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Sound Energy refocuses its gas activities in Morocco

While Algeria ratified, the de-supply of the Maghreb Europe Gas Pipeline (GME) on the occasion of the visit to Algiers, of the third vice-president of the Spanish executive, Teresa Ribera, the British Sound Energy plans to refocus its gas activities in Morocco.

Also Sound Energy says it is ready to sign a key supply agreement with the state public service, but in return hopes for a rapid conclusion of the tax dispute between it and this same state and which would have led the company to suspend some of his projects. Indeed, this situation has led it, while keeping its most important development plans under review, to go ahead than with the much smaller micro-LNG project and to reduce costs. activities in particular those of explorations.

The tax dispute weighs the wings of Sound Energy for a suitable development

In a recent interview with S&P Global Platts, Sound Energy CEO Graham Lyon said his company, which operates the largest gas discovery ever made in the North African country, was ready to continue work on development at its Tendrara field in eastern Morocco, notably with the signing of a key sales agreement with the state-owned company ONEE. Sound Energy is a partner in Tendrara of the Moroccan public company Office Nationale des Hydrocarbons et des Mines (ONHYM), which is supporting it in its multi-million dollar tax dispute. “ONHYM has been very supportive and recognizes that we are right,” said Lyon, adding that his appeal would be heard from next month. Lyon said he hoped the case would be resolved quickly, but warned it could “drag on,” meaning Sound Energy could ease off on Tendrara’s future development.

Sound Energy is committed to a final contract for the sale of gas locally

Sound had signed a memorandum of understanding at the end of 2019 to supply 300 million m3 of gas to ONEE from Tendrara, enough to cover about a third of its gas needs. Despite the ongoing tax dispute, Lyon also said it “intended” to sign “anyway” the final gas sale agreement with ONEE. “Without this trigger, we cannot start the funding,” he said, adding that the initial engineering of the development was complete. In addition, Sound is preparing to invest $ 250 million in the project, including new wells, a gas processing plant and a 120 km secondary pipeline to connect to the GME trunk line. Lyon said there were also important upstream opportunities that could be exploited in eastern Morocco. “We have a lot of exploration potential, maybe 30 different sites where we could consider drilling. If only 10% are successful, we would be able to meet Morocco’s national gas demand,” said Lyon.

Sound Energy projections: meeting Morocco’s domestic needs before Europe

“And as soon as we have satisfied the domestic needs of Morocco, we can sell in Europe”. He continued, “But I am determined not to do anything other than our commitments. We cannot put the infrastructure in place when we have the tax problem on us”. Lyon added that Morocco was extremely under-explored. “We are sitting on reservoirs with a geology similar to Algeria.” “I am sure that we will succeed in this project, if we undertake it”. New gas discoveries in Morocco could also be used to supply Spain via the GME pipeline, whose transit agreement is due to expire at the end of October. In this configuration, Lyon outbid, “Morocco is losing since it satisfies almost all of its gas demand thanks to imports from Algeria, supplied in partial payment for the transit service”.

The closure of the GME boosted Morocco’s ambitions

“The threat of Algerians cutting off their gas has focused the minds of Moroccans a little more on trying to develop some of their national resources rather than importing energy,” Lyon said. The new government wants to focus on domestic gas production, which it sees as a key transitional fuel. “We fit in very well in this space,” said Lyon. In the meantime, Sound Energy is continuing its micro-LNG project and has signed a gas sales agreement with local fuel supplier Afriquia Gaz, which also owns a small stake in Sound Energy. “We are very advanced in setting up a process and signing a contract for the construction of the LNG plant,” said Lyon.

“We will probably have – via Afriquia Gaz – six or seven industrial users of our cheaper and very demanding LNG requested that the imported LPG “. In addition, Morocco is also considering importing LNG into a new floating import terminal, after launching a call for tenders last March for the supply of a floating storage and regasification unit. However, Lyon said that “imported LNG would be more expensive than domestic gas production. The simplest and most profitable gas is domestic gas”.

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