Morocco’s minister of energy transition Leila Benali announced on February 2 that she was suspending a tender for a $1 billion floating storage and regasification unit (FSRU) at Nador on the Mediterranean coast – a move which has caught the industry off guard.
Morocco is looking to diversify its sources of power generation away from coal and aims for renewables to account for 52 percent of installed capacity by 2030, up from 45 percent now.
The North African state currently imports 90 percent of its energy requirements and the planned gas project was promoted as a cornerstone of the kingdom’s independence strategy.
At the same time, though, the project is likely to be redundant. Morocco is pursuing two other projects that will effectively do the same thing. Thus, while the project’s cancellation is surprising – and remains to be fully explained – it does not signal a dramatic shift in Morocco’s energy strategy.
The kingdom imports all its natural gas. It previously received free gas from Algeria in exchange for letting Algerian gas transit through Morocco to Spain via the Gazoduc Maghreb Europe (GME) pipeline. After a diplomatic falling-out, Algeria shut down that arrangement in 2021.
Morocco then reversed the arrangement: instead of gas flowing north to Spain, Spain now pumps gas south to Morocco. Morocco buys LNG on the spot market (usually at a premium), Spain regasifies it, and sends it through the pipeline to Morocco.
It’s costly, but Morocco has no domestic gas reserves or LNG terminals, so it has no other option.
The Nador gas project was supposed to have provided an alternative to the costly reverse-mode GME arrangement. The project’s capacity would have been 5 billion cubic metres/year, (bcm/yr) with the first gas expected in 2027 – exceeding Morocco’s projected requirements for the next decade.
But Nador is only part of the story. Morocco has also planned a smaller FSRU at Mohammedia on the Atlantic coast, rated at 1.7 bcm/yr.
And it is pursuing a far more ambitious project: a 6,000km subsea pipeline connecting Nigeria to Morocco – the Africa-Atlantic Gas Pipeline – which is due to deliver roughly 4-5 bcm/yr.
In short, Morocco has a lot of irons in the fire. The problem is execution and timing. The Nador FSRU is suspended indefinitely. There is no timeline for the Mohammedia FSRU. And the Africa-Atlantic Gas Pipeline is yet to launch.
In fact, given the number of ongoing projects, Morocco is likely to have already accounted for one or more of these not coming to fruition. Had they all come online, the kingdom would have had a surfeit of gas – 5bcm/yr from Nador, another 5bcm/yr from the Africa-Atlantic Gas Pipeline, and 1.7bcm/yr from Mohammedia/Jorf Lasfar. That’s a total of almost 12bcm/yr.
According to Morocco’s own calculations, it will only require 3bcm/yr to meet 100 percent of its electricity requirements in 2040.
With planned projects amounting to nearly 400 percent of the kingdom’s projected future gas requirements, it’s clear that some of these projects were prospective and could be suspended or sacrificed entirely without jeopardising Morocco’s energy import strategy.
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This is what appears to have happened – at least for the time being – with the Nador FSRU project.
The two other projects are still on the books and Nador itself can be revived in the near future, meaning that either the Mohammedia FSRU or the Africa-Atlantic Gas Pipeline (or both) can be cancelled or delayed without any impact on Morocco’s strategy.
The only downside, then, is that of the three gas import projects, Nador was the most feasible in the near term.
Mohammedia is a medium-term solution and Africa-Atlantic Gas Pipeline is very long term. And this of course means that Morocco is stuck importing LNG via the GME, which is less than ideal, especially with summer electricity consumption spikes just around the corner.
Geoff Porter is founder and president of North Africa Risk Consulting
