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

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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