ANNUAL REPORT 2016 His Majesty King Mohammed VI, May God Assist Him SUMMARY MESSAGE FROM THE GENERAL DIRECTOR 4 INTERNATIONAL AND NATIONAL ENVIRONMENT 6 International environment 6 National environment 10 MAJOR FACTS 12 Hydrocarbons 12 Mining 12 Strategy & performance 13 Investment promotion 13 Human resources 13 Information system 14 Corporate social responsibility and environmental "CSR" 14 ONHYM’s contribution to COP22 15 MOROCCO-AFRICA PARTNERSHIP 16 An inclusive South-South co-development vision 16 HYDROCARBON EXPLORATION 18 Licensing 18 ONHYM’s own activity 19 Partners' activity 22 HYDROCARBON PARTNERSHIP & COOPERATION 25 2 HYDROCARBON DEVELOPMENT & PRODUCTION 29 Reservoir studies 29 Development studies 29 Reservoirs production 29 Hydrocarbons delivery 30 Oil Shale - shale gas 31 Maghreb Europe Gas Pipeline ‘‘GME’’ 31 MINING EXPLORATION 32 ONHYM’s own activity 32 Partners’ activity 40 Mining laboratories 42 MINING PARTNERSHIP & COOPERATION 43 HUMAN RESOURCES 45 Social activities 46 ONHYM cultural center 46 Summer camps : Holidays for all 47 "SHC" safety and hygiene committee 48 Training 48 Annual Report 2016 3 MESSAGE FROM THE GENERAL DIRECTOR The worldwide oil price downturn which In the framework of the South-South we have experienced since June 2014 cooperation policy advocated by His impacted investments, capital allocation Majesty King Mohammed VI may God and employment. Assist Him, and which is based on co-development and solidarity principles’, Despite this challenging environment, 2016 was also characterized by a ONHYM has maintained and developed continued cooperation with several its partnerships as well as attracted new African countries. companies to intensify the exploration of Moroccan sedimentary basins. Thus, ONHYM is fully engaged in capacity- building activities, transfer of know-how Today, more than twenty oil companies in the fields of oil and mining exploration, operate in Morocco in partnership with and various management areas. ONHYM, including two majors (ENI and Chevron), one national oil As a catalyst for the hydrocarbons company (Qatar Petroleum), five and mining exploration in Morocco, independent oil companies (Kosmos, ONHYM has made commitments as part Capricorn, Glencor, Woodside and Repsol), of its contribution to the sustainable eleven independents and one junior. development of the country. ONHYM In 2016, the efforts invested by ONHYM ensures compliance with the regulations and its partners revealed gas shows and applicable to its activities and develops discoveries in the areas of Gharb, Meskala, performance standards in line with the Tendrara and Essaouira. best international practices. Regarding mining research, ONHYM is Moreover, in the context of the Kingdom’s continuing its work on promising areas and involvement as the host of COP22, the its dynamics of opening up to domestic Office has committed itself as other and international investors through the international oil and gas companies, sale of mature projects. to promote sustainable solutions. Amina BENKHADRA 4 … the efforts invested by ONHYM and its partners revealed gas shows and discoveries in the areas of Gharb, Meskala, Tendrara and Essaouira. Annual Report 2016 5 INTERNATIONAL AND NATIONAL ENVIRONMENT International environment A low global growth (*) International Monetary According to the IMF(*), world economic In emerging and developing countries, Fund: World Economic Outlook - January 2017. growth reached 3.1% in 2016. The global growth stabilized in 2016 at 4.1%, after economy has been marked by a lower five consecutive years of slowdown. activity in the United States, particularly in the first half of the year, as well as by In 2017, the recovery is expected to the impact of the Brexit. Even though accelerate with global economic growth the financial markets reactions to the estimated at 3.4%: the outlook is British referendum result were limited, improving for emerging and developing the increase in economic, political countries and the US economy is regaining and institutional uncertainties and the momentum. While the longer-term expected reduction in trade and financial outlook for advanced economies remains exchange between the UK and the rest moderate, due to weak productivity of the EU had negative macroeconomic growth, further growth is expected in consequences, especially in the UK. As a emerging and developing countries in the result, growth in advanced economies in medium term. 2016 has been revised downward to 1.7%. 4,5% 4,1% 4,1% 3,4% 3,2% 3,1% 2015 2,6% 2016 2,3% 2017 2% 1,6% 1,7% 1,6% World United-States Euro Zone Emerging and Developing countries Economic growth by region (years 2015-2017) 6 120 111,5 111,0 108,6 98,2 98,5 100 79,4 80 72,6 65,9 62,0 60 54,4 53,9 45,13 38,2 40 28,5 28,9 24,4 25,0 17,9 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Crude Oil (Brent) prices $US/bl 1999 - 2016 Oil prices registered another decline in 2016. Brent price reached $45.13, down 16.3% from 2015. The decline in E&P investment observed in 2015 was confirmed in 2016. At the global level, oil and gas upstream investment reached US$394 billion, down 24% from 2015. This decline particularly affected independents, whose budgets fell by 34%, against 26% for majors, and only 14% for national companies (NOCs). At the regional level, the Middle East and the CIS have been relatively spared. In the Middle East, investment was supported by the NOCs, which account for more than 70% of spending on the region and which, in general, maintained their budget at the 2015 level. The Americas suffered the strongest decrease with declines of 37% in North America and 34% in Latin America. Finally, the decline in investment was close to the world average in Asia-Oceania (-20%), Europe (-22%) and Africa (-25%). Global decline in exploration & production investment is confirmed. Annual Report 2016 7 High volatility and uncertainty affecting oil prices make forecasting the level of investment in 2017 difficult. Nevertheless, if the price of the barrel stays between 50 and 60 dollars, the E&P budgets could increase by 3 to 8%. The increase would mainly concern North America, where investment could jump by nearly 25%, mainly driven by independent US companies. Outside North America, relative stability is expected. The increase in NOCs investments is expected to be offset by continued declines in investment by majors and independents, which remain focused on restoring their margins. Billion USD 800 683 700 664 600 518 Middle East 500 405-425 Europe 394 400 CIS Asia - Pacific 300 Latin America 200 Africa 100 United States & Canada Assessment 2017 0 2013 2014 2015 2016 (e) 2017 (p) *Source : French Institute of Petroleum - IFP (April 2017). Evolution of global investment in E&P* (in Billion US$) In mining exploration, global investment reached US$7.2 billion in 2016, down 22% from 2015. Since 2014, companies are allocating a growing share of their investment to late stage projects, less risky and less capital consuming, to the detriment of early stage projects aiming to find new deposits. Most of the world exploration budget in 2016 was allocated to gold (47.9%), followed by copper (21.9%). … companies are allocating a growing share of their investment to late stage projects, less risky and less capital consuming … 8 Global nonferrous exploration budget (in US$B) During 2016, gold and silver prices Nonferrous Exploration Budget Total Estimated Exploration Total Annual Indexed Metals Price increased respectively by 7.8% and 9.3%. 24 4.0 This trend was due, in particular, to the US$ billions 7.2 22 increased demand for safe-haven assets 3.5 in the stock markets, and the climate 20 US$ billions 9.2 of economic and political uncertainty in 18 3.0 Indexed Metals Price (1996=1) Europe that followed the Brexit. 16 2.5 14 Furthermore, platinum price fell by 6.1% due to the supply surplus on the world 12 2.0 market, which followed the Volkswagen 10 1.5 scandal. This situation has raised 8 investors’ concerns about the stability of Nonferrous Exploration Budget (USSB) 6 1.0 the overall demand for diesel vehicles, and 4 therefore platinum. Similarly, the price of 0.5 2 palladium declined by 11.2% due to lower demand for automotive catalysts. 0 0.0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Source: SNL - Metals & Mining - 2017 Investment by exploration type (as a percentage of Worldwide Exploration) After a decline during the first three 50 quarters of the year, base metal prices Advanced exploration strengthened at the end of the year, 40 benefiting from higher economic growth forecasts and indices of industrial 30 production, mainly in the United States Preliminary exploration (planned stimulus measures), in China 20 Minesite exploration (following the strengthening of the real estate sector) and in India. The only 10 exception was copper, which has been impacted by the excess of supply, and 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 which recorded an annual decline of Grassroots 41.1 38.2 33.8 32.9 33.6 30.7 33.0 30.1 29.0 27.8 Late Stage 39.6 40.6 40.4 42.9 41.7 43.8 38.1 38.7 36.8 37.0 11.5% in 2016. Minesite 19.3 21.2 25.8 24.2 24.7 25.5 28.9 31.2 34.2 35.2 Source: SNL - Metals & Mining - 2017 Global exploration budget 2012 2013 2014 2015 2016 Lead ($/t) 2 059 2 140 2 094 1 784 1 872 (+4,9%) Tin ($/t) 21 071 22 289 21 868 16 070 17 994 (+12%) Copper ($/t) 7 944 7 321 6 858 5 494 4 863 (-11,5%) Zinc ($/t) 1 945 1 908 2 164 1 928 2 095 (+8,6%) Gold ($/Oz) 1 669 1 410 1 266 1 160 1 250 (+7,8%) Silver ($/Oz) 31,1 23,8 19,1 15,7 17 (+9,3%) Platinum ($/Oz) 1 552 1 486 1 384 1 052 988 (-6,1%) Palladium ($/Oz) 643 725 803 690 613 (-11,2%) Metals prices - 2012-2016 Annual Report 2016 9 National environment The Kingdom's Gross Domestic Product Regarding the electricity sector, the growth is estimated to have reached 1.1% electricity production is expected to in 2016, down from 4.5% a year earlier, increase by 2.9% by the end of this year.