VZCZCXYZ0009
RR RUEHWEB

DE RUEHRB #1545/01 2711533
ZNR UUUUU ZZH
R 281533Z SEP 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 7510
INFO RUEHMD/AMEMBASSY MADRID 5799
RUEHAS/AMEMBASSY ALGIERS 4552
RUEHCL/AMCONSUL CASABLANCA 3554

UNCLAS RABAT 001545 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ECON MO
SUBJECT: FUELING MOROCCO'S FUTURE ENERGY NEEDS 
 
REF: RABAT 681 
 
¶1. Sensitive but unclassified - protect accordingly 
 
¶2. (SBU)  Summary.  Morocco's GDP has grown by over 5 percent per 
year for the past five years, foreign direct investment is poised to 
set a record high for the third consecutive year, and the rapidly 
growing tourism industry has spurred a construction boom.  The GOM 
must increase the country's energy supply in order to keep up with 
increasing demand, but this is complicated by record high oil 
prices.  The GOM has ambitious plans to accelerate economic growth 
and modernize its energy sector infrastructure in the next decade. 
By 2017, it plans to diversify energy sources by building a LNG 
terminal, constructing numerous power plants (including nuclear), 
and more than doubling the capacity of its refineries.  If 
successful, this would provide a well diversified energy sector that 
would be integrated with that of its neighbors.  With few domestic 
energy sources currently developed the GOM will continue to depend 
on imported fuel.  End summary. 
 
¶3. (U)  Morocco is highly dependent on imported energy sources to 
power its economy.  In 2006, 96 percent of the country's energy 
needs were imported including petroleum products (59 percent), coal 
(29.7 percent), imported electricity (4 percent) and natural gas 
(3.3 percent).  Domestic sources of energy included hydro 
electricity (3.2 percent), wind generated electricity (0.4 percent) 
and natural gas and petroleum combined (0.4 percent).  Said El 
Aoufir, Director of Combustibles at the Ministry of Energy (MOE) 
told econoff that the GOM seeks to diversify its energy fuel supply 
and achieve something close to the international average of 
petroleum products (36.4 percent), coal (27.85 percent), natural gas 
(23.5 percent), and hydro electricity (6.3 percent).  While the 
National Electricity Office (ONE) is exploring the possibility of a 
nuclear plant, the MOE is not banking on this possibility. 
 
----------- 
OPPORTUNITY 
----------- 
 
¶4. (U)  El Aoufir stated that renewable energy represents Morocco's 
greatest opportunity in the field of energy.  The country has vast 
wind resources to power wind mills and large amounts of sunshine for 
photovoltaic power generation, although these forms of energy are 
comparatively expensive to produce.  Currently, renewable energy 
accounts for approximately 3.6 percent of total energy consumed, but 
by 2012 the GOM hopes it will increase to 10 percent of total energy 
needs and help reduce dependence on imported fuels.   In comparison, 
by 2020 the European Union (EU) targets a renewable energy supply of 
20 percent in order to achieve its strict environmental protection 
targets.  In order to reach this ambitious goal, the EU might need 
to import electricity produced from renewable sources in Morocco, 
creating a valuable export product for Morocco.  Morocco's 
electricity grid is already connected to those of Spain and Algeria 
and it trades electricity on an as needed basis.  In the future, as 
Morocco increases its electricity supply, it plans to export 
electricity to its neighbors in Africa and Europe. 
 
------------- 
THE CHALLENGE 
------------- 
 
¶5. (SBU)  High petroleum prices represent Morocco's greatest energy 
challenge according, to El Aoufir.  Government subsidies on 
petroleum products have put great pressure on the GOM's budget for 
several years.  The 2007 budget was based on oil imports in the 
range of $56-$66 per barrel, but this is well below current prices 
in excess of $80 per barrel.  The GOM spent approximately $850 
million for subsidies on gasoline and diesel in 2006 and El Aoufir 
said this could increase to $1 billion in 2007.  In addition, the 
rising number of vehicles in Morocco will continue to compound this 
problem. 
 
¶6. (U)  Morocco's three leading sources of petroleum products are 
Saudi Arabia (41 percent), Iran (33.8 percent) and Russia (25.2 
percent).  Currently, 29 companies are exploring for oil in Morocco 
and the GOM is optimistic oil will eventually be found (septel), but 
the country will undoubtedly remain vulnerable to the whims of the 
international oil market.  However, El Aoufir was confident that 
Morocco could comfortably continue to source the fuel supplies it 
needs. 
 
¶7. (SBU)  In 2006, diesel accounted for approximately 46 percent of 
Morocco's petroleum-based fuel consumption and this has witnessed 
steady growth of 3 to 5.3 percent since 2000.   Gasoline use has 
been relatively steady at approximately 5 percent of petroleum-based 
fuel consumption and the phasing out of leaded gasoline will be 
completed in 2009.  Fuel oil represented 22.4 percent of Morocco's 
petroleum-based fuel consumption in 2006, but its use dropped 7.4 
percent compared to 2005 because the GOM found it more cost 
effective to import electricity from Spain than produce it from fuel 
oil.  Butane accounted for an especially important 18.9 percent of 
consumption because it is the favored fuel for cooking and heating 
water in Morocco.  Because of this the GOM spends approximately $500 
million per year subsidizing the price of butane.  The last major 
component of Morocco's petroleum-based fuel consumption is jet fuel, 
which grew by 42.9 percent between 2003 and 2006 due to the growing 
tourism sector. 
 
---------- 
REFINERIES 
---------- 
 
¶8. (U) Morocco's two refineries in Mohammedia and Sidi Kasem (near 
Fez) have annual refining capacities of 6.5 million tons and 1.5 
million tons respectively.  The Mohammedia plant is being modernized 
to meet new environmental standards and will be finished in 2009. 
Currently, it produces diesel containing 10,000 parts per million 
(ppm) of sulfur, but by 2009 this will be reduced to 50 ppm.  Since 
2005, the EU has required diesel fuel sold in its markets not to 
exceed 50 ppm of sulfur and in 2010 this will be reduced to 10 ppm. 
 
 
¶9. (SBU) El Aoufir felt that Morocco had adequate refining capacity 
to meet its domestic needs at existing growth rates until 2015 or 
¶2016.  However, he added that the GOM is exploring the possibility 
of constructing a refinery in Jorf Lasfar with a capacity of 7 to 10 
million tons per year.  The project would be financed by foreign 
investors and 80 percent of its production would be for export, 
integrating Morocco further into the energy markets of its 
neighbors. 
 
--------------- 
DIVERSIFICATION 
--------------- 
 
¶10. (SBU)  In order to diversify its fuel supplies, the GOM is also 
investigating the idea of building a $1.4 billion liquefied natural 
gas (LNG) terminal to supply gas to power the various power plants 
it plans to build in the future (see reftel).  The LNG would be used 
instead of coal, which currently produces most of Morocco's 
electricity.  Morocco's electric consumption has grown by 8 percent 
per year since 2002 and several new power plants will be needed in 
the near future.  El Aoufir reported that the country still has 
adequate electricity generation capacity if it uses its 
comparatively expensive fuel oil powered generators (which have a 
combined capacity of 615 megawatts, MW), but in recent years the GOM 
has found it more cost effective to import electricity from Spain. 
 
¶11. (SBU)  The proposed LNG terminal would be completed in the 
2013-2015 timeframe and would likely be situated near Tangier or 
Jorf Lasfar with a pipeline running along the Atlantic coast.  The 
GOM is still not certain who would supply the LNG for the project, 
but most new power plants in Morocco are being designed to use LNG. 
In 2009, an existing 230 MW power plant fueled by natural gas in Ain 
Beni Mathar near the Algerian border will be expanded to 450 MW.  It 
will use natural gas Morocco receives from Algeria for the right of 
way for the pipeline through the country.  The GOM plans to open two 
more electric plants in 2013 that will eventually be supplied by the 
proposed LNG terminal. 
 
¶12. (SBU)  Morocco has made initial forays into the nuclear energy 
sector and currently has a 2 MW research reactor that the ONE feels 
could act as a training tool for an eventual 1000 MW nuclear power 
plant.  ONE is leading the initiative to pursue nuclear energy and 
it has generally been more pessimistic about Morocco's readiness to 
produce an adequate supply of electricity in the near term than has 
the MOE (see reftel).  Reportedly, ONE has developed a short list of 
three companies that could construct the proposed nuclear power 
plant in the 2016-2017 timeframe.  Currently, ONE is working with 
Russia's Atomstroyexport on a feasibility study for the project 
whose probable site has not been made public (see septel). 
 
------- 
COMMENT 
------- 
 
¶13. (SBU) Like other resource poor countries, Morocco is at the 
mercy of the international energy market.  MOE officials see hope, 
however, as a result of the intensified oil exploration that has 
resulted from high international energy prices, and the country's 
wind and solar energy potential.  The GOM receives sporadic domestic 
criticism that it is not moving fast enough to assure that the 
country will have an adequate supply of energy, and that rising 
prices could undermine its plans.  However, the GOM is moving ahead 
with plans, which if successful, should assure that it has a 
sufficient production margin to satisfy anticipated demand. 
GREENE