Although Morocco has limited energy resources, the country is a major phosphate producer, as well as an important transit center for natural gas exports from Algeria to Europe. Information contained in this report is the best available as of January 2001 and is subject to change.
General Background:
King Hassan II, ruler of Morocco since 1961, died on July 23, 1999, and was succeeded by his son, Mohammad VI. The new King is believed to be an advocate of economic reform and political liberalization, but to date the record has been mixed.
Progress on the economic front, including privatization of state-owned companies, alleviation of poverty and unemployment, and deficit reduction, has been slow (in a sign of progress, in late December 2000, the national telecommunications company was partially privatized).
Meanwhile, in December 2000, authorities closed the countries' three leading independent weekly newspapers for a report critical of the Prime Minister, Abderrahmane el-Youssoufi.
Morocco's real gross domestic product is expected to grow by around 8.5 percent in 2001, up sharply from 0.7 percent growth in 2000 (and -0.7 percent growth in 1999), when the country was hurt by a serious drought.
In 2000, the agricultural sector, which makes up a large share (around 17 percent -20 percent) of Morocco's economy and workforce (around 40 percent -50 percent), contracted by around 18 percent.
Morocco's vulnerability to erratic rainfall patterns has encouraged the government in its attempts at economic diversification, particularly towards manufacturing and services (including tourism).
Morocco has a strong tourism sector, plus an expanding manufacturing base (which now makes up around 17 percent of Morocco's economy).
In 2000, an oil and gas discovery (of unknown magnitude) in the Talsint region near the border with Algeria raised hopes that Morocco could add another important asset to its economy, help cut the country's energy import bill (now around $1-$1.5 billion per year) and also attract new investment to the country.
In June 2000, King Mohammed VI paid his first visit to the United States and met with President Clinton.
Morocco maintains relatively tight fiscal and monetary policies, and this has helped reduce the country's fiscal deficit from 10 percent of GDP in the 1980s to less than 3 percent currently.
Morocco's inflation rate (consumer prices) is expected to average around 2.7 percent in 2001, up slightly from 1.9 percent in 2000, in part due to higher food and energy prices (the government has increased subsidies to cushion the impact of oil price increases).
The country's trade deficit should be reduced slightly in 2001, to around $4 billion, from $4.5 billion in 2000 (Morocco traditionally runs a merchandise trade deficit and a surplus on transfers -- largely from worker remittances).
Finally, foreign investment, which had picked up in 1999 (partly in response to government policies aimed at creating a positive environment for such investment), appears to have fallen once again in 2000.
Morocco attracted around $1.9 billion in foreign investment in 1999.
Morocco has begun a new five-year economic plan, which runs from 1999-2004. The plan calls for promoting job creation (unemployment is a serious problem in Morocco), exports and tourism, accelerating the country's privatization process (which as of late 1999, had seen 60 companies privatized since the program was launched in 1993), upgrading of infrastructure, and reducing social inequalities (especially between urban rich and rural poor.
The government also is considering imposing a value-added tax (VAT), as well as direct taxes on business and individual income.
Morocco has pursued an economic reform program supported by significant lending from the World Bank and International Monetary Fund (IMF) since the early 1980s.
This reform program has, at the IMF's urging, liberalized the foreign exchange regime, lowered tariffs and other trade barriers, reformed the banking system, restrained government spending, reduced the foreign debt burden (in part through "debt-for-equity" swaps, in part through refinancing), and encouraged foreign investment (now permitted in most sectors of the economy).
Morocco also has signed several agreements with the European Union on economic cooperation, including one establishing a free trade zone for industrial goods over a 12-year transition period.
The European Free Trade Association (EFTA), as it is known, came into effect on December 4, 1999, following ratification by both sides.
In March 1998, Morocco's first "gouvernement d'alternance" (government alternating between political parties from the right and the left) was installed.
Socialist Prime Minister Youssoufi has committed the government to fighting corruption and abuse of power.
Morocco traditionally has had almost no energy reserves (although recent oil and gas finds may be about to change this), but does contain the world's largest phosphate reserves, and produces significant amounts of fertilizers and phosphoric acid.
Morocco imports around 90 percent of its energy needs, including significant amounts of oil (about $900 million in 1999) and coal.
The government is encouraging increased coal and hydroelectricity production.
Coal imports and phosphate exports travel largely through the deepwater port of Jorf Lasfar, which is also the site of a $1-billion phosphoric acid plant and a coal-fired power plant.
As of early 2001, the decades-old dispute between Morocco and the Polisario Liberation Front over the Western Sahara continues.
A referendum on the future of the territory, a former Spanish colony, was scheduled for January 1992 under U.N. auspices, but has yet to be held.
In December 1999, the U.N. Security Council voted to keep the U.N. mission in Western Sahara through February 2000.
On February 18, 2000, U.N. Secretary General Kofi Annan stated that the core problem of determining who is eligible to vote on the question of independence for the Western Sahara region "could...prevent the holding of the referendum" indefinitely.
In January 2001, the Polisario said that it remained in a state of war with Morocco over the Western Sahara.
Oil and Gas:
Morocco contains insignificant proven oil reserves of 1.8 million barrels, although most sedimentary basins (especially offshore on the Atlantic continental shelf) in the country have not been explored.
At present, the country relies on imports (mainly from Saudi Arabia, Iran, Iraq, and Nigeria) for nearly all of its oil needs, except for about 200 barrels per day (bbl/d) from its Sidi Rhalem field, located in the Essaouira Basin.
This could change in coming years with the possibly significant discovery in August 2000 by Lone Star, a local subsidiary of US-based Skidmore, of oil at Talsint, near the border with Algeria. Initial reports indicated that Talsint contained as much as 20 billion barrels equivalent of oil and natural gas.
This was soon lowered to 1-2 billion barrels, then to 100 million barrels. Many oil analysts are skeptical that Talsint contains even this much recoverable oil and gas, and so far, Lone Star's well (Sidi Belkacem #1) at Talsint only has proven reserves of 10 million barrels or less of total hydrocarbons (the exact mix of oil and natural gas is unknown).
Production from Talsint could begin in 2003, and Lone Star has plans to drill up to 100 wells in the area at a cost of $1 billion.
Gas from Talsint could be used to generate power at a planned combined-cycle plant at Tahaddart near Tangiers, as well as to fuel industry in Casablanca and Kenitra.
Besides Talsint, other areas of Morocco which are being explored include: 1) the Loukos South Offshore block in the Atlantic Ocean north of Rabat, in which Lone Star holds acreage; 2) the Al Hoceima-Nador Offshore area in the Mediterranean, in which Conoco holds a reconnaissance license;
3) the Cap Draa Haute Mer Offshore area south of Agadir, in which Kerr-McGee, Enterprise Oil, and Energy Africa hold shares; 4) an offshore block south of Rabat, in which U.S. Vanco Energy Co. and the U.K.'s Lasmo Plc have oil exploration agreements; 5) a block at Labrouj in the center of the country, for which Lone Star has a contract;
6) an area around Ounoura, on the Atlantic coast near Essaouira, and for which Lone Star plans to invest $50 million; and 7) five deepwater blocks (Rimella A-E) on the Atlantic coast south of Agadir, for which Shell Maroc has signed an 8-year exploration agreement.
Source: United States Energy Information Administration.
© 2001 Mena Report (www.menareport.com)
