To continue the Morocco energy story from last week, it is important to look at the oil and gas situation in the country. Morocco is less fortunate than others with its endowment, or lack of it, of oil and gas.

Its oil reserves are hardly worth a mention given estimates of a mere 1 million barrels and 1 billion cubic meters (bcm) of gas. But government policy is to invigorate exploration and three discoveries were made in recent years. The 34 companies engaged in exploration have 142 licences, including 90 for offshore.

These licenses cover 400,000 square kilometres, and the drilling budget for 2014 was close to $500 million (DH1.8 billion). Therefore, it is possible that reserves can improve over time.

In this respect Morocco is taking a very careful approach with respect to its shale resources due to their high investment cost, long lead times and possible environmental implications. According to a 2013 report sponsored by the US Energy Information Administration, Morocco has 571 bcm and 200 million barrels of technically recoverable shale gas and oil resources, respectively.

Foreign companies are already studying some of the deposits and reached the feasibility studies, but no actual production so far.

Therefore oil production is a modest 5,100 barrels a day and gas production is 0.1 bcm a year. The country depends almost completely on imports where its oil consumption has risen from 6.43 million tonnes in 2002 to 10.75 million tonnes in 2013.

However, crude oil imports in 2013 were only 5.49 million tonnes as the refinery also depends on other component imports for its conversion facilities and blending to the tune of 2 million tonnes a year. Sometimes the refinery is operating below capacity as private importers of products compete with supplies, a point that I think the government should address to improve the utilization and profitability of the refinery as its market share of 50 per cent is well below its potential.

Morocco depends on products imports to balance and complement its refinery products production while the refinery also exports surplus products to the tune of 1.3 million tonnes in 2013.

The petroleum products consumption slate is very much biased towards middle distillates (jet fuel and diesel) with a share of over 50 per cent. The refinery, as we shall see later, had to invest in conversion processes to satisfy the demand for middle distillates as far as possible. Yet diesel imports are probably 57 per cent of its demand in Morocco.

Upgrade facilities

The refinery was established in 1959 and its capacity was increased from the original 2.25 million tonnes a year to the current 10 million, with replacement of the old processing units done during the implementation of the conversion and upgrade facilities starting in 2005.

Therefore, the refinery is highly complex and prides itself by marketing low sulphur diesel (50 ppm) since 2009.

The refinery, which embarked on establishing its own distribution network, was privatized in 1997 and Corral Holdings Societe Marocaine d’Industrie de Raffinage (Samir), a Saudi investment group, owns 67.27 per cent of the shares that are now traded on Casablanca stock exchange.

As a largely importing country, Morocco is obliged to have large storage and terminal capacities in its Mediterranean and Atlantic coasts ports. At the refinery, the terminal has one million barrels for crude oil storage and a similar capacity for petroleum products.

But to improve the security of supply, Morocco expanded its storage and distribution facilities with the completion of construction of the 3.35 million barrel capacity terminal in Tangier built by Horizon Terminals of Enoc and the Dubai Government.

Additional storage and distribution terminals are under development at other ports, especially in the port of Jorf Lasfar on the Atlantic coast where Moroccan phosphate rock and its fertilizers derivatives are exported. With limited LPG production from the refinery, Morocco has to import close to 2 million tonnes a year to satisfy a growing demand and this entailed 37 cylinder filling and storage depots.

Morocco undoubtedly prefers to use gas in power generation instead of coal, but lack of sufficient production within the country is a real impediment. However, the opportunity came with the construction of the Maghreb-Europe Gas (MEG) pipeline to export Algerian gas to Spain and Portugal which passes through Morocco before crossing the Strait of Gibraltar at about 10 billion cubic meters (bcm) a year.

In lieu of transit fees, Morocco receives Algerian gas to fuel some of its power stations. Moroccan consumption rose from very little in 2002 to 1.1 bcm in 2013 including only 70 million cubic meters from domestic production.

There is a long way ahead for the oil and gas industry in Morocco but so far the picture is cautiously encouraging.

The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.