Morocco LNG terminal leaves it over-exposed to imports: experts

Morocco’s new LNG terminal might leave the country’s power generation sector overly-exposed to volatile fossil fuel imports at the expense of domestic renewable sources, experts warned.

The Moroccan move happens amid an expected expansion of LNG supply globally, which might lead to lower prices and competitive terms for new importers such as Morocco.

The 0.5 billion cubic metre/year terminal is to be located at the Nador West Med port, which is currently under construction. It will connect to the Gazoduc Maghreb Europe pipeline (GME) and to the port of Mohammedia through new pipeline links that are also to be built, according to the tender published  by Morocco’s Ministry of Energy Transition and Sustainable Development (MTEDD) in April.

The terminal will also directly supply  a 1.2 GW gas-fired power plant in Nador.

The new infrastructure will help consolidate Morocco’s energy independence, contribute to the decarbonisation of the electricity system “by using natural gas as a transition fuel allowing for the greater integration of renewable energies into the energy supply mix,” as well as supporting the “decarbonisation of national industry in light of the upcoming Carbon Border Adjustment Mechanisms and other carbon pricing global mega-trends,” according to MTEDD.

The facility marks the initial phase of the government’s wider gas roadmap, with two further import terminals planned to be built past 2030 on the Atlantic coast.

In the longer-term, the strategy envisages building new connections to the Mauritanian and Senegalese gas networks through the Gazoduc Afrique Atlantique pipeline (GAA), as well as pursuing green hydrogen plans.

Global LNG supply is expected to expand in the next five years, with around 190 million tonnes of capacity under construction, including the 16.5 mtpa Louisiana LNG project in the U.S., an industry source told Gas Outlook.

Capacity could further increase to 225 mtpa with Russia’s Arctic 2 (19.8 mtpa) and the Mozambique LNG (13.1 mtpa) projects, he added.

This, coupled with predicted weather demand in key markets such as Europe, “especially if there is peace in Ukraine and Russian pipeline natural gas supply restarts,” and also restarts in Japan, Korea and Taiwan, would mean Morocco could benefit from “downward pressure as production builds up,” he said.

On the other hand, Morocco’s expected increase in gas consumption to 8 bcm in 2027 from 1 bcm currently “could jeopardise its energy goals of expanding its renewable capacity to at least 52% of the total electricity capacity by 2030,” Ana-Maria Jaller-Makarewicz, lead energy analyst at the Institute for Energy Economics and Financial Analysis (IEEFA) told Gas Outlook.

“Morocco could risk that its power generation would depend more on volatile fossil fuel imports than home-grown renewables,” she said.

Maghreb-Europe Gas Pipeline

Morocco has been importing LNG indirectly through Spain since 2022, with the regasified LNG being transported to Morocco through the Maghreb-Spain link, known as the Maghreb-Europe Gas Pipeline.

In 2024, gas imports from Spain totalled 9.7 TWh, representing 27% of Spain’s total gas and LNG exports. 

Morocco used to import gas from neighbouring Algeria via pipeline although flows stopped in 2021 amid a breakdown in the relations between the two countries.

In July 2023 national utility ONEE signed a 12-year, 0.5 bcm/year contract with Shell for the supply of LNG initially via Spain but eventually directly.

When contacted by Gas Outlook, Shell declined to comment on whether it was also involved in the new LNG terminal.

The government expects demand growth will be driven mainly by industrial consumers as well as  power generation on the back of ONEE’s planned expansion of gas-fired capacity.

In the short-term, in addition to LNG imports, domestic gas production from the onshore Tendrara field and the offshore Anchois field is estimated to contribute some 1.5 bcm/year.

The tender envisages the terminal will rely either on a floating storage and re-gasification unit (FSRU) or through a floating and storage unit (FSU) connected to an onshore re-gasification component.

“The rush by Europe to use FSRUs to import LNG to replace Russian pipeline natural gas has provided employment for most if not all of the available FSRUs,” an industry expert told Gas Outlook.

While a new FSRU order would likely be delivered no sooner than 2028/2029, it is possible that some FSRUs currently contracted to be installed in Europe “could be released since it looks as though there is now an oversupply of LNG import capacity especially in Germany, with Europe’s natural gas demand weakening and the ending of the Russia-Ukraine war could see Russian exports increase,” he said.

“Conversion of existing LNG carriers would be a faster option and old steam-engined carriers are being retired but scrapping seems to have been the fate for most of those ships removed from service recently,” he added.

(Writing by Beatrice Bedeschi; editing by Sophie Davies)