Importing the vast majority of its energy, Morocco continues to rely heavily on fossil fuel-based imports. In recent years, the kingdom has made concerted efforts to reduce its energy dependence, implementing renewable energy projects, and introducing an oil and gas exploration programme. It has devised a new and ambitious energy strategy, which promotes the development of renewable energy and emphasises using natural gas for electricity generation. Since the 1990s several reforms have also been enacted to liberalise the sector and increase the involvement of the private sector. The government is keen to attract investment in a variety of areas, from energy infrastructure development to the provision of goods and services in related industries.
ENERGY NEEDS: In recent years the energy market has grown considerably. According to the International Energy Agency, total primary supply reached 18.8m tonnes of oil equivalent in 2012, the latest year for which data was available. In relative terms, this translates into an increase of 58% between 2002 and 2012. According to the High Commission for Planning (Haut Commissariat au Plan, HCP), in 2015 primary energy consumption grew by 4.1%, reaching 19.48m tonnes of oil equivalent. Fossil fuels continue to dominate the energy mix: in 2015 petroleum products represented 54.2% of total primary energy consumption, followed by coal (27.4%), hydropower (2.5%), natural gas (5.8%), imported electricity (6.6%) and wind (3.4%).
Around 94% of the kingdom’s primary energy needs are imported, the bulk of which are fossil fuel-based. According to the Office des Changes, in 2016 energy imports consisted of gas oils and fuel oils (48%); petroleum gas and other (20%); hydrocarbons, petroleum oil and lubricants (10%); coal, cokes and similar solid fuels (10%); petroleum spirit (6%); electric energy (4%); and paraffin and other petroleum-derived products (2%).
LONG-TERM STRATEGY: The government adopted an ambitious energy strategy in 2008 to address the situation. It comprises seven key pillars: the development of an optimal and diverse energy mix in the electricity sector, growth in the contribution of renewables, the establishment of energy efficiency as a national priority, exploration of national resources, better regional integration for electricity transport, a greater balance in energy trade and the establishment of a national pact for sustainable development.
The strategy is bolstered by international commitments to battle climate change. Prior to attending the COP21 UN Conference on Climate Change in Paris in 2015, Morocco submitted its intended national contributions, setting greenhouse gas (GHG) emission reduction targets at 32% by 2030 below a business-as-usual scenario and achieving 42% of installed generation capacity from renewable sources by 2020. In 2016 Morocco hosted COP22 in Marrakech, confirming more ambitious targets: a 42% reduction in GHG emissions and 52% of power from renewables by 2030.
HYDROCARBONS: Unlike other countries in the region, Morocco has very limited hydrocarbons resources. However, this has not stopped the kingdom from supporting exploration and production activities as part of efforts to reduce its reliance on energy imports. Since 2000 the country has introduced fiscal incentives in the Hydrocarbons Code to attract foreign investment, including a 10-year corporate tax exemption as of the date of first commercial production for each exploitation concession, no surtax, and an exemption from Customs duties and value-added tax on all equipment, materials, products and services required for reconnaissance, exploration and exploitation operations.
According to the Office of Hydrocarbons and Mining (Office National des Hydrocarbures et des Mines, ONHYM), in the first eight months of 2017 the private sector invested some Dh467m (€43.2m) in the country’s hydrocarbons industry, while ONHYM invested Dh18.8m (€1.74m). With its partners, the office spent nearly Dh16bn (€1.48bn) on hydrocarbons exploration in 2010-16, 98% of which came from private investors.
Hydrocarbons production is concentrated in Essaouira and Gharb, which are located in the west and north-west of the country, respectively. HCP and ONHYM data shows that the kingdom produced 86m cu metres of natural gas and 4998 tonnes of condensate in 2015, down from 94m cu metres of natural gas and 5184 tonnes of condensate in 2014. According to ONHYM figures, 80.24m cu metres of natural gas and 4841 tonnes of condensate were produced in 2016.
As of 2015 ONHYM’s exploration of conventional hydrocarbons covered 338,848 sq km in partnership with 28 firms under reconnaissance contracts and petroleum agreements, and it held two exploitation concessions of its own. Non-conventional activities, especially oil shale, extended over 304 sq km, with four private partner companies in these ventures.
EXPLORATION PERMITS: The authorities awarded a new offshore exploration permit to the UK-based Chariot Oil & Gas in February 2017. The permit allows the company to explore a 1400-sq-km area off the coast of Kenitra in Gharb. Chariot Oil & Gas holds a 75% share of the permit, with the remaining 25% held by ONHYM. The site is estimated to hold around 464m barrels. Only a few days before, another UK-based firm, Gulfsands Petroleum, announced it had signed an extension on its exploration permit at Moulay Bouchta in Taounat province, a site estimated to contain 149m barrels. Gulfsands Petroleum has a 75% interest in this permit and ONHYM holds 25%, but in February 2017 local media reported that the UK company was looking for additional partners in this endeavour.
The London-listed firm SDX Energy has also seen its exploration permits extended for Lalla Mimouna Nord and Sud, and Sebou, located in Gharb. Lalla Mimouna Nord and Sud, covering 2211 sq km, will be extended until March 2018, whereas Sebou, a 135-sq-km concession, will run through to 2025. The Sebou concession renewal includes a commitment to drill two exploration wells within the first four-year period.
NEW DISCOVERY: In May 2017 the UK-based Sound Energy announced the conclusion of its third exploration well, TE-8, located in the Tendrara permit, in which the company holds another two wells, TE-6 and TE-7. The exploration results confirmed the commercial potential of this area, doubling the previous estimates of potential hydrocarbons reserves. The well is set to produce approximately 249,000 cu metres per day, with James Parsons, CEO of Sound Energy, comparing the site to ENI’s 849.5bn-cu-metre Zohr gas field in Egypt, the largest in the Mediterranean.
Sound Energy has also commenced exploration activities at its onshore exploration permit in Sidi Mokhtar, in which it has held a 75% interest since December 2016. The company purchased the stake from PetroMaroc (50%) and Maghreb Petroleum Exploration (25%), and is set to re-evaluate the potential of the two existing wells at Sidi Mokhtar, Koba-1 and Kamar-1. If successful, the company planned to deliver gas to the domestic market by the end of 2017, but this had not been reported by early 2018. Upon its licensing, the firm should benefit from the gas storage and transport infrastructure located nearby, as well as its geographical proximity to Jorf Lasfar and various industrial installations. The company estimates that the Sidi Mokhtar permit holds 252bn cu metres of gas. If this is confirmed, Sound Energy’s finds would likely provide a welcome push to the development of Morocco’s gas potential. In the meantime, the kingdom’s energy strategy and climate change commitments rely partly on liquefied natural gas (LNG) imports to compensate for the reduction of energy sources that generate more pollution.
LNG DEVELOPMENT PLAN: The Ministry of Energy, Mines, Water and Environment (Ministère de l’Energie, des Mines, de l’Eau et de l’Environnement, MEMEE) launched a national development plan for LNG in cooperation with the National Office for Electricity and Potable Water (Office National de l’Electricité et de l’Eau Potable, ONEE) in December 2014. The plan aims to boost the contribution of LNG to the energy mix from around 16% in 2014 to 32% by 2025. According to the MEMEE, the country’s gas demand is set to reach 5bn cu metres by 2025. Of this, 3.5bn cu metres will be allocated for electricity generation through combined-cycle power plants, 1bn cu metres for refineries, and 500m-1bn cu metres for industries around Jorf Lasfar-Mohammedia-Kenitra and the phosphate industry.
The LNG development plan has two stages. The first stage, called “gas to power”, running from 2015 to 2025, seeks to meet additional demand for power. In partnership with national and foreign operators, ONEE is in charge of developing this stage. The second stage, “gas to industry”, is set to bolster the use of natural gas. This stage is entrusted exclusively to national operators and consists of the creation of distribution facilities connecting the national grid.
In June 2016 a draft gas code – the regulatory framework set to support the second stage of the LNG development plan – was ready to be evaluated by the government and submitted be considered by Parliament for approval. According to local media, the government also wrapped up calls for expressions of interest in stage-one gas and electrical infrastructure projects. However, as of early 2018 the code had yet to be approved by the authorities.
GAS INFRASTRUCTURE: Morocco has several gas facilities: the 385-MW Tahaddart combined-cycle power plant, commissioned in 2005 with an annual production of 3100 GWh; the 470-MW Ain Beni Mathar thermo-solar combined-cycle plant, generating 3538 GWh per year; two gas turbines, each with 300-MW capacity, in Mohammedia and Kenitra; and the Maghreb Europe Gas (MEG) pipeline, which connects the Hassi R’Mel field in Algeria to Córdoba in Spain via Morocco. The annual capacity of the 1620-km-long MEG has been extended to 12bn cu metres of gas. Additional infrastructure investment under the LNG development plan totals $4.6bn, a part of which will be mobilised through private investors, as well as national and international institutional investors under power purchase agreements.
RENEWABLES: The development of renewable energy is at the heart of Morocco’s power strategy and its international commitments to battle climate change. The kingdom aims to generate 42% of all electricity from renewables by 2020 and 52% by 2030. To do this, it is seeking to exploit its significant potential in solar, wind and hydropower (see analysis).
Morocco enjoys an estimated 3000 hours of sunlight per year, holding an average annual solar potential of 5 KWh per sq metre, according to the “National Energy Strategy 2030” report published by the MEMEE. This potential had been little exploited until the launch of the Moroccan Solar Energy Programme in November 2009, with the exception of the Global Rural Electrification Programme, which employed photovoltaic technology to supply energy to remote areas.
Morocco also holds significant wind power potential. Thanks to its 3500-km-long coast, the country’s technical onshore wind-energy potential is estimated at just under 5000 TWh per year, and there is potential to install 25,000 MW of capacity, according to the National Agency for the Development of Renewables and Energy Efficiency (Agence Nationale de Développement des Energies Renouvelables et de l’Efficacité Energétique, ADEREE). Wind speeds vary depending on the geographic area. Essaouira, Tangiers and Tétouan offer 9.5-11 metres per second at the height of 40 metres, whereas Tarfaya, Dakhla, Taza and Laâyoune record speed of 7.5-9.5 metres per second. To take advantage of this potential, in June 2010 Morocco launched the Integrated Wind Energy Programme, which aims to supply the country with an additional 2000 MW by 2020, the equivalent of 6600 GWh of electricity per year, for an investment of Dh3.5bn (€324.1m).
Hydropower is a more traditional component of the power mix. Investment in hydroelectricity capacity commenced in the 1960s under King Hassan II, and as a result, this segment is already well developed.
INSTITUTIONAL REFORM: Various regulatory reforms aiming to facilitate the development of renewables have been introduced over the past few years. These include the establishment of key sector institutions and a sound governance structure. In September 2016 the Moroccan Agency for Solar Energy, created in 2010, saw its responsibilities expanded to include the development of all renewable energy initiatives, thus gaining its new title, the Moroccan Agency for Sustainable Energy (MASEN). Previously, ONEE had held some responsibilities for the development of renewable energy, although it is expected that during the five-year transition period, most will be moved to MASEN.
ADEREE is another main body whose responsibilities changed as a result of institutional reforms; it is now the Moroccan Agency for Energy Efficiency (Agence Marocaine pour l’Efficacité Energétique, AMEE). The creation of the National Authority for Electricity Regulation is also expected in the short term, pursuant to the adoption of Law No. 48-15, strengthening the sector’s regulatory framework for private investors.
PROMOTING INNOVATION: Morocco’s commitment to the expansion of renewable energy has led to increasing investment in research and development (R&D). Created in 2011 under the MEMEE, the Research Institute for Solar Energy and New Energies (Institut de Recherche du Solaire et des Nouvelles Energies, IRESEN) plays a key role in this field. IRESEN supports 540 researchers and has launched 10 calls for proposals since its creation, while 37 projects are in progress.
“Our main challenge is supporting the practical application of innovative projects,” Badr Ikken, director-general of IRESEN, told OBG. To this end, IRESEN is launching a call for proposals to fund collaborative applied research, renewable energy and energy-efficiency development projects targeting innovative goods, services and processes, as well as those seeking to support project holders in the practical application of research results. “Initially, we plan to allocate between €500,000 and €1m to innovation-related projects during the 2017-20 period,” Ikken added.
In addition to being responsible for R&D and innovation initiatives, IRESEN supports the development of related infrastructure. In January 2017 King Mohammed VI inaugurated the Green Energy Park, an international platform for solar energy testing, research and training developed by the institute. Located in Ben Guerir, the park cost Dh210m (€19.4m) and covers an area of 8 ha.
According to Ikken, IRESEN is building a Green and Smart Building Park, with construction commencing in 2017 and expected to finish in 2018. A Water Energy Park and a Bioenergy Park are also scheduled to be built between 2018 and 2020. During its first five years of operation, IRESEN’s budget totalled Dh500m ($46.3m), with half of the funds coming from the state and the other half in raised capital. In the following 10 years the institute is expected to receive Dh500m ($46.3m) in state funds and a similar amount from capital raised.
ENERGY EFFICIENCY: Energy efficiency is a key goal of the government’s energy strategy. In 2017 the 2030 National Strategy for Energy Efficiency and the sector-specific contract to support the implementation of the first stage of the strategy are due to be launched.
Prior to finishing its draft strategy on energy efficiency, AMEE undertook an extensive study identifying a series of objectives, in particular reducing national energy consumption by 20% by 2030. The study also looked at certain key economic sectors, especially the industries that are the highest consumers of energy, such as construction, transport, industry, and agriculture and fishing. For the construction sector, a reduction of 20% in energy consumption is targeted, while transport is set to see a 35% decrease. Industry is expected to reduce its energy consumption at an annual rate of 2.5% leading up to 2030, while agriculture and fishing should do so at the rate of 0.2%.
“The newly installed government has already signalled its commitment to the sector-specific contract that will support the launch and implementation of the energy efficiency strategy,” Said Mouline, director-general of AMEE, told OBG. “In the meantime, a number of projects have been identified in each key sector, and progress has already been made with initiatives, such as the Moroccan Sustainable Energy Financing Facility (MorSEFF) in the industrial sector, or awareness-raising activities and training concerning the future use of solar-powered pumping systems in agriculture.”
AMEE’s efforts to promote the adoption of solar-powered pumping systems in agriculture is leading up to the launch of National Programme for the Promotion of Solar Pumping. With a €110m credit line provided by the European Bank for Reconstruction and Development, in cooperation with European Investment Bank, the French Development Agency and the German Development Bank, MorSEFF enables local companies to access loans or leases to acquire equipment or pursue renewable energy or energy-efficiency projects, providing a 10% credit on investment subsidies, granting technical assistance and ensuring local distribution of financing via its local partners, BMCE Bank and Banque Centrale Populaire. Local cement producers, which were set to meet nearly 80% of their energy needs from renewable sources, have benefitted from this scheme.
ELECTRICITY: Morocco enjoys one of the highest electrification rates in Africa, alongside Algeria, Egypt, Libya and Tunisia, according to the World Economic Forum’s “Global Energy Architecture Performance Index Report 2017”. The report ranks the kingdom 57th of 127 countries, making it the top performer in the MENA region and second in Africa. Launched in 1996, the government’s Rural Electrification Programme was hugely successful, boosting electrification rates in the countryside from 18% in 1995 to 99.43% by the end of 2016.
MEMEE data shows that in 2016 electricity production increased by 2.9%, totalling 35,414.5 GWh, and in the first half of 2017 it continued growing, by 2.1%. Of the 2016 total, 14% was imported through regional linkages. The kingdom imports electricity from Algeria and Spain, and is connected to the latter via two 1400-MW underwater cables; studies are under way to create a cable to Portugal (1000 MW) and a third to Spain (700 MW). There are also plans to connect to sub-Saharan African countries via Mauritania and Senegal.
The bulk of electricity is derived from non-renewable resources. In 2016 coal remained the largest source of power, accounting for 48% of the total, followed by natural gas with 17% and renewable energy with 14%. Taqa Morocco, a subsidiary of the Abu Dhabi National Energy Company (TAQA), operates Morocco’s largest coal-fired power plant at Jorf Lasfar, with a capacity of 2056 MW, while ONEE manages three smaller coal-based power plants, including two in Mohammedia with a total capacity of 300 MW and one in Jerada, with 320 MW. Another coal-fired plant is anticipated to come on-line in July 2018 in the city of Safi in southwest Morocco. The 1386-MW facility is being built by a consortium of GDF Suez, Nareva Holding and Mitsui at a cost of Dh23bn (€2.1bn).
While the contribution of fossil fuels remains significant, renewable energy’s share of the power mix has grown in recent years, with new wind and solar projects coming on-line. Wind power generation increased by 19% in 2016, reaching 3000 GWh, while solar power jumped from 5.7 GWh to 401.5 GWh. However, hydroelectricity declined by 27.1% to 1662.2 GWh.
Production increases have mirrored rising investment in the segment. An additional 10 GW of installed capacity is planned in order to reach the target of renewables comprising 52% of the energy mix by 2030. The private sector is set to play a key role in this thanks to the gradual opening of the electricity market (see analysis).
WASTE MANAGEMENT: According to MEMEE data, waste generated in urban areas of the country is estimated to total 5.56m tonnes per annum, which is approximately equivalent to 0.76 kg per inhabitant per day. To better manage waste, the kingdom has adopted various measures, including a national solid waste programme launched in 2007. This government initiative aims to modernise waste management in Morocco, encouraging the development of both the collection and processing of waste, as well as recycling, composting and energy generation (see analysis).
NUCLEAR: Under the national energy strategy, the development of nuclear power is considered a long-term alternative in the efforts to diversify the energy mix. The kingdom has identified a site for the construction of a nuclear power plant, following a technical and economic feasibility study conducted in the 1980s. Morocco is also party to a series of conventions and treaties on the peaceful use of nuclear energy, and has been developing national legislation to this effect. It has benefitted from the assistance of the International Atomic Energy Agency, including a 2015 mission to review the kingdom’s integrated nuclear infrastructure. Morocco has also actively participated in the organisation’s technical cooperation programme and its coordinated research project.
GLOBAL PERFORMANCE: Morocco’s efforts to stimulate its energy sector are reflected in its position in global energy rankings, including the aforementioned “Global Energy Architecture Performance Index Report 2017”. In 2017 the kingdom was ahead of its MENA peers in the index, which covered 127 countries. The kingdom ranked 57th, up 14 positions compared to 2009. The ranking is based on three criteria: economic growth and development (43rd), energy access and security (54th), and environmental sustainability (86th). With virtually universal rural coverage, Morocco is well placed in terms of the electrification rate (1st) and methane emissions from the energy sector (10th). However, it lags behind on CO emissions from electricity production (106th) and energy imports (120th).
OUTLOOK: The sector is likely to continue on a positive trajectory in the near and longer term. While the kingdom faces undeniable challenges, such as reducing its dependence on energy imports, particularly fossil fuels, and curbing its CO emissions, it has presented a solid sector strategy and multiple segment-specific initiatives, ranging from solar to wind and LNG.
The nation’s hydrocarbons resources are limited, but if recent discoveries are confirmed, Morocco could become a natural gas producer instead of a net importer. In the meantime, energy efficiency and renewable energy will remain at the heart of the country’s energy strategy. The government has established a set of institutions and is in the process of creating a regulatory authority for the electricity segment. This will contribute to the further consolidation of the regulatory framework for the development of renewable energy. The approval of the energy strategy and sector-specific contract on energy efficiency is also likely to help move the policy forward.
The promotion of R&D and innovation also stands to play a key role in the development of both renewable energy and energy efficiency, contributing to the strengthening of local expertise and development of applied research initiatives in connection with energy-related industries. However, a number of milestones on the path towards the greater development of renewable energy – including the liberalisation of the electricity market and the creation of appropriate incentives to facilitate the development of modern waste-management practices – are still to be reached.
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