Somali disown oil deal with US firm

The government of Somali has rejected an oil revenue sharing deal signed by the Petroleum Ministry and Coastline Exploration Ltd a US firm in Texas.

President Mohamed Abdullahi Farmaajo and Prime Minister Mohamed Hussein Roble publicly disowned the deal which was involved works on seven offshore oil blocks. According to them the production sharing agreement which was signed violates the presidential decree that banned engagements and pacts with foreign entities during election time.

In a statement, the ministry clarified that the accord is to “launch the exploration” for hydrocarbons in offshore Somalia. The statement said the accord with Coastline, an upstream oil and gas company focused on East Africa but based in Texas, is the result of recently completed seismic programmes – studies on potential of the oil or natural gas presence. This indicates that Somalia has the potential to become a significant oil and gas producing country.

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Oil industry

Somalia discovered oil in 1950 but the civil war caused companies including Exxon Mobil to halt operations. However, with the launch of the 2020 Somali Bid Round after ratification of the Petroleum Law and Resources 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 which Somalis hope will replicate the extraordinary offshore exploration success enjoyed by Guyana in recent years.

The country has more than 200 blocks offshore that could potentially hold crude oil. Exploration studies have also occurred onshore in Somaliland in recent years. These included 2D Seismic and macro-seepage studies in 2018 and 2019 by Genel & RAK Gas.