SAMIR to invest massively in its refinery

Dec 23, 2004 01:00 AM

The new production facility, which will have no impact on the total refining capacity, is scheduled to come into operation by the end of 2008 and will produce high quality gasoline and diesel. The move comes following external pressures by industry participants, especially distributors.
"The company, though, hasn't unveiled yet whether it will finance the investment with debt or equity," a financial analyst who covers the stock said. "SAMIR cannot put off the upgrade of its plants indefinitely, because of requirements of the new regulations and new engines running on cleaner energy products. Distributors providing these imported products can take their toll on SAMIR's market-share," she added.

Morocco imported an average of 5.92 mm tpy of crude oil during the last three years, 40 % of which from Saudi Arabia, 22.5 % from Iraq, 19 % from Russia, and 17.5 % from Iran.
"Crude oil is processed in two national refineries, both of which are the property of SAMIR," said El Aoufir Said, Directorof Hydrocarbons in the Ministry of Energy and Mines. "Mohammedia's refinery has a 6.5 mm-ton capacity per year while that of Sidi Kacem a 1.5 mm," he added.

In 2003, 3.14 mm tons of diesel and 384,781 tons of petrol were sold in Morocco. Oil derivatives in Morocco are heavily taxed. In 2002, MAD 9.3 bn was cashed in by the Moroccan government, 10.6 % of total fiscal revenues. The distribution market of refined products in Morocco is very competitive.
"A total of 15 distribution companies -- many of them subsidiaries of international oil majors -- share in 2,000 gas-stations throughout the country," said El Aoufir.

Prices are not liberalized in Morocco but are regulated by the government, and distributors of energy products apply the same prices and compete solely in service quality.
Regulation, though, allows for a mark-up for the transportation from the refineries, which causes minor differences in various regions of the kingdom: diesel costs 13 cents more in Agadir than in Rabat.

In 2002, SAMIR processed 6.33 mm tons of crude oil. It accrued MAD 15.8 bn of sales and MAD 400 mm net profits. In 1996, and in accordance with the privatisation strategy of the Moroccan government, SAMIR was sold through the Casablanca Stock Exchange and to foreign investors.
In May 1997, a 60.99 % stake of the company was sold to Corral Petroleum for MAD 3,157.5 mm. The Saudi-Swedish group bought an additional 5.77 % in June 1998 for MAD 296.1 mm. A 30 % stake of the MAD 5 bn market-cap company was listed on the Casablanca Stock Exchange, bringing in MAD 1,504.8 mm to the government coffers. <<P>In June 1998, SAMIR acquired a 71 % stake of SCP, the last state-owned oil company of Sidi Kacem for MAD 453.4 mm. The merger was officially complete by June 1999.
The deal struck with Corral Petroleum at the time called for a differed liberalization to allow the buyer some time to restructure its new acquisition.
The clauses of the deal also called for the company to invest and upgrade its refineries to provide energy-products compliant with environmental laws. The 10,000 ppm diesel is to give way for the 50ppm standard.

In Dec. 2001, SAMIR took the market by surprise by announcing its alliance with Somepi, a major local distributor. The deal, structured in a MAD 200 mm capitalistic tie, heralded a drastic change of strategy. From a sole refining company, SAMIR was to set up a vertically integrated oil group spanning extraction, refining, and distribution. From the 9,636 tons of crude oil extracted in Morocco in 2002, 66 % were by SAMIR.
Distributors, sensing the threat, turned the heat on the government and SAMIR. They insisted the statutes of the original deal be respected and pressed the government to stick to its pledges. They argued there was a risk for SAMIR to discriminate between distributors now that it was a distributor itself.

There was hope among residents of the city of Mohammedia that SAMIR would relocate away from an urban area to Jorf Lasfar, 250 km south-west of Rabat, on the Atlantic Ocean.
Hopes were especially high after the Nov. 2002 fire of the refinery. This latest massive investment, though, obviously intended for the long run, is a major blow to their hopes.

Source: Morocco Times
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