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The Moroccan finance ministry has vetoed a pipeline tender

An official document and a source familiar with the issue said that an opposition from Morocco's Finance Ministry was behind a decision by the energy ministry to suspend an invitation to bid for a natural-gas pipeline.

The document and source stated that the tender, launched by the energy minister last month, was part of an effort to facilitate the transition from coal to gas. However, it was vetoed because the finance ministry deemed the process to be flawed, there were fiscal risks, and the new gas law was not clear.

The Energy Ministry had announced on Monday that it would be putting on hold the tender due to "new parameters and assumption", but did not provide any further details. The energy ministry and the interior ministry did not reply to comments on Tuesday.

In a document seen by the Finance Ministry, it stated that it "reiterates their commitment to continue to support this project" as well as that they are ready to resume evaluation when?the necessary conditions are met.

The pipeline would have been connected to the future terminal

Rachid Ennasiri is the director of IMAL, an independent climate think-tank. He said that putting this pipeline on hold'may prove to be a prudent decision for risk management in a context where fossil fuel prices are volatile and gas markets are shifting.

He added that governments across many power systems are responding to price and security risks by "accelerating the deployment and storage of renewables and grid flexibility and avoiding long term gas lock-in." Morocco's energy interest, he said, resides in its domestic renewables.

The tender was framed as "a public-private partnerships" and was for the construction of a pipeline connecting a future LNG terminal in the Mediterranean port Nador West Med with an existing pipeline used by Morocco to import LNG through Spanish terminals. The date set for the opening of bids was February 3.

The tender included a section connecting the existing pipeline with industrial zones in Mohammedia, Kenitra and the Atlantic Coast.

According to the document, the Finance Ministry vetoed the tender for the pipeline on the basis of the opinion given by the Commission in charge of approval of public-private partnerships (PPPs) on January 20, 2009.

MOROCCO WANTS TO REDUCE COAL RELIANCE

The document, signed by the Finance Minister, stated that the tender was launched without the approval of the finance ministry prior to the project's eligibility for public-private partnership status.

The report also expressed concerns over the "budget sustainability" of the project and the "unbalanced distribution of risks between private operators and public entities."

The project was criticized for not having a clear target scenario to guide the partnership.

Morocco wants to increase its use of natural gas to reduce its reliance on coal, while also promoting a plan for renewable energy that aims to reach 52% installed capacity by 2030. This is up from the current 45%.

According to the National Electricity Regulator (ANRE), coal will account for 60% of?Morocco’s electricity production in 2024. Natural gas is 10% and wind and solar 25%.

According to estimates by the ministry, the country's demand for gas is expected to increase to 8 billion cubic meters in 2027. It currently stands at about 1 bcm. The majority of Morocco's gas is imported from Spanish LNG terminals via a pipeline which previously carried Algerian natural gas. (Reporting and editing by David Holmes; Ahmed El Jechtimi)

(source: Reuters)