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Somalia’s energy sector poised for take off

Somalia’s Minister of Petroleum & Mineral Resources says the upcoming offshore 15 block licensing round is a ‘game-changing development’ that will benefit the entire population

If you were to ask where one of the world’s most significant hydrocarbon investment opportunities is located, not many would say Somalia. But, increasingly, it is recognised as a potentially huge, secure and fiscally attractive frontier prospect poised for take-off.

In a turbulent region, this game-changing development will play a key role in transforming the lives of its people. The federal government has put in place a unique revenue-sharing agreement with our member states, which are set to receive an unparalleled up to 70pc of potential future petroleum revenues.

Small but symbolically important early revenues from surface rentals paid by Shell and ExxonMobil are going to be distributed shortly for allocation under the terms of this agreement, which is helping to build a broad consensus across the country on how best to develop our hydrocarbon resources. Much needed investment in schools and healthcare are key priorities.  

Over the last four years, the government has employed Spectrum (now called TGS) the world’s leading provider of subsurface data. The area evaluated by Spectrum is huge—122,000km²—and each block in the upcoming licensing round will represent up to 5,000km².

Spectrum’s surveys have been hugely positive for two reasons. Firstly, there is strong evidence of ‘source rock’ with potential oil hydrocarbons, which de-risks development potential. And secondly, the geological strata and structures to trap oil in a subsurface reservoir were also identified.

“Looking at offshore, where the forthcoming licensing round is focused, the issues of piracy were resolved many years ago, with no incidents in recent years”

In addition, Spectrum highlighted similar geological structures to those with proven oil and gas reserves in neighbouring basins located in Madagascar, Kenya, Tanzania and Mozambique. As a result, Spectrum stated that “offshore Somalia is about to become the hottest area offshore East Africa”.

These results are already proving of great interest to the global oil industry, as many look to bid in the first licensing round for 15 blocks to be held later this year.

While the subsurface data suggests huge potential, our government has also been focused on ensuring that ‘above ground’ work is moving forward as well. Our aim is to ensure that the regulatory and fiscal framework is fully competitive globally and in line with international best practice, enabling Somalia to attract the investment necessary to develop its resources.

At all times, we have been fully cognisant that the production sharing agreement (PSA) we are putting in place delivers an equitable share to the Somali people for their resources, while providing the returns investors have every right to expect in a new frontier market. We believe we have got the balance right and that this will be demonstrated when we launch the license round later this year in Houston.

70pc Share of petroleum revenues up to which Somalia’s states will receive

Security is, of course, a top priority for the federal government and all the member states. In recent years, our international partners, such as the United Nations, have recognised the progress that has been made. This has included embedding a democratic and inclusive government working in true partnership with the member states, the pre-requisite for building secure and stable civil institutions for the long-term.

As recently as October, the UN Deputy Secretary-General Amina Mohammed said that Somalia has made “enormous strides on its path to peace and stability… helping advance society towards an inclusive and peaceful future”.

Looking at offshore, where the forthcoming licensing round is focused, the issues of piracy were resolved many years ago, with no incidents in recent years. Indeed, there were no issues as Spectrum collected their data. While we still have a long way to go on the mainland, offshore opportunities can be explored in a wholly secure environment.

Our energy sector really is poised for take-off. The exploration and production of hydrocarbons in a responsible and safe manner will provide the vital resources we need to build communities and ensure the long-term sustainable development and prosperity of our country.

Abdirashid Mohamed Ahmed is Somalia’s Minister of Petroleum & Mineral Resources

 

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