SAMIR: the rise and fall of Morocco's energy independence dream

 For decades, SAMIR refinery played a critical role in reducing Morocco’s dependence on imported refined fuels, but it gradually turned sour as a web of mismanagement, a crippling debt burden, and the volatile nature of oil prices ultimately led to the refinery’s demise. 

And as Morocco shifts gears towards renewable energy, with the Kingdom aiming to generate half its electricity from clean sources by 2030, Energy experts Hespress English spoke to say diversifying the energy mix alone isn’t enough.  

For this transition to be successful, Morocco needs to address the shortcomings exposed by the SAMIR. 

The following timeline dissects the key events that propelled SAMIR’s initial success, its brush with privatization, and the ultimate factors that led to its closure.

In May 25, 1960,  King Mohammed V renamed the city of Mohammedia, which was then known as Fedala, during the laying of the refinery’s foundation stone.

1973 marked a shift for SAMIR as the Moroccan government nationalized the Italian shares.  This move was followed by a significant expansion in 1978 with the construction of a new refinery complex, boosting total capacity to 6.25 million tons per year.

The 1990s ushered in a new era for Morocco’s energy sector – privatization and public-private partnerships (PPPs). 

 International financial institutions heavily promoted this approach, touting it as the path to efficiency and increased investment. 

 But this period wasn’t without its challenges.  Labor unions fiercely opposed the privatization of SAMIR, launching a nationwide strike in 1989 that lasted 35 days.

 “Even the general president of SAMIR Abderrafie Menjour said that the privatization was a gamble for the industry,” said Hussein Yamani, president of the National Front for the Salvation of the Moroccan Petroleum Refinery SAMIR in an interview with Hespress English.

 The ideal turned out to be a pipe dream, as it created a system heavily reliant on private companies for profit while leaving Morocco with a large debt burden.

 SAMIR suffered the brunt of this ideal when the state decided to privatize it under the government of Abdellatif Filali, by transferring 67.27% of its capital to the Swedish Coral Group, owned by Saudi businessman of Ethiopian origin Hussein Al-Amoudi.

 This decision came in the context of a privatization law that targeted companies struggling financially. The idea was to sell off those on the brink of collapse. 

 “To our surprise, even SAMIR, a profitable company generating 400-500 million dirhams in net profit and actively contributing to the community, ended up on the list,” said Yamani.

 The second reason behind the privatization was the fact that the government, facing financial strain and struggling to pay its employees, resorted to selling off assets like SAMIR to raise funds.

This privatization occurred within the context of the IMF’s structural adjustment plans aimed at reducing public spending.  By the end of 2015, the company hit a rough patch as it was drowning in debt – a whopping MAD 40 billion owed to Moroccan banks and customs.

This financial crisis dragged them to court in Casablanca, where they were forced to liquidate on March 21, 2016.

 SAMIR was not only a refinery but also a promoter of the petroleum port in Mohammedia, which currently operates at only 45% of its capacity. The company also distributed approximately MAD 1 billion in wages within the city.

Back then, instead of importing refined products, Morocco relied on SAMIR’s ability to import crude oil in massive quantities – up to 120,000 tons per ship – which they then refined to meet the country’s needs.

 The refinery was Morocco’s one-stop shop for refined petroleum products. They produced gasoline, kerosene, diesel, jet fuel, and bitumen, fulfilling 100% of the domestic market’s needs for all products except kerosene (which was 50%). They even exported some of their production. 

 Hussein Yemani said that SAMIR led to the construction of more than 2500 housing units for employees, supported sports and cultural activities, and even helped with environmental initiatives. 

 Choukri, a technician who first joined SAMIR in 2006, recounted how the work at the refinery was exciting and dynamic, leading to the creation of new branches! All signs pointed to a thriving company on a clear path to growth.

“However, around 2012-2013, the market underwent liberalization. This meant the company faced direct competition for the first time. This led to a period of pressure on the company,” said Choukri. 

 SAMIR’s employees were jolted in August 2015 when the refinery revealed in a statement that it was facing challenges securing raw materials

 Since then, workers and retired employees have been staging ongoing protests against the dire conditions they face since production at the company ceased and it was placed under judicial liquidation. 

 The employees demand a resolution to what they describe as the miserable and appalling situation of workers and retirees, who have been deprived of 40% of their wages and have not had their pension contributions paid since 2016.

 According to Choukri, after the company’s liquidation, employees experienced immense mental strain, compounded by difficulties receiving their wages. Over the years, a significant number of workers left the refinery. Today, around 470 employees work in the refinery.

 But SAMIR did not only provide a source of income for hundreds of employees but also saved Morocco’s foreign currency that would have been spent on imports by refining oil domestically.

Privitization was not the only setback in SAMIR’s story. Yamani says transparency and public participation were sacrificed at the altar of expediency while decisions were made behind closed doors. 

Yamani explains that the privatization of SAMIR  deviated significantly from standard procedures.  

 “There were no competing bids or evaluations of potential buyers. Instead, the company was directly handed over to Saudi interests without a detailed agreement outlining commitments, rights, and responsibilities for both parties,” he explained.

 The new owner, who had already managed SAMIR for 17 years, continued in that role. This lack of change potentially allowed mismanagement to continue without government intervention.

The privatization agreement of SAMIR was tied to a separate investment agreement promising the construction of new production units with a MAD 4-5 billion investment between 1997 and 2002. 

 “Unfortunately, these investment commitments were never fulfilled, and had we not privatized the SAMIR, we wouldn’t have reached the catastrophic situation that we find ourselves in now,” says Yamani. 

 Instead, in 2008, the state-mandated the company to complete the required investment, but this time with new revised terms.

 La SAMIR’s transformation from state-owned to private ownership, intended to be a springboard for progress, ultimately failed to deliver.

 Privatization, as Yamani explains, aims to protect and create new jobs, boost domestic industry, and attract foreign investment. 

 La SAMIR saw its workforce slashed by half, production facilities remained outdated, and promised foreign investment never arrived. 

 To make matters worse,the company owners did not inject hard currency into the investment made in 2008. Instead it was financed by the company’s own resources, Moroccan banks, and resorting to borrowing which the company had never done before.

 The situation worsened when additional illegal accounting practices were discovered. The court specifically mentioned the distribution of fake profits for a specific year, which could be a crime under commercial law.

The ripple effect of a lost refinery

 The closure of SAMIR left a deep scar on Morocco, both in terms of its social fabric and economic well-being. 

The company wasn’t just a source of jobs; it employed 4,500 people directly and indirectly.  These jobs, along with the taxes SAMIR paid and the local businesses it supported, played a crucial role in the development of the city of Mohammedia.  

 The company also sponsored various activities, further contributing to the city’s social life.

 Economically, the impact is equally severe. Morocco is now forced to import refined petroleum products at a staggering cost of MAD 20 billion annually.  

 This expense could have potentially been mitigated if a domestic competitor like SAMIR existed in the market, putting downward pressure on fuel prices for Moroccan citizens.

The ramifications extend beyond immediate financial burdens. The port of Mohammedia, once a hive of activity during SAMIR’s operation, now faces a different reality. Many businesses that relied on the refinery have shut down, adding to the economic woes of the region.  

 Morocco’s strategic oil product reserves have dwindled significantly.  SAMIR’s storage capacity of 2 million tons, previously maintained at a healthy 1.5 million tons, is no longer a national asset.

 SAMIR’s privatization failure speaks to the pitfalls of the neoliberal model, which locks states into agreements with private energy producers that guarantee high production costs.   This translated into expensive energy for ordinary citizens.

Why Morocco Still Needs a Refinery

Despite some arguing that Morocco has no need for a refinery, Yamani pointed out that forecasts predict oil will remain a significant player in the global energy mix even beyond 2050. This continued demand is fueled by the world’s ongoing energy needs and the slow growth of renewable energy sources. 

 Oussama Ouassini, a supply chain and economic strategy expert, said that the continued suspension of SAMIR’s refining activities is driving up consumer costs. 

 “Refining a barrel of oil, which used to cost around two dollars, now costs up to 30 dollars due to the scarcity of refineries amid the global energy transition, particularly in Europe,” he explained. 

 While some suggest transitioning to renewable energy, Ouassini points out that this is unrealistic, except for nuclear power. 

 To be competitive, the cost per kilowatt-hour needs to be under 50 cents. “With current oil import prices, we’re paying double that, pushing investors to look elsewhere unless we offer subsidies,” he added.

 Given these challenges, there’s a compelling case for state intervention. 

If the government takes control, it could convert SAMIR’s debt into equity, securing an 82% stake. This move could stabilize prices and secure the future of Morocco’s oil industry, presenting a more sustainable solution than leaving it to private operators who would likely align with international pricing.

 The expert proposed a more watchful state role in the energy sector. This suggests the government should take a more active stance in overseeing the industry to prevent a recurrence of what happened in SAMIR’s case. 

 Moving forward requires a break from dependence on external actors and the volatility of the international market.  Instead, Morocco needs to focus on unlocking its domestic energy potential through resource development and investments in technologies that bolster its energy security, Ouassini said.