1. Mme. Wafae Benhammou Petroleum Participation Manager ATTRACTING FOREIGN INVESTMENT IN THE UPSTREAM Not an official UNCTAD record

2. CONTENTS u BUSINESS CLIMATE uHOW TO EXPLORE IN MOROCCO u FISCAL REGIME u AGREEMENTS

3. BUSINESS CLIMATE GLOBAL VISION

4. BUSINESS CLIMATE uENHANCEMENT OF ESTABLISHED DEMOCRATIC INSTITUTIONS GLOBAL VISION uSUSTAINABLE DEVELOPMENT. uGROWING MARKET – ORIENTED ECONOMY BASED ON: LIBERALIZATION, PRIVATIZATION, DISINVESTMENT OF THE STATE, ECONOMY EASILY INTEGRATED IN THE WORLD GLOBAL ECONOMY uMODERN ADMINISTRATION WITH HIGH QUALITY OF RESPONSIVENESS TO BUSINESS CONCERN AND TO CITIZENS NEEDS IN GENERAL

5. BUSINESS CLIMATE TO ENHANCE AN INCENTIVE GLOBAL ENVIRONMENT TO DO BUSINESS. GLOBAL STRATEGY uA STRATEGY BUILT AROUND CLEAR GOALS IS SET, uINSTRUMENTS AND TOOLS IN TERMS OF LAWS AND REGLEMENTATION ARE ENFORCED, uREFORMS AND RE-STRUCTURATION OF CRUCIAL SECTORS ARE IMPLENTED

6. 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 STRATEGY  IMPROVE ECONOMIC, SOCIAL AND POLITICAL ENVIRONMENT ; u ENHANCE STANDARDS OF LIVING ; uINTEGRATE THE GLOBALISATION OF THE WORLD ECONOMY. uSUSTAIN A HIGH GROWTH RATE OF DEVELOPMENT ;

7. BUSINESS CLIMATE u 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 ELECTRICITYO.N.E.  LARGE RURAL ELECTRIFICATION PROGRAMME ENERGY SECTOR GLOBAL STRATEGY

8. BUSINESS CLIMATE uOIL 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 STRATEGY

9. 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 ENVIRONMENT

10. HOW TO EXPLORE IN MOROCCO

11. SINCE 1958 CODE CONTINUAL EFFORTS HAVE BEEN MADE TO ATTRACT 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

12. RECONNAISSANCE LICENCE DURATION 1 YEAR MAX, EXTENDIBLE GRANT ENERGY MINISTER WORKS INCLUSIVE OF SEISMIC BUT NO DRILLING AREA UNLIMITED ASSIGNMENT NOT PERMITTED HOW TO EXPLORE IN MOROCCO

13. EXPLORATION PERMIT EXPLORATION RIGHTS EXCLUSIVE RIGHTS, INCLUDING DRILLING, GRANTED BY MINISTERIAL ORDER AFTER SIGNING A PETROLEUM AGREEMENT DURATION 8 YEARS IN 2 OR 3 PERIODS WITH POSSIBLE EXTENSION OF 2 YEARS FOR APPRAISAL OF DISCOVERY MADE IN THE LAST TWO YEARS OF VALIDITY. AREA MIN - 200 KM2, MAX - 1000 KM2 FOR EACH ON SHORE PERMIT MIN - 200 KM 2, MAX - 2000 KM 2 FOR EACH OFFSHORE PERMIT PERMIT HOLDER MAX. ACREAGE = 10,000 KM2 ONSHORE PERMIT HOLDER MAX. ACREAGE = 20,000 KM 2 OFFSHORE HOW TO EXPLORE IN MOROCCO

14. EXPLORATION PERMIT (Cont’) RELINQUISHMENT AT END OF INITIAL PERIOD 10% * NUMBER OF YEARS COMPLETED FOR EXAMPLE 30% AFTER 3 YEARS HOW TO EXPLORE IN MOROCCO

15. EXPLOITATION CONCESSION PRODUCTION RIGHTS DEVELOPMENT AND EXPLOITATION OF COMMERCIAL DISCOVERY DURATION HOW TO EXPLORE IN MOROCCO 25 YEARS + EXTENSION OF UP TO 10 YEARS

16. FISCAL REGIME

17. STATE PARTICIPATION 25% MAX IN ANY EXPLORATION PERMIT OR EXPLOITATION CONCESSION STATE IS CARRIED THROUGH EXPLORATION WITH NO REIMBURSEMENT OF PAST EXPLORATION COSTS FISCAL REGIME PARTICIPATION INTEREST FINANCING

18. ROYALTY THE ROYALTY RATES ARE AS FOLLOWS : ONSHORE AND OFFSHORE <200 METERS WATER DEPTH THE FIRST THREE HUNDRED THOUSAND OF OIL AND 300 MILLION M 3 OF GAS PRODUCED FROM EACH EXPLOITATION CONCESSION ARE EXEMPTED OFFSHORE >200 METERS WATER DEPTH THE FIRST 500,000 TONS OF OIL AND 500 MILLION M 3 OF GAS PRODUCED FROM EACH EXPLOITATION CONCESSION ARE EXEMPTED FISCAL REGIME OIL 10% GAS 5% OIL 7% GAS 3.5%

19. RENTAL AT APPLICATION AND EXTENSION FOR EACH EXPLOITATION CONCESSION TAX DEDUCTIBLE FISCAL REGIME 1,000 DIRHAMS/KM 2 (APPROX. $100)

20. TAXATION OF PROFITS FISCAL REGIME OIL COMPANIES ARE SUBJECT TO INCOME TAX UNDER THE GENERAL TAX CODE HOWEVER, UNDER THE NEW HYDROCARBON LAW THERE ARE : FROM START OF COMMERCIAL PRODUCTION FROM EACH EXPLOITATION CONCESSION THAT ALLOWS EXPLORATION COSTS, INCLUDING DRY HOLE COSTS, TO BE DEDUCTED AGAINST REVENUES OF ANY EXPLOITATION CONCESSION HELD BY THE TAX PAYER TWO NEW INCENTIVES 10-YEARS TAX HOLIDAY CONSOLIDATION THE TAX RATE IS 35% OF TAXABLE INCOME

21. TAX DEDUCTIONS AND ALLOWANCES FISCAL REGIME TAXABLE INCOME IS DETERMINED BY MAKING THE FOLLOWING : ACCORDING TO RATES IN THE TAX CODE DEPLETION ALLOWANCE (PRG) OPTIONAL DEDUCTIONS ROYALTY, RENTAL, BONUSES, TRAINING EXPENSES PRODUCTION EXPENSES AMORTISATION NEGOTIABLE IN PETROLEUM AGREEMENT- DEPRECIATION OF FIXED ASSETS MIN. 2 YEARS MAX. 10 YEARS

22. OTHER TAXES FISCAL REGIME WITHHOLDING TAX ON PROFITS VALUE ADDED TAX BUSINESS ACTIVITY TAX URBAN TAX TAX ON NON-IMPROVED URBAN LAND TAX EXEMPTIONS

23. CUSTOMS AND EXCHANGE CONTROL FISCAL REGIME IMPORT DUTY THE OIL COMPANY, ITS CONTRACTORS AND SUB-CONTRACTORS MAY IMPORT ITEMS FOR USE IN MOROCCO DUTY-FREE IF THERE IS NO COMPETITIVE SUPPLIER IN MOROCCO SAME APPLIES TO PERSONAL EFFECTS BROUGHT IN BY FOREGN PERSONNEL EXCHANGE CONTROL TRANSFER OF CAPITAL, PROFITS AND DIVIDENDS FREE OF RESTRICTION AND TAXES RIGHT TO HOLD EXPORT REVENUES ABROAD

24. AGREEMENTS

25. PETROLEUM AGREEMENT PARTIES STATE REPRESENTED BY ONAREP AND THE OIL COMPANY(IES) MAIN ASSURANCES AGREEMENTS ASSIGNMENT ARBITRATION MARKET PRICE

26. 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

27. PETROLEUM AGREEMENT (Cont’) Agreements COMMITMENT TO FUND FOR ONAREP PERSONNEL NEGOTIABLE US$ AMOUNT EACH YEAR FROM EFFECTIVE DATE INCREASES FOR EVERY EXPLOITATION CONCESSION GRANTED PROFEESIONAL TRAINING

28. ASSOCIATION CONTRACT PARTIES ONAREP AND OIL COMPANY(IES) PURPOSE TO ESTABLISH PROCEDURES NECESSARY FOR EFFICIENT JOINT CONDUCT OF OPERATIONS MAIN CLAUSES MANAGEMENT COMMITTEE / JOINT OPERATING COMPANY OPERATOR CASH CALLS AND ACCOUNTING ANNEX BASED ON AIPN MODEL FORM JOINT OPERATING AGREEMENT AGREEMENTS