Mme. Wafae Benhammou

Petroleum Participation Manager

ATTRACTING FOREIGN INVESTMENT IN THE UPSTREAM

Not an official UNCTAD record

CONTENTS

BUSINESS CLIMATE

HOW TO EXPLORE IN MOROCCO

FISCAL REGIME

AGREEMENTS

BUSINESS CLIMATE

GLOBAL VISIONGLOBAL VISION

BUSINESS CLIMATE

ENHANCEMENT OF ESTABLISHED DEMOCRATIC INSTITUTIONS

GLOBAL VISIONGLOBAL VISIONSUSTAINABLE DEVELOPMENT.

GROWING MARKET – ORIENTED ECONOMY BASED ON: LIBERALIZATION ,PRIVATIZATION, DISINVESTMENT OF THE STATE,ECONOMY EASILY INTEGRATED IN THE WORLD

GLOBAL ECONOMY

MODERN ADMINISTRATION WITH HIGH QUALITY OF RESPONSIVENESS TO BUSINESS CONCERN AND TO CITIZENS NEEDS IN GENERAL

BUSINESS CLIMATE

TO ENHANCE AN INCENTIVE GLOBAL

ENVIRONMENT TO DO BUSINESS.

GLOBAL STRATEGYGLOBAL STRATEGYA STRATEGY BUILT AROUND CLEAR GOALS IS SET,

INSTRUMENTS AND TOOLS IN TERMS OF LAWS AND REGLEMENTATION ARE ENFORCED ,

REFORMS AND RE-STRUCTURATION OF CRUCIAL SECTORS ARE IMPLENTED

BUSINESS CLIMATE

TO CATCH UP WITH THE FUTURE DEVELOPMENT AND TO MEET THE CHALLENGE OF CONTINUOUS GROWTH THE GOVERNMENT IS UNDERTAKING POWERFUL ACTIONS TO ALLEVIATE POVERTY , TO REMOVE ILLITERACY , TO UP-GRADE ECONOMY … THE UTMOST FINAL GOAL IS TO ACHIEVE WEALTH AND PROSPERITY.

OBJECTIVES OF THE GLOBAL STRATEGYOBJECTIVES OF THE GLOBAL STRATEGY

IMPROVE ECONOMIC, SOCIAL AND POLITICAL ENVIRONMENT ; ENHANCE STANDARDS OF LIVING ;

INTEGRATE THE GLOBALISATION OF THE WORLD ECONOMY.

SUSTAIN A HIGH GROWTH RATE OF DEVELOPMENT ;

BUSINESS CLIMATE

REINFORCEMENT OF ELECTRICAL SUPPLY NETWORK WHICH STARTED BY :

THE FIRST IPP LICENSE GRANTED TO THE HOLDING ABB-CMS ,CONTRACT IN 1997.

RESTRUCTURING OF THE NATIONAL OFFICE OF ELECTRICITY O.N.E.

LARGE RURAL ELECTRIFICATION PROGRAMME

ENERGY SECTOR GLOBAL STRATEGYENERGY SECTOR GLOBAL STRATEGY

BUSINESS CLIMATE

OIL PRODUCTS POLICY:

PRIVATIZATION IN 1994 OF OIL PRODUCTS REFINING PLANTS SUPPLY FIRMS

TARIF AND TAX REFORMS OF THE ENERGY PRODUCTS IN 1995 AND 1996

PROMULGATING A NEW HYDROCARBON LAW.

ENERGY SECTOR GLOBAL STRATEGYENERGY SECTOR GLOBAL STRATEGY

BUSINESS CLIMATE

is a country of- peace and stability

- rights and democracy,- modernity and tradition,

- tolerance and openess, …..

MOROCCO is a ground of all the people and all the religions

GLOBAL ENVIRONMENTGLOBAL ENVIRONMENT

HOW TO EXPLORE IN MOROCCO

HOW TO EXPLORE IN MOROCCO

SINCE 1958 CODE CONTINUAL EFFORTS HAVE BEEN MADE TOATTRACT FOREIGN OIL COMPANY INVESTMENT

CHANGES MADE IN THE 1992 CODE WERE INSUFFICIENT

HYDROCARBON CODE WAS AGAIN CHANGED IN EARLY 2000

• LAW 21-90 AMENDED AND COMPLETED BY LAW 27-99• DECREE 2-93-786 AMENDED AND COMPLETED BY DECREE 2-99-210

HYDROCARBON CODE

RECONNAISSANCE LICENCE

DURATION1 YEAR MAX, EXTENDIBLE

GRANTENERGY MINISTER

WORKSINCLUSIVE OF SEISMIC BUT NO DRILLING

AREAUNLIMITED

ASSIGNMENTNOT PERMITTED

HOW TO EXPLORE IN MOROCCO

EXPLORATION PERMIT

EXPLORATION RIGHTSEXCLUSIVE RIGHTS, INCLUDING DRILLING, GRANTED BY MINISTERIALORDER AFTER SIGNING A PETROLEUM AGREEMENT

DURATION8 YEARS IN 2 OR 3 PERIODS WITH POSSIBLE EXTENSION OF2 YEARS FOR APPRAISAL OF DISCOVERY MADE IN THE LAST TWO YEARS OF VALIDITY.

AREAMIN - 200 KM2, MAX - 1000 KM2 FOR EACH ON SHORE PERMITMIN - 200 KM2, MAX - 2000 KM2 FOR EACH OFFSHORE PERMIT

PERMIT HOLDER MAX. ACREAGE = 10,000 KM2 ONSHOREPERMIT HOLDER MAX. ACREAGE = 20,000 KM2 OFFSHORE

HOW TO EXPLORE IN MOROCCO

EXPLORATION PERMIT (Cont’)

RELINQUISHMENTAT END OF INITIAL PERIOD 10% * NUMBER OF YEARS COMPLETED

FOR EXAMPLE 30% AFTER 3 YEARS

HOW TO EXPLORE IN MOROCCO

EXPLOITATION CONCESSION

PRODUCTION RIGHTSDEVELOPMENT AND EXPLOITATION OF COMMERCIAL DISCOVERY

DURATION

HOW TO EXPLORE IN MOROCCO

25 YEARS + EXTENSION OF UP TO 10

YEARS

FISCAL REGIME

STATE PARTICIPATION

25% MAX IN ANY EXPLORATION PERMIT OR EXPLOITATION CONCESSION

STATE IS CARRIED THROUGH EXPLORATION WITH NO REIMBURSEMENTOF PAST EXPLORATION COSTS

FISCAL REGIME

PARTICIPATION INTEREST

FINANCING

ROYALTY

THE ROYALTY RATES ARE AS FOLLOWS :

ONSHORE AND OFFSHORE <200 METERS WATER DEPTH

THE FIRST THREE HUNDRED THOUSAND OF OIL AND 300 MILLION M3 OF GASPRODUCED FROM EACH EXPLOITATION CONCESSION ARE EXEMPTED

OFFSHORE >200 METERS WATER DEPTH

THE FIRST 500,000 TONS OF OIL AND 500 MILLION M3 OF GASPRODUCED FROM EACH EXPLOITATION CONCESSION ARE EXEMPTED

FISCAL REGIME

OIL 10%GAS 5%

OIL 7%GAS 3.5%

RENTAL

AT APPLICATION AND EXTENSION

FOR EACH EXPLOITATION

CONCESSION

TAX DEDUCTIBLE

FISCAL REGIME

1,000 DIRHAMS/KM2 (APPROX. $100)

TAXATION OF PROFITS

FISCAL REGIME

OIL COMPANIES ARE SUBJECT TO INCOME TAX UNDERTHE GENERAL TAX CODE

HOWEVER, UNDER THE NEW HYDROCARBON LAW THEREARE :

• FROM START OF COMMERCIAL PRODUCTIONFROM EACH EXPLOITATION CONCESSION

• THAT ALLOWS EXPLORATION COSTS,INCLUDING DRY HOLE COSTS, TO BE DEDUCTED AGAINST REVENUESOF ANY EXPLOITATION CONCESSION HELD BY THE TAX PAYER

TWO NEW INCENTIVES

10-YEARS TAX HOLIDAY

CONSOLIDATION

THE TAX RATE IS 35% OF TAXABLE INCOME

TAX DEDUCTIONS AND ALLOWANCES

FISCAL REGIME

TAXABLE INCOME IS DETERMINED BY MAKING THEFOLLOWING :

ACCORDING TO RATES IN THE TAX CODE

DEPLETION ALLOWANCE (PRG)OPTIONAL

DEDUCTIONS

ROYALTY, RENTAL,

BONUSES, TRAINING EXPENSES

PRODUCTION EXPENSESAMORTISATION NEGOTIABLE IN PETROLEUM AGREEMENT-

DEPRECIATION OF FIXED ASSETS

MIN. 2 YEARS MAX. 10 YEARS

OTHER TAXES

FISCAL REGIME

• WITHHOLDING TAX ON PROFITS • VALUE ADDED TAX

• BUSINESS ACTIVITY TAX

• URBAN TAX

• TAX ON NON-IMPROVED URBAN LAND

TAX EXEMPTIONS

CUSTOMS AND EXCHANGE CONTROL

FISCAL REGIME

IMPORT DUTYTHE OIL COMPANY, ITS CONTRACTORS AND SUB-CONTRACTORS MAYIMPORT ITEMS FOR USE IN MOROCCO DUTY-FREE IF THERE ISNO COMPETITIVE SUPPLIER IN MOROCCO

SAME APPLIES TO PERSONAL EFFECTS BROUGHT INBY FOREGN PERSONNEL

EXCHANGE CONTROLTRANSFER OF CAPITAL, PROFITS AND DIVIDENDS FREE OFRESTRICTION AND TAXES

RIGHT TO HOLD EXPORT REVENUES ABROAD

AGREEMENTS

PETROLEUM AGREEMENT

PARTIESSTATE REPRESENTED BY ONAREP AND THE OIL COMPANY(IES)

MAIN ASSURANCES

AGREEMENTS

ASSIGNMENT

ARBITRATION

MARKET PRICE

PETROLEUM AGREEMENT (Cont’)

AGREEMENTS

NEGOTIABLE ELEMENTS• WORK PROGRAMME• BONUSES• TRAINING BUDGETS• AMORTISATION

BONUSES• UPON EACH COMMERCIAL DISCOVERY• ON REACHING AGREED PRODUCTION LEVELS

NEGOTIABLE (IN $US) AND TAX DEDUCTIBLE

PETROLEUM AGREEMENT (Cont’)

Agreements

COMMITMENT TO FUND FORONAREP PERSONNEL

NEGOTIABLE US$ AMOUNT EACH YEAR FROM EFFECTIVE DATE

INCREASES FOR EVERY EXPLOITATION CONCESSION GRANTED

PROFEESIONAL TRAINING

ASSOCIATION CONTRACT

PARTIESONAREP AND OIL COMPANY(IES)

PURPOSETO ESTABLISH PROCEDURES NECESSARY FOR EFFICIENTJOINT CONDUCT OF OPERATIONS

MAIN CLAUSESMANAGEMENT COMMITTEE / JOINT OPERATING COMPANYOPERATORCASH CALLS AND ACCOUNTING ANNEX

BASED ON AIPN MODEL FORM JOINT OPERATING AGREEMENT

AGREEMENTS