Somalia's opportunity as one of the last true frontiers of oil and gas exploration could soon be revived – creating an industry to deliver long-term economic growth and prosperity to the Somali people
The launch of the 2020 Somali Bidding Round following ratification of the Petroleum Act and Resource Revenue Sharing Agreement, the establishment of the Somali Petroleum Authority (SPA) and an internationally competitive Production Sharing Agreement all potentially herald a flurry of activity that the Somalis hope to replicate the extraordinary offshore exploration success enjoyed by Guyana in recent years.
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Somalia and hydrocarbons
The presence of working hydrocarbon systems on land in northern Somalia triggered an industry rush to the country in the 1980s, before the major oil and gas companies were forced to declare force majeure before the civil war in 1991.
Fast-forward nearly 30 years and with an updated legal and regulatory foundation and the promising results of two new 2D seismic surveys covering an offshore area of over 120.000 square kilometers, suggesting a reserve potential of several billion barrels, Somalia's Minister of Petroleum has offered seven blocks in the Bidding Round.
Somalia presents concern for investors
While safety is likely to be a major concern for potential investors, it is worth noting that both seismic surveys were safely completed without a single incident. The federal government enacted the Resource Revenue Sharing Agreement among the 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 untapped and only one offshore well has been drilled to date; Seismic surveys in 2014 and 2015, carried out respectively by Soma Oil and Gas and Spectrum, were the first to map the deep offshore. Exploration studies have also taken place on land in Somaliland in recent years. These included 2D seismic and macro-infiltration studies in 2018 and 2019 by Genel & RAK Gas.
The country appears to have the geology in place, has created the necessary legal and regulatory framework, and has shown a determination to share revenue fairly. Interest has already been shown by large companies such as an Exxon/Shell joint venture.
