Energy firms Total and Kosmos issued declarations made in partnership with the Moroccan government on 5 February, assuring investors that exploration off Western Sahara would be in compliance with international law.
IHS Global Insight perspective
Development of renewable energy projects and hydrocarbons in Western Sahara is key to Morocco's bid to reduce its 95% energy import dependency and meet 42% of its electricity needs from renewables by 2020.
Morocco probably calculates that Algeria, the main backer of Sahrawi independence movement Polisario, is too occupied with preserving internal stability to pose any serious threat to Moroccan plans in Western Sahara.
Overwhelming security force capability to suppress protests means that violent risks to Western Saharan projects are only moderate. However, legal and reputational risks are presented by the vague wording of UN legal opinion on resource exploitation, a pro-Sahrawi lobbying campaign, and rival exploration licences issued by the Sahrawi government-in-exile.
Western Sahara is considered a Non-Self-Governing Territory by the United Nations, which has never recognised Morocco's annexation of the territory after 1975. Following a guerrilla war by the secular leftist Algeria-backed Sahrawi Polisario Front against Morocco, a UN-brokered ceasefire was agreed in 1991 and Polisario's armed forces withdrew to Algeria and a small strip of Polisario-controlled territory adjoining Morocco-controlled Western Sahara. However, a promised referendum on self-determination has never materialised due to disputes over who is eligible to vote.
In the meantime, Morocco has attempted to secure its rights to Western Sahara through a combination of encouraging Moroccan migration to the territory, and heavily subsidising aid and welfare in the region in order to foster loyalty to the state.
Map showing resource flashpoints in off Western Sahara.
Morocco's development plans
Morocco sees resource exploitation in Western Sahara as key to helping reduce its 95% energy import dependency. Morocco granted the first licences for oil reconnaissance activities offshore Western Sahara in 2001. Following promising studies, Kosmos Energy, which holds 55% of the Cap Boujdour block along with Cairn Energy (20%) and Morocco's Office National des Hydrocarbures et Mines (ONHYM), plans to start drilling an exploration well (Gargaa 1) in the second half of 2014. France's Total is due to announce the result of its own reconnaissance studies in the Anzarane Offshore block towards the end of 2014. Onshore, reconnaissance studies led by Longreach and San Leon in partnership with ONHYM are occurring in two main areas: Tarfaya, where there are oil prospects overlapping the border between Morocco and Western Sahara, and Zag, near the Western Saharan capital of Laayoune, which has gas prospects and is located towards the north of the territory.
Meanwhile, Morocco is aiming for 42% of its electricity to be provided from renewable sources by 2020. Nareva Holdings, the energy arm of the Moroccan king's holding company Société Nationale d'Investissements (SNI), has entered into a joint project with GDF Suez and Siemens to construct and operate the largest wind farm site in Africa with a capacity of 300MW, also at Tarfaya; another is under construction at Foum El Oued south of Laayoune. Morocco is hoping to attract foreign investment for further wind farm sites with a further 300MW capacity at Tiskrad near Laayoune, and 100MW at Boujdour around 100km southwards down the coast. Solar projects are also planned for the Tarfaya area, at Sabkhat Tah.
Legal and reputational risks
However, there are reputational and legal risks surrounding all of these projects. The United Nations Legal Counsel assessed in 2002 that exploration and exploitation of resources in the territory was only legal if it took into account "the interests and wishes of the people of Western Sahara". The legality of any contract hinges on the question of how this should be judged. The UN opinion as originally issued in relation to mineral resources, but has also been used by the European Commission to justify a fishing agreement with Morocco in Western Saharan waters. As such, any future dispute on the legality of wind and solar projects is also likely to hinge on this opinion. Kosmos's planned drilling in the second half of 2014 will be an important test case in this regard, as it would be the first drilling in Western Saharan territory since the 1970s. The outcome of any legal challenge by the Polisario to either the fisheries agreement (which it said in January 2014 that it would contest via the European Court) or the Kosmos drilling will set an important precedent for other contracts granted by Morocco in the territory.
A further potential problem is raised by the fact that the SADR government-in-exile in Algeria's Tindouf province has granted its own exploration contracts for some blocks overlapping those granted by Morocco. Companies who have entered into contracts with the SADR are small operators, including Ophir and Tower Resources, who have likely acquired the blocks at a knock-down price. Although very unlikely in the next few years, any resolution of the Western Saharan question in the SADR's favour would put these firms at an advantage over the larger operators that signed with Morocco.
Meanwhile, project operators in Western Sahara remain unable to access financing from the World Bank or European Investment Bank, and it is questionable whether they will be able to obtain Clean Development Mechanism emission credits, administered under the United Nations Framework Convention on Climate Change. Reputational risk due to pro-Sahrawi lobbying is a further factor, with four Swedish pension funds, for instance, divesting from firms with connections to Western Sahara in October 2013.
The Algerian position
Morocco likely calculates that despite the legal grey areas, the long deadlock over the referendum works in its favour, and the prospects of commercial benefit from Western Sahara will increase international support for Morocco's proposal of an autonomous Western Saharan region within a Moroccan state rather than a referendum on self-determination.
Despite deteriorating Moroccan relations with Algeria, the Polisario's main backer is focused on maintaining internal stability ahead of presidential succession in April 2014 and is unlikely to devote much attention in the next year to disrupting Western Saharan resource development. Any such attempts would in any case take the form of political lobbying on the international stage, rather than backing for attacks on projects or a return to insurgency. Algeria's appetite to interfere in renewable power project development plans is probably also reduced by the fact that these pose no competitive threat to its own hydrocarbon export-dominated economy.
Protest risks relating to grievances over Moroccan exploitation of Western Saharan resources are likely to be centred in Western Sahara's main towns of Laayoune and Dakhla. A heavy Moroccan security force presence means that such protests are very unlikely to cause disruption to power or energy projects. In May 2013, Laayoune witnessed its largest protests since 2010, sparked by the failure to ensure a human rights remit for the renewed UN peacekeeping force mandate. Yet even then, they attracted no more than 2,000 people, and did not affect commercial operations in the area. Sites closer to Laayoune (for example Foum El Oued) are more likely to experience protests than those further from main urban centres, for example at Boujdour or Tarfaya. However, road blockades of more than a few hours, or damage to property at project sites, are unlikely.
Outlook and implications
Morocco's aim appears to be to convince international investors and bodies that its international legal obligations to protect Sahrawi interests are fulfilled via the channelling of energy revenues to fund development aid for the region. Already, around half of Morocco's national aid budget goes to Western Sahara. Yet this is not matched by genuine political representation for Sahrawis, with Morocco's Royal Advisory Council for Saharan Affairs appointed by the king rather than elected, and meeting only infrequently. However, the failure of the Polisario and SADR to make any political progress on behalf of Sahrawis is also harming Sahrawi loyalty to their leadership.
As a result, although protest risks are still containable, there is a risk of protests erupting against the Polisario leadership itself in the next few years. This would probably happen first in Sahrawi refugee camps in Algeria's Tindouf area, but with a risk of spreading to Western Saharan towns. This disillusionment with Polisario is also likely to lead to some turn to jihadist ideology, although the limitations on capability imposed by the Moroccan security presence in the region means that these Sahrawis are more likely to travel for jihad elsewhere, for instance in Mali.