PESA: Fusion Provides 200,000 km2 Study For New African Acreage Chance

PESA News, April/May 2003, Issue Number 63.

Published 17 February 2005

Petroleum Exploration Society of Australia (PESA)

Fusion Provides 200,000 km2 Study For New African Acreage Chance
- Saharawi's future hangs in the balance

Perth based oil and gas exploration company Fusion Oil & Gas has signed an agreement with an African government which could see it acquire up to 60,000 km2 of unexplored offshore acreage after it agreed to carry out a study to help determine the potential of more than 200,000 km2 of virtually unexplored acreage to get, what could be, a substantial foothold into the region.

But there is a catch. The government Fusion has negotiated the deal with, the Saharawi Arab Democratic Republic (SADR), represented by the Polisario independence movement, does not have control over its own lands ever since its former colonial power, Spain, withdrew in 1976.

The Spanish withdrawal prompted an invasion by neighbouring countries Morocco and Mauritania, forcing the Saharawi people to live in refugee camps in Western Sahara and neighbouring Algeria. The future of the people of the Western Sahara has been hanging in the balance to this day.

Mauritania later withdrew from the conflict. But Morocco's claim for sovereignty has not been recognised internationally and is being contested by the Polisario movement. The invasion prompted the Polisario to wage a guerrilla war which ended in a cease fire in 1991. The United Nations has been involved in trying to negotiate a settlement to the dispute ever since the cease fire was declared.

Fusion Oil Managing Director, Alan Stein, said Fusion had become involved in Western Sahara after it decided to seek further opportunities in the region, following its entry into Mauritania in 1997.

"In 1999, after having looked to the south of Mauritania in Senegal, The Gambia and Guinea Bissau we began looking to the north where there was a big void on the map", Stein said. "We approached the Foreign and Commonwealth Office (FCO) in London and asked who do we talk to?" Fusion's London based Chairman, Peter Dolan, was encouraged to talk to the Polisario's UK representative, Brahim Mokhtar, to gain a further understanding of what was happening in the region.

"I don't think advising us to talk to the Polisario was formal FCO policy", Stein said. "However, what we have observed is that while formal policy is, not surprisingly, supporting the American position, I think you will find within the government of the day in the UK, and within the Civil Service, a hell of a lot of sympathy and support for the Saharawi people. In the world of realpolitik, however, legal and moral considerations alone do not always carry the day in terms of official government policy.

Mokhtar explained the Saharawi struggle, which Stein said was a real 'eye opener' for the Fusion team and, after the meeting, it was decided to dig deeper into the issue and remain in touch with Polisario. "At the time of our first meeting all we said was we'd like to talk to you about the offshore acreage when everything is settled, since it is not appropriate right now", he said.

In the meantime, Fusion prepared a brief report outlining the history of oil and gas exploration offshore Western Sahara because, he said, Polisario knew little about the petroleum industry. "We kept in touch and every now and again would have a bit of a chat about how things were going", Stein said.

In October 2001 the Moroccan government, through its oil company ONAREP, controversially issued reconnaissance licenses in October 2001 to two multi-national oil companies, Kerr-McGee and TotalFinaElf to explore in the same area.

The move prompted the UN Security Council to investigate the legality of Morocco's actions. But in a vague finding, the UN's legal counsel, Hans Corell, reported on January 29th, 2002, that licensing the Western Sahara aquatory violated international law if the interests of local inhabitants were not taken into consideration prior to drilling and production.

"If exploration and exploitation activities proceed in disregard of the interest and wishes of the people of Western Sahara, they would be in violation of the international law principles applicable to mineral resource activities in non-self governing territories", Corell said.

The companies awarded contracts to perform the collection of seismic data to Norwegian company TGS-NOPEC, which also became embroiled in the controversy. TGS-NOPEC issued a press release dated June 7th, 2002, saying it had no agreement to participate in, or profit from, any exploratory drilling or any production or exploitation of mineral resources of the area. Citing the UN legal decision, the company said the contracts for "oil reconnaissance and evaluation" did not entail exploitation or the physical removal of the mineral resources.

According to a March 6th, 2003 news report, TGS-NOPEC announced it would not pursue any further seismic work in Western Sahara. TGS-NOPEC's Chief Financial Officer, Arne Helland, reportedly said that, with hindsight, the company should not have "been so imprudent as to shoot 15,000 km of seismic" in waters claimed by Morocco. Helland said TGS-NOPEC would not now carry out any follow-up 3D seismic in the area, even if there was a need for such work.

In the meantime, TGS-NOPEC was about to hand over all data gathered to Onarep and the two oil companies, having completed the survey last month, the report said. A TGSNOPEC spokesperson confirmed to PESA News that Helland attended the meeting but could not corroborate all of the statements attributed to him in the report. She said TGSNOPEC was planning to issue another press release about the issue, but this was not available as PESA Newswent to press.

Australian based Polisario representative, Kamal Fadel, said he was surprised when the companies announced they had been awarded licenses to undertake exploration work in disputed waters. "This is a territory that is still on the UN list as a non self governing territory, it is a decolonisation issue and
the UN mission is present in the territory", Fadel said. "No country in the world recognises Morocco's sovereignty over Western Sahara."

Fadel said the companies were "taken in" by Morocco's political attempts to "legitimise" its annexation of Western Sahara. "It is also an attempt to get two important countries involved in the territory having business interests and that will help their [Morocco's] case in the UN, and also make their occupation of the territory a fait accompli."

Fadel said Polisario had written letters of protest to TotalFinaElf and Kerr-McGee, and, as far as he was aware, they ignored Polisario's protests. "I hope that those companies, and the countries behind them, have the wisdom to understand that this is a case of decolonisation", he said. "This is our people's right to self-determination and we will not give up that right, and that this issue will have to be solved in a just, legal and fair manner because any other solution will not be lasting."

(Photo caption: "This is not a contest between Fusion and other oil companies. This is, and always has been, a struggle between the Government of Morocco and the Saharawi people." Fusion Oil Managing Director, Alan Stein)

He said Polisario was not against foreign investment in Western Sahara, which was "quite rich" in mineral resources. "We are not against companies being involved in the future of Western Sahara, but it has to be done with the people who have a right to deal in the territory, Saharawi's themselves, not
with Morocco", he said.

Stein said Morocco's decision in 2001 to award reconnaissance licenses in offshore Western Saharan territory changed everything. "The decision by the Moroccans to license that acreage caught the industry completely by surprise", Stein said. "I genuinely believe there was an understanding that this was an area that was off limits, it was a disputed zone." He said the Polisario decided to make a counter claim on the same area.

"After looking at the international law in relation to non self governing territories we decided that it wasn't appropriate at this time to make a counter claim in the form of an exploration licence", Stein said. This was despite the Polisario having a stronger case to do so than the Moroccans did. "We entered into a technical co-operation agreement [with the SADR] to make sure that we were doing the right thing ", he said. "We agreed to work together and any licenses would be awarded once the situation was resolved."

The agreement provided for Fusion to carry out detailed geological and geophysical studies and evaluation of the area, extending from Mauritania in the south to Morocco and the Canary Islands in the north, covering an area of about 200,000 km2, over a 16 month period.

The technical study, which will become the property of the SADR, is expected to be finished in August 2003. Stein said it will give Fusion the to right to apply for some exploration acreage for a period of time. "Should we choose to do so we can make up to three license applications, for areas of up to 20,000 km2 each", he said. "The applications will then be ratified by the government in the understanding that they will become effective when there is a resolution to the political situation."

In undertaking the study, Fusion has had to dig deep in collecting data from a wide variety of sources. "We have collected a very wide and disparate set of technical data that has been acquired by oil companies, service companies and by academic institutions", Stein said. "That ranges from conventional marine seismic, academic seismic research cruises, and even seismic acquired by the US Navy which has been integrated with previous onshore and offshore drilling results, satellite oil seepage data, satellite gravity data, geological reports, and onshore satellite images. Given our experience elsewhere along this coastline we also have a great deal of regional knowledge which can be brought to bear in addition to the basic data."

Stein was reluctant to discuss details concerning the cost of the study however he said it is a fairly substantial investment, but one which is within Fusion's means and was justified in terms of the upside potential.

He said the two exploration licenses Fusion is involved with in Mauritania covered an area of about 20,000 km2. "We have a 3% and a 6% interest in PSC A and PSC B where there have now been two deep water oil discoveries ", he said. "We have effectively built the company around those interests."

"We are now talking about the possibility of up to three exploration licenses, offshore Western Sahara, together covering three times as much area, where Fusion will have an initial equity of 100%, providing the flexibility to drive the whole programme forward", he said. "Now there are still huge technical risks because this is an un-drilled frontier with very little data but that is okay, we can address those issues once we get into the work programme."

Fadel said Polisario had been trying to get governments around the world to recognise the status of Western Sahara as an independent country and expose what is happening in the territory to the wider community.

"We are trying to build relations of friendship, understanding and cooperation, not only for now but also for the future when Western Sahara gets its full independence", Fadel said. The SADR is recognised by 74 countries and the African Union, formerly the Organisation of African Unity.

The UN established the UN Mission for a Referendum on the Western Sahara (MINURSO) in the disputed territory, and for the past 12 years, according to Fadel, has spent more than $US500 MM ($840 MM) trying to organise a referendum to let the people decide their fate. But Morocco has continually stalled the referendum process, and in the meantime has been pouring its own people into the region to participate in the referendum when, and if, it happens.

"The referendum has been delayed and obstructed by the Moroccans for many years now because they fear the verdict of the Saharawi people, and the UN has not been very effective in putting pressure on Morocco to allow the referendum to take place", he said. In the meantime, the Saharawi have been held captive in occupied territories by Moroccan forces, or have been living in refugee camps near the Algerian town of Tindouf, ever since their country was invaded in 1975.

But after waiting 27 years for a democratic solution to determine the future of their country, their patience is wearing thin. "It is frustrating, it is disappointing and our people's patience is running out", he said. "And at the same time as our people are waiting in the refugee camps in dire conditions, our people in the occupied territories have been subject to human rights abuses by the Moroccans."

Up until now Polisario has been prepared to cooperate with the UN to "give peace a chance". "But it is high time the UN did something because we cannot just wait there indefinitely", he said. "Our military people and our people in general are really putting pressure on the [Polisario] leadership to do something because what is happening now is not good. They are saying that if the UN fails we have to resume military action."

The mandate for the UN mission in Western Sahara is due to expire on March 31st, 2003, and the Security Council is expected to decide its next course of action. "We are hoping that the UN will decide to go ahead with the referendum because there is no reason for them not to do so", Fadel said. "In case they declare they can't do that, and they are withdrawing from the territory, then we will have to do something ourselves."

Another option currently on the table is a proposal by the UN's peace negotiator, former US Secretary of State, James Baker, to give wide-ranging autonomy for Western Sahara under Moroccan sovereignty. But this proposal has not impressed the Polisario. "Our position is that we reject utterly that option", Fadel said. "If it were to be considered by anybody, we reject it, we will not accept it because it is illegal. It is in violation of UN resolutions and of the practice of decolonisation, and because it is against the wishes of the Saharawi people."

Fadel called on the UN to take a hardline stance on Morocco to finally resolve this issue or the consequence could be a return to violence. "The UN Security Council must indicate clearly to Morocco that it has to allow the process of organising the referendum to take its course, because anything apart from that will create instability and havoc in the region", he said.

Stein said he believed the fight over the control of Western Sahara was not simplistically about legality or morality. "There is an element of geopolitical expediency", he said. But Stein emphasised that Fusion was not involved in the geopolitical machinations surrounding the issue. "Fundamentally for Fusion, this is not a political issue, although we take an interest in the political struggle, we are not part of the political process", he said.

"We do not see this as a contest between Fusion and other oil companies. This is, and always has been, a struggle between the government of Morocco and the Saharawi people. We have chosen to provide technical assistance to the Saharawi people. If that means we end up being able to pursue the relationship through to taking an exploration license, then so be it. If that opportunity does not materialise, then so be it also."

He rejected a suggestion that the company was involved to raise its profile. "I don't think there has been much profile for Fusion in doing this", he said. "If anything, we are exposing ourselves to an aspect of political risk that companies wouldn't normally want to be exposed to."

"The worst that can happen is that we will have made an investment in deepening our understanding about how the petroleum geology of this whole coastline works while being comfortable in the knowledge that we have acted with integrity" Stein said. "If, as we fully expect, there is a just resolution that allows the Saharawi people to administer their own territory, then there is an opportunity for us to explore a whole new province and we will have delivered a game changing opportunity to our shareholders."

(Photo caption: "It is high time the UN did something because we cannot just wait there indefinitely.", Australian based Polisario representative, Kamal Fadel)
Kerr-McGee Responds

"On October 4, 2001, Kerr-McGee du Maroc Ltd, an affiliate of Kerr- McGee Corporation, and ONAREP, the Moroccan state oil company, entered into a Reconnaissance Permit by which Kerr-McGee undertakes to perform geological and geophysical studies in a maritime area offshore Boujdour.

The reconnaissance permit allows us to conduct research activities, including seismic surveys. We are currently continuing our research activities, which include processing seismic data. The UN Under- Secretary for Legal Affairs has confirmed that we acted lawfully in contracting with Morocco. Neither the United States nor the United Nations recognizes any other administrative authority or government in that territory.

Kerr-McGee continues to support the ongoing efforts of the United Nations to find a permanent and amicable solution to the Western Sahara issue. We hope to be able to make a contribution to the development of this area and its people. It would be inappropriate to speculate about what the future may hold in this area."

Debbie Schramm
Director - Corporate Communications
Kerr-McGee Corporation

TotalFinaElf Responds

"The contract dated October 2001 between the Moroccan agency ONAREP and TotalFinaElf aims at evaluating the possible petroleum potential offshore Western Sahara.

The United Nations Under-Secretary-General for Legal Affairs, after a thorough review, has made a statement to the Executive President of the Security Council on January 29th 2002. According to this statement, this contract is not illegal under prevailing practice of States or international law.

The Under-Secretary-General for Legal Affairs stated also that it could be considered as unlawful in case of development decision, if it did not take into account the interests and will of the Saharawian people. Morocco and Polisario representatives accepted this statement publicly.

TotalFinaElf's operations are therefore in full agreement with the international law and the positions of the political stakeholders of the area. It is clear that, in case of discovery, the situation could have to be
re-examined in close connection with the United Nations.

We are currently performing reconnaissance and seismic activity as contemplated under the reconnaissance permit we have with ONAREP."

Patricia Marie
Relations Presse

To view the complete UN legal opinion letter click onto:

PESA News contacted representatives from Onarep to comment on this article,
but they did not respond.

PESA's Western Sahara acreage map:

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