Iraq is reported to be making an offer to Morocco that may result in relaunching operations at the shuttered 200,000 barrels a day refinery in Mohammadiya. If the deal goes through, and I am enthusiastic, it could prove strategic to both. Dow Jones had reported BB Energy and another European oil company are partnering Iraq in the bid.

Morocco’s single refinery ceased operations in August 2015 due to mounting debt and forcing it to be placed under liquidation by a court ruling. The refinery was originally built in 1959 as a joint venture with Eni, but the Moroccan government took total ownership in 1973. The original capacity of 2.25 million tonnes a year (mty) was increased to 10-mty and many process units were renewed over time, especially during the implementation of the conversion and upgrade facilities from 2005.

The refinery is highly complex, with fuel oil production minimised to increase production of gasoline and diesel. Product specifications were also improved and low-sulphur diesel (50 ppm) marketed since 2009. The plant even established its own distribution network to gain value from marketing.

The refinery was privatised again in 1997 whereby Corral Holdings Societe Marocaine d’Industrie de Raffinage (Samir), a Saudi Arabian investment group, took 67.27 per cent and the rest remaining with the government. The shares were freely traded on the Casablanca stock exchange.

Morocco has limited oil and gas resources and depends almost completely on imports. Its oil consumption rose from 6.43-mty in 2002 to almost 16-mty in 2015 and is probably higher now. However, crude oil imports in 2013 were only 5.49-mty as the refinery also depends on imports of other components for its conversion facilities and blending to the tune of 2-mty a year.

This low rate of utilisation may have contributed to the refinery’s financial woes and prompted the Moroccan government to open the market for independent imports of oil products at the expense of the refinery utilisation. Since 2015, many deadlines for the liquidation were announced and extended in the hope of receiving better offers from investors.

The court-appointed experts valued the assets at $2.1 billion and many offers were reported to have been made by foreign investors in a process that is often blamed as not being transparent, slow and lacking political will.

The government is owed $1.3 billion in tax returns and pressured by the 850 workers on the one hand and foreign creditors on the other. One of the best conditions that were laid out is that any investor must guarantee operating the refinery rather than just converting it to a product depot to further the cause of imports and traders. To maintain a domestic refining capability is strategic in addition to the accrued advantage to the local area’s economy.

As for Iraq, the advantage is that it will first secure sales of up to 200,000 barrels a day of crude oil in a market that is increasingly oversupplied. Second, Iraq lacks sufficient refining capacity at home for obvious reasons and is forced to import huge quantities of light products, of gasoline and diesel in particular. By having this additional processing capacity in Morocco, it may be possible for Iraq to swap products with Gulf producers, especially as the refinery in Mohammadiya is complex and capable of producing products to European standards.

Under the best circumstances, Iraq country will continue product imports even by 2025. The potential partners with Iraq are capable traders and must be aware of Iraq’s needs and the logistical advantage of having this additional processing capacity.

But the deal is not easy and will depend on a number of procedures to insure the sale of “assets that are not essential to the industrial refining activity and use the proceeds of asset disposals to pay off creditors”.

The ownership of the 240-hectare site on which the refinery is built has to be assigned and then a lease for 25 years offered to the operating partners, which will also bring some cash for the creditors. The operating company “will be solely responsible for the operation, pay an immediate amount to be defined in the context of this recovery, and take charge of the industrial upgrading and restart of the refinery”, according to Dow Jones.

While there are other bidders around, the Moroccan government, without sacrificing competitiveness, must realise the advantage of opening up to an Arab country with huge oil and gas resources. And that the advantage to Iraq is so high as to ensure the refinery’s operation for a long time to come.

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