On Friday morning, I met with a delegation from Morocco. The five officials were from ONHYM (Office National des Hydrocarbures et des Mines), the national agency overseeing oil, gas, and mining. They're here in the U.S. under the provisions of a Department of State (DOS) initiative on the major new energy source – shale.
And they gathered in my conference room in Pittsburgh to discuss how to best manage this significant new source of fuel.
The DOS project is the Global Shale Gas Initiative (GSGI), launched in April to help make the U.S.' extensive experience in shale production available to countries around the world. The emphasis so far has been on the shale gas side – although North Africa in general, and Morocco in particular, may also have significant deposits of oil shale.
GSGI recognizes two very important developments.
First, shale is going to change the energy sourcing mix significantly. (As game-changers go, this one is huge.) Second, it may just be the most significant opportunity for the export of American hydrocarbon technology and knowhow to come along in generations.
Both of these developments are going to provide major advantages for rest of the world… and major profits for us.
Moving forward, new oil and gas shale production will be providing considerable options for plays in exploration and production (E&P) companies, as well as in technical providers.
I have already written here several times on the shale gas moves in the U.S. (see "Marcellus Shale About to Take Off on One Sweet Ride") and Canada ("Natural Gas Comes Roaring Back in Western Canada"), as well as oil shale in California ("The 'Granddaddy' of Shale Formations Just Got Profitable Again").
Yet this is hardly a North American play only.
Shale gas is already under development in Western Europe, and plans are advancing quickly for major projects in China. However, the geology tells us that the MENA region (the Middle East and North Africa) may well hold more shale than any other area on Earth.
And that's what brought this Moroccan delegation to Pittsburgh to see me.
To Develop Shale Gas, You Need Three Things
There is no question North Africa is excited about its shale prospects. Yet several of the countries have had difficulty identifying projects.
That has led the Tunisian oil and gas authority – the Entreprise Tunisienne d'Activités Pétrolières (ETAP) – to organize a workshop devoted to unconventional gas early next year.
Only a few potential deposits of shale gas have been identified thus far in Tunisia. But on the other hand, the country has a number of tight gas reservoirs that are hard to exploit because they lack natural links leading to drilled wells. The reserves must be artificially stimulated in order for the gas to be extracted.
Tight gas – like shale gas – requires hydrofracking and horizontal drilling. Thus far, deposits have been identified in Tunisia on blocks under development by Italian major Eni (NYSE:E). Austrian state company OMV (OTCPK:OMVKY), Pioneer Natural Resources (NYSE:PXD), and several smaller private companies.
ETAP would like to hammer out a contractual framework to organize exploration for unconventional gas. (That's the same reason the ONHYM delegation came to talk to me.) Sonatrach, the Algerian state company, is probably furthest along in the region – having already spudded test wells and identified shale gas reserves at the Belkacem Boumediene deposits.
But everybody in the region needs three things: 1) a plan; 2) access to technology; and 3) help in developing what are likely to be very large blocks.
That is where the GSGI project comes in.
Morocco Needs the U.S. to Help Tap 37 Billion Barrels
Morocco has known about its potential shale boon for several years. ONHYM has been trying to make the most out of three shale oil deposits located near Tangiers, Timahdit, and Tarfaya.
The junior San Leon Energy (OTCPK:SLGYF), owned by Irish businessman Oisin Fanning, holds rights on Tarfaya, while Brazilian major Petrobras (NYSE:PBR) is exploring the Timahdit deposit. But no significant work has yet been carried out on the two permits (although San Leon is moving ahead with an oil shale test plant that should be operational next year).
Despite the lack of early success, there are good reasons why these companies are continuing the effort. The two deposits are potentially huge – with Timahdit believed to hold some 15 billion barrels and Tarfaya almost 22 billion barrels.
GSGI has also come along at a good time for the Moroccan government.
You see, they're showing some impatience in moving forward with all of this. That has led to movement with unusual partners.
In late May, Energy Minister Amina Benkhadra signed a memorandum of understanding with the Estonian state-owned company Eesti Energia (also called Enefit) to exploit Morocco's own shale oil potential. Enefit was, at one time, the world's largest producer of oil shale from several deposits in Estonia. It also has developed a technology to produce electricity from oil shale.
Yet Enefit is not large enough to make the difference Morocco needs.
So ONHYM has come to the U.S. in search of assistance and a better fit in joint venture partners. The DOS is now hard at work facilitating that attempt, meaning it should hold significant promise for both Moroccan and U.S. companies.
I have agreed to provide help to ONHYM as they design their plan and regulations. That means when developments really start moving, I'll be in the perfect position to fill you in.
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