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    British Oil Company Loses Money as Morocco Conducts Tax Audit

    Sound Energy refutes announcement of tax reassessment, as the Moroccan government examines the company’s 2016-2018 tax payments.

    02 Jun 2021

    Sound Energy, a UK-Moroccan joint oil and natural gas production company, is expressing concern over Morocco’s plan to audit it’s tax payments. Although Morocco's intention to audit Sound Energy has been known since at least September of 2020, stock in the company dipped 12% by Tuesday to roughly $2.18 a share, according to British news sources.

    The dip in stock price is largely due to an upcoming tax committee meeting that is scheduled for Thursday. Graham Lyon, Sound Energy’s executive chair, stated he was “exceptionally disappointed to have received the subsequent notifications from the Moroccan Tax Administration,” as the company continues to negotiate terms with the Moroccan government.

    Sound Energy has been operating in Morocco since 2015, when it initially won a one-year reconnaissance contract for onshore gas exploration in Tendrara, a rural area in eastern Morocco. Since then, it has also expanded its work to Sidi Mokhtar, and the company continues to operate sites in both regions.

    Currently, the company maintains a 25 year exploitation concession contract with Morocco in Tendara, an eight-year exploratory contract in Sidi Mokhtar. It is also seeking a second eight-year exploratory contract in Meridja.

    The company mainly focuses on “upstream” oil production, and most of its work focuses on the exploration and mapping of potential drill sites for petroleum. Between its contracts, Sound Energy now holds exploration rights for over 28,000 square kilometers of Morocco, according to the company’s official website.

    Although the “downstream” oil industry, which focuses on the actual drilling, is well established and dominated by oil giants such as Shell Maroc, Afriquia, and Total Maroc, the “upstream” industry focusing on the exploration and mapping of oil fields is still an emerging field within Morocco.

    Onshore exploratory companies such as Sound Energy are competing to gain control of both the Essaouira basin in central Morocco and the Gharb basin in northern Morocco, two sites that offer huge potential in terms of petroleum exploration. In addition to Western exploratory companies currently in competition for the rights to these areas, the national Moroccan upstream company, Office Nationale de Recherches et d’ Exploitations Pétrolières (ONAREP), has also been working to locate potential drilling sites.

    Sound Energy achieved incredible success within Morocco during 2020, with agreements between the company and the Moroccan government to open gas treatment plants. This initial success led to the extension of licenses to operate within the country, according to the Sound Energy website.

    However, Morocco’s tax reassessment plans are expected to slow down the company’s ability to continue growth and expansion, as the government pressures the oil company to pay its fair share of taxes while operating within the kingdom.

    Sound Energy’s executive defended the company in his press release, claiming “Sound Energy and its partners have invested over USD140 million” in Morocco. The company has also provided “economic stimulus in Morocco,” he noted, describing the North African country as frequently overlooked for investing.

    However, Sound Energy is not the only oil company looking to make inroads in the kingdom, and other oil companies will surely look to use Sound’s audit as an opportunity for future expansion within Morocco.

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