MOROCCO: NewMed Energy, Adarco Energy Signs Partnership for Boujdour Atlantique License
NewMed Energy and Adarco Energy have signed agreements concerning oil and/or natural gas exploration and production activities in the Boujdour Atlantique exploration
license, which is situated in the Atlantic Ocean off the coast of Morocco , with the National Office of Hydrocarbons and Mines of Morocco (Office National des Hydrocarbures et des Mines, “ONHYM”). Inter alia, the agreements that have been signed grant each of the Partnership and Adarco 37.5% of the interests in the License, with the remaining interests in the License, the rate of which is 25%, granted to ONHYM, in accordance with standard regulation in Morocco.
The agreements further grant the Partnership, Adarco and ONHYM the right to search for hydrocarbons in the area of the License for a term of 8 years, subject to compliance with a work plan, which may be extended in the event of discovery. The Partnership shall act as the operator of the License.
During the exploration period, the Partnership and Adarco shall also bear, in addition to
their relative share of the costs, the costs in respect of ONHYM’s share, in accordance
with the regulation in Morocco. Furthermore, the agreements with ONHYM include
additional provisions, inter alia, with respect to bonuses that are payable to ONHYM
according to the accomplishment of milestones of output from the License, royalties to the State of Morocco, fines in the event of non-compliance with obligations under the
agreements, guarantees, stability in respect of economic terms, obligations of professional training in the domestic market, as well as provisions pertaining to the joint operation of the License.
The agreements are contingent on the receipt of approval from the Minister of Energy
Transition and Sustainable Development and the Minister of Finance of Morocco and on
approval by the general meeting of holders of the Partnership’s participation units. In the event that the Meeting’s approval is not obtained as required under the provisions of the Partnership Agreement and the bylaws of the Tel Aviv Stock Exchange Ltd. within 90 days of the signing date, these agreements will be rescinded.
Details with respect to the Petroleum Asset:
The License is a negligible petroleum asset in relation to the Partnership’s operations and
assets, and therefore a limited description of the License is presented below, based on the assumption that the Agreements will be approved and will become effective. The
following details with respect to the Petroleum Asset relate to the rate of the Partnership’s holdings in the Petroleum Asset, which it intends to assign to a wholly-owned subsidiary of the Partnership (presently in the process of incorporation), which is intended to hold 37.5% of the interests in the Petroleum Asset, subject to receipt of the required approvals from the regulator in Morocco.
Actual and Planned Work Plan for the Petroleum Asset
Following is a concise description of actual and planned activities, noting the estimated budget for the conduct of each activity and the share of the holders of the Partnership’s equity interests in such budget:
According to local regulation in Morocco, the rate of royalties depends on the depth of water at the well site and the findings (gas or oil). In respect of a well where the depth of the water is greater than 200 metres in case of the discovery of oil royalties will be payable at an annual rate of 7%. However, in respect of a discovery of gas at such depth royalties will be payable at a rate of 3.5%. The calculation in the above table was made in accordance with a gas discovery (that is, a rate of 3.5%). Furthermore, an exemption from corporate tax is granted for 10 years following the beginning of production, and thereafter the rate of corporate tax is 31% (in respect of both oil and gas discoveries).
The Partnership will therefore own 37.5%, Adarco 37.5% and ONHYM 25%.