UK's Chariot in talks with Spanish market players for Morocco gas offtake

London — UK-listed Chariot Oil & Gas said June 17 it has held talks with Spanish market players about the potential future supply of gas from its Lixus license offshore Morocco as it looks to fast-track development of the Anchois prospect.

Chariot was awarded the Lixus offshore license, which contains the existing Anchois discovery, in April last year.

The company believes the total estimated resources at Lixus could be as high as 2.2 Tcf.

"Initial discussions have been held with ONEE, the Moroccan state electricity company, and the key players in the Spanish gas market with a view to future gas offtake arrangements," CEO Larry Bottomley said in Chariot's 2019 annual report.

Bottomley said the Anchois reservoirs had a production capacity that is potentially sufficient to fully supply individual power stations in Morocco, with any surplus gas being contracted to domestic industrial users or export off-takers.

The fast-track base case development option that Chariot is focusing on is a low-cost subsea-to-shore model with two subsea wells and a 40km line to an onshore Central Processing Facility.

The project would deliver a plateau production rate of 53 Mmcf/d (1.5 million cu m/d), which would deliver some $150 million/year in revenue under a $8/Mcf gas price assumption, the company said. On an annualized basis, production would be some 0.54 Bcm.

"Sales to industrial users would be expected to be smaller volume, higher margin in nature at around $11/Mcf offering material upside," Bottomley said.

"In addition to targeting power generation, gas-to-power projects and industrial users, the Maghreb-Europe Gas pipeline (GME) is within 30 km of landfall of the Lixus license, which makes the export of gas into the Iberian Peninsula, a potentially lucrative market, feasible."

Development partners

Chariot has also been looking for partners to help it develop the prospect.

Bottomley said the company had been "encouraged" by the response from both potential upstream partners and a wide range of potential strategic alliances across the energy value chain.

Chariot has a 75% interest and operatorship of the Lixus license. Its partner is Morocco's state-owned Office National des Hydrocarbures et des Mines, which has the remaining 25% stake.

Bottomley said the data room had been host to E&P companies and also to midstream players, engineering service companies, downstream power generators and third party off-takers.

"We will seek partnering prior to first development drilling as both a key de-risking strategy for validation of the asset and as a crucial source of funding," Bottomley said.

However, Chariot warned that frontier play exploration had become less attractive in recent years.

"The risk appetite of investors and the industry has gone through a realignment, and exploration in frontier regions has fallen out of favor," Bottomley said.

"Following the post-2014 oil price collapse and reorganization of the sector, focus has redirected away from international exploration and as such the pool of potential investors and partners for higher risk oil exploration has diminished."

However, he said Lixus represented a "much lower risk development opportunity" that would appeal to a wider target market of potential investors and partners.

Morocco has negligible gas production to date and sources its gas needs from Algeria.