Morocco LNG advisory awarded, as SAMIR saga drags on
Thursday, Nov 16, 2017
A recent uptick in activity surrounding Morocco’s multi-billion dollar flagship gas-to-power (GTP) project was maintained in early November with the belated award of a contract to advise on LNG procurement.

Nonetheless, the nature of the counsel being sought – some three years after the scheme’s launch – also served to highlight the authorities’ continued doubts over implementation strategy.

Meanwhile, the troubled and protracted process of selling the bankrupt operator of the kingdom’s sole refinery was drawn attention to by the arrest in Saudi Arabia of the firm’s controversial former owner – who stands accused of running the strategically important company into the ground.

The government’s Office Nationale de l’Electricite et de l’Eau Potable (ONEE) in early November announced the award of an US$0.85 million contract to a UK team of The Energy Contract Co. (TECC) with LNG Value to advise on LNG procurement for the proposed US$4.6 billion GTP project, planned on the kingdom’s Atlantic coast.

According to the statement, the decision was taken on September 25 – almost precisely a year after six bids were received in response to a request for proposals (RFP) issued in July 2016. TECC has worked on similar projects in Malta and Ghana.

The slow-moving scheme, launched in late 2014, calls for the integrated development under a 20-year concession agreement of a 5 bcm per year LNG import and regasification facility at Jorf Lasfar, a 400-km high-pressure pipeline connecting to the existing Maghreb-Europe (GME) pipeline, tie-ins to four power plants along the route, and construction of two 1,200-MW power plants at Jorf Lasfar and Dhar Doum.

The authorities’ preferred strategy for LNG procurement has always been unclear: a request for expressions of interest (EOIs) sent to prospective developers in December 2015 mooted the options either of consortia proposing their own supply plan or of receiving the resource indirectly via a government deal.

Rabat has openly spoken of having been in talks with Qatar and, more consistently, Russia about an intergovernmental accord – with a memorandum of understanding (MoU) to co-operate in the sector signed with Moscow last year – while France’s Total evinced interest in June in participating as both LNG supplier and downstream developer.

High-level talks with Russian officials last month also yielded verbal professions of interest in involvement. The RFP for the procurement advisory contract called for the selected team to examine various strategies’ relative merits, looking at contract durations, geopolitical and other risks affecting different suppliers, the volumes and qualities available, and price.

One of the GTP project’s aims is to reduce dependence on imports from Algeria through the GME pipeline – in view both of tense relations with Algiers and the inherent risk of over-dependence on a single supplier.
Momentum behind the project has flagged throughout much of this year after a revival in late 2015 and 2016 saw the award of legal, technical and financial advisory contracts and the EOI invitation – apparently drawing interest from 93 firms in May last year.

The renewed movement prior to the latest contract award was also an implicit admission of the problems besetting the scheme, as a tender was floated in the third quarter for a new financial adviser – HSBC, the original winner, having withdrawn over differences with the client.

When developer interest was invited, ONEE promised an RFP by June and envisaged awarding the deal this year in time for gas imports to commence in 2021. However, a senior ONEE official revealed in March that an RFP was not now envisaged before the first half of 2018.

Aside from the unprecedented complexity of the project for the Moroccan authorities, the kingdom spent some six months without a government following elections late last year while, more positively, the long-harboured hope of unearthing domestic resources to ease the kingdom’s enormous import dependence has recently been piqued by major gas discoveries by London-listed explorers SDX Energy and Sound Energy.

The sale of Societe Anonyme Marocaine de l’Industrie et du Raffinage (SAMIR) – the main asset of which is a 200,000 bpd refinery at Mohammedia – has been messy, controversial and opaque from the outset.

The debt-laden firm was put into liquidation in March last year after controversial Saudi/Ethiopian owner Mohamed al-Amoudi reneged on promises of a capital injection. The refinery has been idled since August 2015, when the operator became unable to raise finance for fresh crude feedstock – amidst debts subsequently estimated at around 44 billion dirhams (US$4.4 billion).

In late October, the commercial court in Casablanca again delayed until mid-November the deadline for bids for the facility – invited in February with strict conditions on financial guarantees and requiring a commitment to restart the refinery, the cost of doing which is constantly increasing the longer the process drags on.

While numerous prospective investors have reportedly expressed interest, by early November none was yet believed to have submitted a formal written offer accompanied by the requisite deposit – now permitted either in the form of a bank guarantee or a cash advance.

Speculation is mounting that the facility will attract only offers considerably below the 25-30 billion dirham (US$2.6-3.1 billion) range being sought by court-appointed administrator Mohamed el-Krimi.
The debacle returned to the Moroccan media’s attention on November 5 as Al-Amoudi – who fell out acrimoniously with Rabat over his refusal to rescue the refinery he purchased in the late 1990s – was arrested during a wide-ranging purge by the Saudi government over unspecified corruption allegations.

Close watch will be paid to whether any of the charges relate to the billionaire’s Sweden-based Corral Petroleum Holdings – through which SAMIR was owned.

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