Minnows take on oil giants in a sand storm

A PAIR of small British energy companies are squaring off against French and American multinationals in a conflict over oil in a barren corner of Northwest Africa.

Published 02 June 2004

Sunday Times
May 22, 2004

Geopolitics and exploration rights collide in isolated Africa
By Carl Mortished 
http://business.timesonline.co.uk/tol/business/article429568.ece

Premier Oil and Sterling Energy have acquired conditional exploration rights offshore of Western Sahara from the Polisario Front, the movement fighting for the liberation of the territory from Morocco, which has occupied Western Sahara since 1976.

The territorial waters of Western Sahara, equal in size to the United Kingdom but as yet unexplored, are attracting keen interest after recent large oil finds in neighbouring Mauritania. But the two British companies find themselves facing up to Total, of France, and Kerr-McGee, the American energy and chemical giant. Each has been granted by Morocco exploration rights that together cover the same offshore territory granted by the Polisario Front to Premier and Sterling.

Since Spain abandoned the patch of desert in 1976, Morocco claims to have “reintegrated” Western Sahara, a process that has involved a military occupation force of more than 100,000 troops to subdue no more than 260,000 Saharawi, the indigenous tribal people, most of whom live in Tindouf, a refugee camp in Algeria.

The Polisario is incensed that the administration in Rabat has granted exploration concessions to Total and Kerr-McGee. After conducting an initial seismic survey, neither company has done any work that might inflame an already delicate political situation.

Mhamed Khadad, a member of the Polisario leadership and the movement’s UN co- ordinator, reckons that Rabat’s behaviour reveals its true interest. Apart from the prospect of oil, there are valuable phosphate deposits in the north of the territory and the ocean teems with fish, a prize coveted by French and Spanish fishing fleets.

“Their interest is primarily commercial,” says Mr Khadad of the Moroccans. “There are no emotional or cultural links between Morocco and Western Sahara. Moroccans are farmers and they cannot live in Western Sahara.” The region is a desert with frequent sandstorms; there is no water and in summer temperatures rise to 47C. According to the Polisario, the occupation is costing Morocco $1 million (£559 million) a day, importing food, water and energy to maintain the army and the Moroccan settlers.

The Polisario wants Morocco to implement a Peace Plan agreed unanimously in 2003 by the UN Security Council — a transitional period followed by a referendum on self- determination. Rabat rejects this, offering instead “autonomy within the framework of Moroccan Sovereignty”.

And now there is the lure of oil. Interest in the oil and gas potential of Northwest Africa is growing after a series of unexpected discoveries in Mauritania. Woodside, an Australian company, has already made several finds, drilling seven wells and encountering hydrocarbons in four, an unusually high success rate. At Chinguetti, its first discovery drilled in May 2001, it found a substantial oilfield 90km offshore at a water depth of 800m.

Recoverable reserves in the Chinguetti field could total 130 million barrels and Woodside has made further discoveries, including Tiof, which may contain 200 million barrels. Dana Petroleum, another oil company, has made a significant gas find, approximately one trillion cubic feet, at its Pelican-1 well, offshore from Northern Mauritania.

That encourages some to believe that the oil and gas-bearing geological structures continue north from Mauritania into the disputed territory of Western Sahara. Neil Hodgson, general manager for exploration at Premier Oil, has seen the seismic surveys of Western Sahara and reckons something lurks offshore. He says: “If you look at the geology, you can follow the source rocks from Mauritania into Western Sahara.”

The survey, conducted by TGS-NOPEC, a Norwegian firm, and initially sold to Total, is broad brush. Detailed seismic work would need to be done prior to drilling. However, Mr Hodgson reckons the survey shows evidence of geological “traps” — the structures sought by petroleum geologists where oil flowing from source rocks may be collecting. “Until you have drilled, you don’t know if all the pieces in the puzzle are there, but it leads one to be optimistic,” he says.

Premier acquired its interest in Western Sahara in a deal with Fusion, a tiny Australian oil exploration company that made its name promoting opportunities in Mauritania. Fusion was subsequently taken over by Sterling Energy in a £38 million bid last December. In a deal typical of its buccaneering style, Fusion struck a “technical co-operation agreement” with the Polisario Front to study geophysical data. More importantly, in the event that the Saharawi Arab Democratic Republic is granted admission to the United Nations, Fusion would get exclusive rights to three exploration licences, each representing 20,000 sq km. Since the bid, those rights are controlled by Sterling Energy and under the deal with Premier Oil, the latter is entitled to 35 per cent of whatever licence is awarded by a future Saharawi government to Fusion-Sterling.

It is a gamble on oil and geopolitics. It seems fitting that the irrepressible Saharawi are supported by small independent firms like Sterling and Premier while the big guns, Total and Kerr-McGee, line up alongside the imperial court of King Mohammad VI in Rabat.

While the Polisario protests against Rabat’s attempt to exploit Western Sahara, it shows little resentment towards the manoeuverings of the oil majors.

Mr Khadad is surprisingly conciliatory and even suggests that the Polisario would be prepared to share natural resources with Morocco, conditional on agreeing self-determination for the Saharawi. He says: “The fight for the last 30 years was for democracy. That is not negotiable but all the rest is negotiable. If that means giving part of our wealth to Morocco, we will do it.”

It sounds like a deal in the making but that is to ignore the inequality of power with some 30 million Moroccans eyeing up a potential mineral prize claimed by just 260,000 nomadic tribal people. Nonetheless, the Polisario take every opportunity to point out the difference between them and their Moroccan overlords who, according to Amnesty International, have still not accounted for the disappearance of hundreds of Saharawis.

While Morocco is a monarchy, the Polisario, claims Mr Khadad, is run by a democratic congress. In a clear pitch to Western sentiment, Mr Khadad explains that the Saharawi are different to a conventional Western view of Arab society. He says: “Religion to us is a personal belief. It should not be imposed by the state. Women play an important political role in our society, a quarter of our representatives are women.”

Oil would transform an extremely poor society. “It would be good news for the Saharawis,” Mr Hodgson says.

But the struggle for control of that oil may make the transformation even more distant.
 

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