Oil Companies Very Keen On Western Sahara

Oil Companies Very Keen On Western Sahara Despite The Geopolitical Problems. Oilbarrel.com, 14 May 2005.

Published 14 May 2005

Despite The Geopolitical Problems

By Helen Campbell



The term ‘geopolitics’ might have been coined especially for places like Western Sahara. Tensions flare high almost thirty years after Morocco’s controversial occupation of this North African territory, with oil playing piggy in the middle. Hostilities could be fuelled further this week with the announcement by the territory’s exiled government of an oil licensing round.

Western Sahara comprises 266,000 sq km of desert wedged between Mauritania, Morocco, Algeria and the Atlantic Ocean, with La’Ayoune as its capital city. The UN has tried for fourteen years to broker a peace deal between Morocco and the Frente Polisario, the self-proclaimed government-in-exile of what it calls the Saharawi Arab Democratic Republic (SADR). In 2003 Polisario accepted, but Moroccan officials in Rabat rejected, a proposed four-to-five year transitional period followed by a referendum on independence and the ball is still firmly in the UN’s court.

Last month the UN extended Minurso, its Western Sahara mission, until October 31 this year, the latest in a series of such extensions. Texan oil company Kerr McGee followed days later with a declaration that it had extended by six months its contentious ‘reconnaissance agreement’, originally struck with Rabat in October 2001, covering acreage offshore Western Sahara and itself serially extended.

The agreement allows geological and geophysical studies offshore Cap Boujdor, 300 km from the ‘border’ with Morocco proper. While the work - including a drop core programme during which samples are taken from the seabed - stops short of actual drilling, the thorny issues are that any kind of agreement was signed with Morocco at all, and the wording of certain UN legal documents.

Rabat’s jurisdiction of Western Sahara is not internationally recognised, while the SADR, defined under international law as a ‘non-self-governing territory’, is recognised by more than 70 nations.

“For KMG to renew their contract… flies in the face of attempts by the wider petroleum industry to instil greater moral and ethical best practice,” says Tom Marchbanks of campaigners Western Sahara Resource Watch. “By continuing its activities in Western Sahara … KMG is legitimising the Moroccan occupation while actively seeking to exhaust valuable potential resources which will be an important livelihood for the returning Saharawi - who have resided as refugees in the Sahara desert for 30 years.

Kerr McGee appears largely alone in its oil dealings with Rabat on Western Sahara following the pullout from the territory of Norwegian, Dutch and Danish seismic firms in 2003 and mid-2004 and then Total - which had a similar agreement with Rabat - last November. The French giant cited the lack of exploitable hydrocarbons but observers maintain that, as no wells have been drilled, it is too early to determine prospectivity and that Total caved in under political pressure.

Kerr McGee, meanwhile, remains determined, with its press office unbendingly giving the same response to a number of entirely different questions posed for this article. “We support the ongoing efforts of the UN to find a permanent and amicable solution to the Western Sahara issue, and we hope to make a contribution to the development of this area and its people. Kerr-McGee by its reconnaissance permit has not prejudged or prejudiced such efforts,” said a spokesman in response to the question of whether Kerr McGee had any communications with Polisario, and when the company last employed a contractor to carry out work on its behalf.

Kerr McGee points out that the UN confirmed the legality of its reconnaissance permit in 2002, when it concluded that while the contracts awarded by Rabat were not in themselves illegal: ‘…if further exploration and exploitation activities were to proceed in disregard of the interests and wishes of the people of Western Sahara, they would be in violation of the principles of international law applicable to mineral resource activities in
non-self-governing territories.

Under international laws decreeing the treatment of non-self-governing territories, Morocco’s granting of rights in Western Sahara to Kerr McGee holds no more sway than if those rights had been granted by Luxembourg or Ireland, according to one legal expert. Furthermore, says political scientist and lawyer Raphael Fisera, the term ‘further exploration’ is key as the UN legal report emerged prior to Kerr McGee’s drop core programme, which, says Fisera, can be interpreted as ‘further exploration’.

“The nuance introduced between the initial phase of exploitation (seismic reconnaissance) and “further exploration” (supposedly exploratory drilling) and exploitation is highly dubious,” he wrote in a recent thesis.

Perhaps more concerned with the ethics of Kerr McGee’s actions than the legality, some investors have already dumped shares and the Norwegian Petroleum Fund may shortly follow suit.

UK-registered junior Wessex Exploration also initially chose to go with the Moroccans but put any project on the backburner. Its managing director Frederik Dekker says Wessex is about to assign its dataset for the mostly onshore Aaiun Basin to an unnamed 'shortly-to-be-registered company', which other sources say is siding with Polisario.

“Wessex together with another company made an application about two years ago for a reconnaissance licence with the Morocco authorities over part of what Morocco calls the south western provinces but elsewhere is referred to as Western Sahara,” Dekker told oilbarrel.com. “ We met with [state oil company] Onarep and at one time looked like starting a dialogue with them but we were never invited back to Rabat and shortly after withdrew our application.

The UN, while stopping short of recommending Kerr McGee’s withdrawal from Western Sahara, has asked all parties involved [in the wider dispute] not to take any provocative action, remarks which appear to be directed at the Kerr-McGee deal.

“The UN has not issued any views [on Kerr McGee’s extension],” says Carmen Johns, Minurso’s La’Ayoune-based political affairs officer. “However, I would like to draw attention to the Secretary-General\'s latest report on the situation … [in which] he expresses the sincere hope that all concerned will show the necessary political will to break the current deadlock.” That report adds: “In the meantime, both parties must refrain from inflammatory statements or taking any action, including legal, political or military, which would have the effect of further complicating the search for a solution or cause unnecessary friction.

This week’s planned presentation to industry, government and legal figures, scheduled for Tuesday 17 May in London and at which the Polisario will announce details of a licensing round, is expected to provoke outrage in Morocco. Oil ministry officials did not respond to emailed requests for an interview about the signing of agreements with foreign companies for Western Sahara, whether by themselves or Polisario.

Should the SADR ever become an independently recognised state, UK companies Sterling Energy and Premier Oil would be able to take advantage of rights acquired through respective deals with Fusion Oil (now owned by Sterling). In 2002 Fusion negotiated a technical cooperation agreement with Polisario covering all of Western Sahara’s offshore territory. The agreement gave Fusion the right to select up to three exploration licences of up to 20,000 sq km each, within six months of the SADR being admitted to the UN.

The agreements exist on paper but Sterling and Premier have a raft of current projects elsewhere and are far from pushing the matter. A spokesman for Sterling says the company ‘has a good technical knowledge of the area and remains interested in what might happen but is not actually pursuing any interest”.

While Polisario and Morocco fight over control of the area and the Saharawi people’s fate - matters that must be resolved with or without oil - the presence of hydrocarbons remains unproven. A handful of inconclusive offshore wells were drilled in the Aaiun Basin in the 1960s and 1970s and while Fusion earlier spoke positively about the region, current views are mixed. Hopes are pinned on the huge oil finds off Mauritania, in structures that may extend northwards into Western Saharan waters.

“There may be analogues with some of the finds off Mauritania,” says analyst Ross Millan of consultants Wood Mackenzie, adding that drilling success off Morocco itself yet eludes Rabat. “There were three deepwater wells drilled there [Morocco] in 2004, two by Shell and one by Vanco, and they have all been dry. There was a lot of hope pinned on the two Shell wells but it’s early days and there is a lot of potential there.

Given the size of the Mauritanian finds, the feeling is that Kerr McGee is extremely anxious to hold onto the ‘rights’ it has been allocated by Rabat, even if the company appears to be shattering its reputation in the process.

“Kerr McGee is understood to be very keen to hold onto the acreage and if there were no outside influences it would be keen to make it a petroleum exploration permit,” says Millan, “ However, the real problems would begin if someone started drilling. That would further the tension. Until there is some overall conclusion [as regards sovereignty] I don’t see too much happening.

Western Sahara is also rich in phosphates and possesses excellent fishing opportunities: Morocco is not about to give up on these in a hurry or on what may be its best prospects for decent oil and gas reserves. But Polisario has for years clearly demonstrated its preparedness to fight for the independence of the SADR and is not about to give in either.

Late April brought renewed threats of violence in the region and Kerr McGee’s opponents say the extension of its agreement has not helped matters. Mr Annan, you have six months.

Helen Campbell is a graduate in modern languages, speaking French, German and Russian. For the past eight years she has been an energy writer for a range of industry publications. Her special interests are Russia and the rest of the former Soviet Union.
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