BRIEFING: Western Sahara: Trouble offshore

10 March 2006
Exploration of oil and gas in the Western Sahara region is a tale of two cities. The Bir Lehlou-based government of the Saharawi Arab Democratic Republic (SADR) is poised to put pen to paper in March to seven offshore exploration contracts following the launch of its first oil and gas licensing round in May 2005. But the acreage on offer to the six interested international oil companies is the same as that licensed for reconnaissance purposes to France's Total and the US' Kerr McGee (KMG) by the Moroccan government in Rabat in 2001.

The political dispute between the two governments over the territory has raged since the 1975 departure of its colonial masters, Spain, from what was then known as the Spanish Sahara. Rabat, claiming a historical right over the territory, argued that it should automatically revert to Moroccan rule. The Saharawis, led by the Polisario Front, believe that under a UN mandate on self-determination, the area should be self-governed.

Since then, neither side has budged. While maintaining its UN-designated status as a non-self-governing territory, the Western Sahara has been recognised by more than 70 countries, most of them members of the African Union. In 1991, the UN set up a mission to resolve the dispute and the international community has pushed for both sides to accept its mediation. But numerous attempts by the international body to hold a referendum on the status of the territory have come to nothing.

The intensity of the dispute is heightened by the potential oil and gas resources offshore. Morocco is the largest oil importer of any country in the Middle East and North Africa region, and its sensitivity to this trade imbalance has been exacerbated by the upward shift in oil prices over the last year. Control over the region's resources, though not providing an immediate fix, would ease Rabat's position in the future.

'It could be among the most attractive acreage in West Africa,' says Frederick Dekker, chief executive officer of the UK's Wessex Exploration, one of the bidders for the offshore acreage. 'The potential of the fields is not proven. But it's such a huge basin and it has all the ingredients for a petroleum system. It's hard to believe that at least some parts of it won't be highly prospective.'

In January, SADR launched a second, onshore, licensing round for a further six blocks, for which bids are due in March. But the production sharing contracts to be signed on both the onshore and offshore acreage will not come into force until the status of the territory is resolved. Companies will sign an assurance agreement governing the intervening period, during which they will be able to evaluate existing seismic data and geological samples.

Although this means there is no direct conflict with the licences awarded by Rabat, the companies granted permits by Morocco have come under considerable pressure to relinquish their interests in the region. In 2003, Total abandoned its interest in the 115,000-square-kilometre Dahkla offshore acreage, citing commercial reasons; Norway's TGS-Nopec, which had been conducting seismic studies for KMG, has also pulled out; and the Norwegian National Retirement Fund has divested its $52 million interest in KMG stock.

KMG itself is standing firm and in October renewed its permit to analyse seismic data on the 110,400-square-kilometre Boujdour block. 'We support the ongoing efforts of the UN to reach a permanent and amicable resolution of the dispute,' a KMG spokesperson told MEED on 2 March. 'We do not believe that our presence in the area prejudges or prejudices this and we hope to make a positive contribution to the area and its people.'

In recent months, the situation has been further complicated by the Polisario's claims that KMG is set to start drilling when the current reconnaissance permit expires in April. 'If the data shows good prospects, then the next step would be to sign an exploration permit,' says the KMG spokesperson. 'But we are still doing evaluation work and cannot speculate on future activities.'

SADR believes that any exploration work would be an infringement of UN rulings, citing the opinion of UN under-secretary Hans Corell in February 2002. While concluding that the contracts themselves were not illegal, Corell said that exploration and exploitation activities that disregarded the interests and wishes of the Saharawi people 'would be in violation of the principles of international law'.

In October, the Polisario issued a statement declaring that it 'cannot guarantee the safety of any individual involved in the intended operations of Kerr McGee', concluding that 'the Saharawi army must carefully consider its position and response if these inflammatory activities proceed'.

In recent months, there has been a lull in the violence that for years has characterised the struggle for control over the territory. But the coincidence of the award of offshore contracts by the Saharawis and the decision on exploration to be taken by KMG could once more inflame tensions that have smouldered in the region for more than 30 years. 'The UN has put a lot of effort into resolving the dispute,' Saharawi presidential adviser Enhamed Khadad told MEED in May. 'Morocco cannot deny a solution forever. But if a peaceful solution is not imposed by the international community, we will have to consider other means - an intifada or a return to armed struggle.'

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