleashed the imagination of the consortium members. Perhaps recalling the notable marine deposits in other countries off the same African shore, such as Angola or Guinea, one of them stated to Reuters that it was like discovering "a new Gulf of Mexico".  The publication Maghreb Business warned in June of 2001 that "the political implications of a sizeable deposit will be most relevant, since Mauritania borders the Sahara to the north."

It was not necessary to confirm the magnitude of the deposit.

Six months later, in November of 2001, Morocco granted the oil "reconnaissance license on the Saharan coast to the French company Total Fina Elf and the U.S. company Kerr MacGee. By means of a broad interpretation of the concept of territorial waters, Morocco signed an oil reconnaissance agreement with Kerr MacGee, known as Bojador offshore, which covers a marine area of 110,400 square kilometers, exactly the northern half of the Saharan coast.  The French company Total Fina took the southern half of the Saharan coast adjacent to Mauritania and, therefore, the most promising one.  Its area, called Dakhla offshore, covers 114,556 km2. It is Total's first operation in the country, while Kerr MacGee has six exploration permits around Cape Draa together with the South African company, Energy Africa, and Enterprise Oil. The Polisario Front hastened to denounce the situation before the United Nations.  Its leader, Mohammed Abdelaziz, classified these agreements as "provocation... that only serves to worsen a situation that is already highly deteriorated."

Three months later (BOE dated January 23, 2002), the Spanish Government granted Repsol nine adjoining permits, located between the coast of Morocco and the islands of Lanzarote and Fuerteventura.  These permits are valid for six years and oblige Repsol to invest 30 million Euros in the drilling of two exploration wells. Rabat reacted fiercely to this concession.  In a diplomatic note delivered to the Spanish Embassy in Morocco it classified this event as "hostile and unacceptable", "persistently inviting Spain to desist in its application". The Moroccan minister Benaissa explained his reaction by claiming that Spain had unilaterally defined the border between Canarian and Moroccan areas of interest.  In fact Spain placed the line right on the median between the islands and the continent.  The severity of the note suggests that perhaps Rabat expected to apply the Alboran model to this border area.

Six days after the concession to Repsol, on January 29, 2002, the UN's legal advisory board issued a report on Moroccan concessions in the Sahara.  Following the denouncement of the Polisario Front, this report had been requested by Kofi Anan to clarify whether or not Rabat could effect these concessions.  And attorney Hans Correll affirmed that "financial activities in territories that are not self-governed should be undertaken to the benefit of the population". (http://www.un.org/Docs/sc/reports/2002/178e.pdf; page 4).  Therefore, simple "reconnaissance" that does not mean drillings and lacks the ability to generate financial return would be legal, but not an "exploration permit" or "concession", since these would involve drilling and may generate profits.  This report raises the question of how nothing can be done to benefit the population of the Sahara, in that there is no agreement as to the census for the area.  Therefore, oil companies have continued their activities in the area and TGS-NOPEC is performing a seismic study in 2D with its ship, Northern Access. It is believed that its clients are Total-Fina Elf and perhaps Kerr MacGee.

In view of this situation, the Polisario has contracted the Australian oil company Fusion Oil  (part of the consortium that made the Mauritanian discovery), to evaluate the oil potential of the entire Sahrawi marine platform that Morocco distributed between Total and Kerr MacGee. This "agreement for technical cooperation" (http://www.fusionoil.com.au/presentation4.html) extends exclusively over a period of sixteen months, after which Fusion must deliver a report on the area's oil and gas potential.  Payment for this study will take the form of an option to drill up to three places in the territory with surface areas less than 20,000 km2. The permits will be granted, at the latest, six months after the Sahrawi Democratic Arab Republic "becomes a member of the United Nations". Since there is no legal infrastructure for this agreement, the parties have agreed that the royalties and tax treatment for these future explorations "will have to be competitive as compared with those offered in adjacent areas".

Fusion had been preparing its entry into the Sahara for some time.  It was presented to the leaders of the Polisario in 1999 by the British Foreign Office, which officially defends the Moroccan thesis on the Sahara.  This Australian company appears to remember the case of East Timor well, where a referendum similar to the one called on the Sahara terminated the island's Indonesian dominance.

 Is there oil in the Sahara?

The Sahara-Canary Islands area does not appear very promising.  Unlike the Alboran, the Sahara has been the subject of very broad and fruitless oil prospecting. While it was a Spanish colony, the territory was explored in detail prior to relinquishing sovereignty.  Following the French discoveries of Hassi Mesaoud and Hassi R'mel in Algiers in 1956, Spain commenced a sustained drilling effort.  The Sahrawi territory was divided into 108 squares, almost all of them 40' parallel by 20' meridian. The most reputable international companies explored 42 of these.  In 1964, 57 borings had been performed, drilling 100,706 meters.  For a time the Spanish Sahara was the area of greatest interest shown by international oil companies worldwide. While there were indications of oil in some borings, no profitable deposits were found.  In practice, the possibility of deposits in the territory was practically dismissed.  However, the technologies of the time did not permit such detailed exploration of the marine platform, which was explored, among others, by the U.S. company Union Carbide. Suffice it to say that they did not find indications of oil off the Sahrawi shore.  With respect to the Canarian Coast, in 1978 and 1983 the former government-owned companies Eniepsa and Hispanoil performed various studies, without these providing any data that could lead to positive expectations.  Of course the technology they utilized is far from the precision offered today by modern equipment.

The possibility of finding something should not be closed.  A possible deposit on the coast of the Sahara, similar to that of Mauritania, would rouse the conflict between Rabat and the Polisario Front.  A discovery off the Canary Islands would involve the immediate protest of Rabat in accordance with the note issued by its Ministry of Foreign Affairs when the permit was granted to Repsol.

Why this conflict?

In the world of oil, forecasts, studies and even experience are of very little value.  Oil only exists where it is found, and it is found only where drilling takes place and out of every four drilling sites, only one is successful. This means that if the oil companies involved obtain positive data from their studies and decide to drill in West Alboran or the Saharan Coast, there is a 25% probability of finding gas or oil or even both.  This is like saying that this matter has a 25% chance of leading to a conflict, the intensity of which would be based on the magnitude of the possible deposit (more probable in Alboran than in the Sahara).  

On the other hand, the governments involved will, in this oil prospecting, find a curb to changing their policies in the area.  This means that Morocco will become even more embedded in the Sahara, for as long as its potential is being investigated.  However, and following Spain's example, it is likely to give up if, after several years, the territory turns out to be sterile.

This situation is far too relevant not to analyze how it has come to this.  It gives the impression that the parties involved feel that hypothetical profits will compensate the very real conflict, which is furthermore prior to the a posteriori hypothetical. This is something that does not appear to be very intelligent.  Other bordering countries have preferred to avoid confrontations by creating joint oil companies to explore the borders, as in the case of Tunisia and Libya.  Why haven't Spain and Morocco done the same thing? Or have they? The concession of the Alboran Sea to Conoco could be an example of this type of cooperation by means of a third party.  In that case, why wasn't the same thing done in the Sahara-Canary Islands? What happened to paralyze this hypothetical cooperation between the concession to Conoco (October 19, 2001) and the one to Repsol (January 2002)? Does the withdrawal of the Moroccan ambassador on October 27, 2001 have anything to do with this? It should be recalled that the Moroccan Government did not offer any reasons for this initiative in the verbal note with which it notified the Spanish Ministry of Foreign Affairs. These questions are of course only pertinent if the Spanish Government knew that it was granting oil rights to Spanish West Alboran to the holder of these on the Moroccan side.  And the Spanish Government, to date, has confirmed nothing to this regard.

(1) This "prospecting" permit should have been renewed or broadened to include "exploration" in March of 2002.  Something that may have occurred, since Conoco sent a communiqué to the authors in August of 2002 affirming that it held oil rights to the Moroccan side of the Alboran:  "Conoco confirms that it has exploration rights on the Moroccan and Spanish sides of the Mediterranean area known as the Alboran Basin". Nevertheless, the company did not explain either the type of rights or when it obtained them.  Neither has Onarep publicized whether the permit to Conoco has been renewed.  It has limited itself to stating that negotiations are underway with the company with regard to this territory.

Iñigo Moré

President of the Mercados Emergentes Consultant Company

e-mail: mercadosemergentes@hotmail.com

www.mnmagrebnegocios.com