Somalia: The New Frontier of Oil and Gas

The Opportunity of Somalia as One of the Last True Frontiers for Oil and Gas Exploration Could Be Revived Soon – Creating an Industry to Provide Economic Growth and Long-Term Prosperity for the Somali People

The launch of the Somali Licensing Round of 2020, following the ratification of the Petroleum Law and the Resource Revenue Sharing Agreement, the establishment of the Somali Petroleum Authority (SPA), and a competitive international Production Sharing Agreement, all potentially herald a wave of activities that Somalis hope will replicate the extraordinary offshore exploration success enjoyed by Guyana in recent years.

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Somalia and Hydrocarbons

The presence of operating hydrocarbon systems onshore in northern Somalia triggered an industry rush to the country in the 1980s, before major oil and gas companies were forced to declare force majeure ahead of the civil war in 1991.

Nearly 30 years later, with an updated legal and regulatory framework and promising results from two new 2D seismic surveys covering an offshore area of over 120,000 square kilometers, suggesting reserve potential of several billion barrels, the Minister of Petroleum of Somalia has offered seven blocks in the Licensing Round.

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Somalia Poses Concerns for Investors

While security is likely to be a major concern for potential investors, it is worth noting that both seismic surveys were completed safely, without a single incident. The federal government enacted the Resource Revenue Sharing Agreement among federal states, ensuring an equitable distribution of natural resource revenues among all Somali citizens.

Somalia fits the bill for genuine frontier status. It is relatively unexplored, with only one offshore well drilled to date; the seismic surveys in 2014 and 2015, conducted respectively by Soma Oil and Gas and Spectrum, were the first to map the deep offshore. Exploration studies have also occurred onshore in Somaliland in recent years. These included 2D seismic studies and macro-infiltration in 2018 and 2019 by Genel & RAK Gas.

The country seems to have the geology, created the necessary legal and regulatory framework, and demonstrated determination to share revenues fairly. Interest has already been shown by major companies, such as a joint venture of Exxon/Shell.